The speed and effectiveness with which your company can complete customer orders have a direct impact on your profitability. If customers are unhappy with the way their orders are processed and fulfilled, they can decide that you don’t offer good customer service and go to your competition. In other words, since it’s a crucial element that could have an impact on your bottom line, your delivery process needs to be your top priority.
In this post, we’re providing an answer to the question, “What does order fulfillment mean?”, discuss the order fulfillment process steps, and offer tips on how to improve your order fulfillment process.
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What Does Order Fulfillment Mean?
Order fulfillment includes the task of putting together an order and sending it to the customer, as well as the activities that help with these tasks, such as product inventory management, supply chain management, quality assurance, order processing, and customer service. The main objective is to deliver the customer’s order as quickly, affordably, and efficiently as possible.
How Order Fulfillment Works: Order Fulfillment Process Steps
The order fulfillment process takes place in one or more fulfillment centers and is comprised of the following steps:
1. Receiving Inventory
Incoming goods need to be counted, inspected, and inventoried regardless of where they are coming from or in what forms, in order to make sure the number is right and the quality is acceptable. Bar codes or SKUs are used for receiving, storing, and retrieving the delivered goods from storage.
2. Inventory Storage
After being received and inventoried, goods are either distributed right away or placed in short- or long-term storage. Instead of holding things for future sales, it is preferable to store items for only long enough to aid in the orderly distribution of commodities for current sales.
3. Order Processing
Order processing is a key component of order fulfillment, and effective order-processing workflows can help maintain customer satisfaction. The workflow includes product picking, transporting the product to the packing team, performing damage inspection, choosing packing materials, and finally, packing and moving the product to the shipping center.
4. Shipping
At this stage, it is necessary for you to choose a third-party fulfillment carrier that will handle order shipping. Your shipping carrier will choose the optimum delivery method based on the order’s dimensions, actual package weight, and other requirements (as supplied by the shipping center). The shipping center then updates the order status so that sellers are informed when orders are shipped.
5. Returns Processing
Returns processing entails conducting quality assurance inspections and sorting returned goods accordingly. The returned items are then restocked, shipped back to the retailer or manufacturer for credit or refund, or sent to a recycling facility.
Why Is Order Fulfillment Important
Order fulfillment is one of the most important aspects of any sale. If you succeed at the fulfillment stage, all of the hard work you put into finding the proper clients and converting them will have been worthwhile. On the other hand, all of your efforts will be in vain if the order you deliver is inaccurate, late, or damaged.
In addition, order fulfillment has an impact on a number of other areas of your company, including inventory management. To make sure your fulfillment process runs well when demand spikes, you must order extra products and keep them on hand. You might also need to hire more employees and rent a bigger fulfillment warehouse to store your goods. Therefore, if your order fulfillment process is defective, all of these other operations will suffer.
When using the proper order fulfillment process, you can:
- Always have the appropriate number of products on hand
- Reduce your shipping costs
- Prevent underselling or overselling
- Offer better customer service
- Reach out to new customers
- Lower your operating expenses
- Spend more time working on expanding your company.
9 Tips to Improve Your Order Fulfillment Process
As mentioned before, your order fulfillment strategy is the backbone of your business and can make or break your company’s profitability. Here are 9 tips on improving your current order fulfillment process.
Choose a good order fulfillment software
Choose a system that allows for end-to-end tracking of orders, inventories, and any other business-related activities. ApparelMagic is PLM and inventory management software that has integrated warehouse management and fulfillment tools that enable you to improve on-time deliveries and customer experience. ApparelMagic offers speed and transparency throughout the allocation and pick-and-pack process, as well as invoicing and delivery in one secure, cloud-based system that is always accessible.
Optimize your inventory management
You can’t work on order fulfillment If you don’t have the products you need to ship. For both order fulfillment and supply chain management, you must have reliable, real-time data on item availability. Good inventory management software is really important for this task as it guarantees inventory accuracy. This means you will have no issues with understocking or excess inventory, and you will always have adequate supplies on hand.
Select the locations of your distribution centers wisely
If you have the option of housing goods in different places, the closer a facility is to your customers the better. If, on the other hand, you want to handle order fulfillment from only one location, having that location centrally positioned is your best option.
Choose the right order picking strategy
It’s critical to make the most of your human resources if you want to keep prices down and efficiency high in your order fulfillment operation. Typical order-picking techniques include zone and batch order picking (in which several orders are picked simultaneously), discrete order picking (in which each order is selected separately), and other techniques meant to cut down on travel time and speed up picking.
Choose the right shipping company
Even though it can appear straightforward, there are several factors to take into account when selecting a shipping carrier. You must first be certain that the company you select can successfully ship to your clientele. Are the majority of your consumers in urban areas or remote, hard-to-reach areas? Can the company you choose rapidly ship little, delicate things or extremely huge shipments without breaking them or losing them? You might need to conduct some research to compare shipment costs and consult with other business owners to find out which shipping method and commercial carriers they use for their products.
Practice demand planning
Your entire order fulfillment process should be able to handle an increase in demand levels. You can predict and get ready for potential fluctuations in demand by reviewing prior volumes and noticing significant increases (for example, around holidays that have an impact on your sales).
Set clear expectations
When setting customer expectations, it’s always best to underpromise and over-deliver. When an order is received, it’s best to establish clear expectations and then put in the effort to fulfill them. If anything seems to be taking longer than expected, let your customer base know as soon as possible so they know what to expect and don’t end up disappointed.
Prepare for customer returns
Even while you strive to provide each and every one of your customers with a flawless experience, mistakes, flaws, and shipping delays will occasionally occur. No matter who was at fault—you, your customer, or a supplier—it is best to be ready to make things right with as little fuss as possible.
Measure and review key metrics
It’s difficult to improve your order fulfillment process if you don’t know where adjustments are required. Choose the most important metrics, monitor them over time, and check them regularly. Some of the KPIs you can’t afford to ignore are on-time shipping, order cycle time, perfect order percentage, order picking accuracy, order fill rate percentage, etc.
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How Do You Choose an Order Fulfillment Strategy?
Businesses can choose from a variety of order fulfillment models and strategies. You might favor either internal or external fulfillment, depending on the capabilities and resources available in your organization.
If you have the resources on hand, conducting fulfillment in-house gives you complete control over shipping accuracy, delivery schedule, operations, human error, and shipping costs. With internal fulfillment, you are responsible for hiring the workers, maintaining the company warehouse, and guaranteeing that each item is shipped flawlessly. Many of these difficulties disappear when you are outsourcing order fulfillment.
On the other hand, order fulfillment may be better off being totally outsourced to a third-party fulfillment company if fulfillment and logistical resources and abilities are limited. This makes it possible for your team to concentrate on creating and marketing the product, which frequently results in increased predictability.
Your path to the ideal solution should be guided by a thorough financial analysis, but you should also consider the products you’re selling, prospective shipping choices, and fulfillment costs to make the best choice for your company.
The Bottom Line
Although improving your entire fulfillment process might seem like a difficult task, it is one of the best methods to gain a competitive edge and increase your company’s profits.
Hopefully, the order fulfillment process steps described in this article will help provide an answer to the question “What does order fulfillment mean?”, and the improvement tips will give you an idea of where to start when it comes to improving the process for your own organization.
There isn’t one fulfillment method that works for all companies. Whether you decide to adopt a hybrid model of fulfillment or outsource to a third-party fulfillment partner, the important thing is to identify the optimal method that satisfies the requirements of both your business and your customers. Your fulfillment procedures should be made more efficient in order to maintain client satisfaction and business profitability.
