Congratulations on your new E-Commerce store. Now that you’re up and running, it’s time to consider how you’re going to store your inventory, package your products, and ship items to your customers. That’s where e-commerce fulfillment comes in.
Don’t worry. E-Commerce fulfillment isn’t nearly as complicated or as challenging as it sounds and you don’t have to be an expert to get started. All you need is determination and this beginner’s guide to e-commerce order fulfillment.
What is E-Commerce Order Fulfillment?
E-Commerce order fulfillment is the process in which online orders are picked from the shelves, packed into boxes, and shipped to the final customer. Like retail fulfillment, e-commerce order fulfillment consists of six basic components:
- Inventory Management – The process of ordering, storing, and utilizing a company’s raw materials, components, and finished products.
- Warehousing and Storage – The process of storing goods in a warehouse for later use.
- Receiving – The process of obtaining raw materials and inventory.
- Pick & Pack – The process of gathering individual inventory items from shelves and packaging them for shipment.
- Shipping – The process of transporting items from the warehouse to the end customer.
- Returns – The process of transporting damaged and/or mis-shipped items from the customer back to the warehouse for processing and reshipment.
Generally speaking, there are three different e-commerce order fulfillment options available to online business owners; in-house fulfillment, dropshipping, and third-party logistics (3PL). Each has its advantages and disadvantages, which are simple enough to comprehend.
The tricky part is determining which e-commerce order fulfillment strategy is right for your business. It all depends on your business strategy.
How to Choose a Fulfillment Strategy
The best e-commerce fulfillment strategy for your business depends on a myriad of factors, like where your suppliers are relative to your customers, or if you ship more than 100 orders per month. In any case, you can’t make a decision unless you fully understand the choices available to you.
In-House E-Commerce Order Fulfillment
In-house order fulfillment is exactly what it sounds like – when a business conducts the order fulfillment process via its own facilities, labor and assets, and without the aid of a third-party logistics provider.
Whether or not in-house e-commerce order fulfillment is the right strategy for your business model depends on your inventory volume. If your operation is small (less than 100 items/month), then in-house e-commerce order fulfillment is likely the best option for your business.
In-house strategies are a popular choice for e-commerce businesses who sell on Etsy and other C2C platforms, as most do not have the inventory volume or the capital needed to invest in their own warehouse, labor, and equipment.
In-House E-Commerce Order Fulfillment: Advantages
- Easiest to implement.
- Lowest startup costs.
- Custom packaging.
- Control over the entire fulfillment process.
In-House E-Commerce Order Fulfillment: Disadvantages
- Impossible to scale.
- Limited storage space.
- Limited labor.
- No shipping discounts.
Dropshipping is an e-commerce order fulfillment strategy wherein orders from your e-commerce store are forwarded from your website to your supplier who picks, packs, and ships the order directly to your customer on behalf of your business.
At no point does the retailer have to purchase, store, pick, pack, or ship their inventory. All they have to do is sit back and relax while their manufacturer takes care of the entire fulfillment process.
However, this also means that e-commerce businesses have minimal control over the fulfillment, shipping, and handling of their inventory. If the customer receives a broken item or poor customer service from the dropshipper, they are going to come to you with the complaint and the bad review.
- Lower startup costs.
- Lower cost of inventory.
- Lower order fulfillment costs.
- Easy to update inventory.
- Only pay for what you sell.
- No control over shipping and handling.
- Reliant on supplier stock and customer service.
- No bulk pricing
- Lower profit margins
- Shorter lead times
Third Party Logistics (3PL)
Third-party logistics is a fulfillment model available to e-commerce businesses in need of supply chain management. In other words, a 3PL is a service you hire to manage the various functions of your supply chain, such as :
- Sourcing transportation
- Inventory storage and management
- Freight forwarding
- Shipping/receiving and distribution
- Customs brokerage
- Picking and packing
Outsourcing to a 3PL is beneficial to e-commerce retailers who lack the resources to store, pack, and ship inventory themselves. By outsourcing the entire fulfillment process, you don’t just free up time and resources, you enable your team to focus on things like marketing and business development.
You also leverage the 3PL’s buying power; data insights; value-added tools; shipping network and industry expertise to your advantage. It’s like having your own in-house fulfillment team without the associated costs and headache of managing it yourself.
Third Party Logistics (3PL): Advantages
- Leverage industry expertise.
- Reduced operating costs.
- Larger network of providers.
- Greater buying power.
- Optimized shipping, handling and returns.
- Improved data insights.
- Easy to scale.
Third Party Logistics (3PL): Disadvantages
- Many 3PLs to choose from, not all of them good.
- Relinquish some control over shipping, customer service and returns
- Supply chain reliant on third-party vendors.
How to Choose an E-Commerce Fulfillment Provider
Now that you know the fulfillment options that are available, it’s time to determine which one is the best choice for your e-commerce business model. That’s where Flowspace comes in.
Different from traditional fulfillment providers, Flowspace enables online retailers with the flexibility they need to gain a strategic advantage over their competition and ensure their customers get what they want when they want it.
We’re also the source for useful, reliable information on fulfillment, on-demand warehousing, and third-party logistics. Stay tuned for the next installment of our E-Commerce Fulfillment Learning Series.