Should you outsource ecommerce fulfillment? What are the pros and cons of using a 3PL or ecommerce fulfillment provider? This post helps you decide.
Optimizing Ecommerce Fulfillment in 2022
We explain why ecommerce fulfillment is important, what fulfillment services look like, and how you can optimize ecommerce fulfillment in 2022.
In this post, you will learn all about optimizing ecommerce fulfillment in 2022.
We will explain:
What Is Ecommerce Order Fulfillment?
Ecommerce order fulfillment is the whole process behind delivering products to customers after online orders.
It consists of inventory management, order processing, picking and packing items, and shipping products to customers.
Fulfillment is not only about preparing and packing orders. A well-organized ecommerce fulfillment warehouse helps your business run smoothly.
Why Is Quality Ecommerce Fulfillment Important in 2022?
As more and more businesses are turning to ecommerce, the quality of order fulfillment and logistics affect the way customers choose which company to buy from.
Superb ecommerce fulfillment guarantees that an online order was delivered to the customer safely and efficiently.
The quality of fulfillment has become a way for online businesses to stand out from their competitors.
Here are the top reasons why quality ecommerce fulfillment is important:
#1 Reduced Costs
For many companies, the growth of ecommerce is a huge opportunity for profit.
However, more sales also mean that companies must add more items to their warehouses, hire more staff, and put more effort into making sure orders are shipped correctly.
The average cost of fulfilling an online order is 70% of the average order value, when overhead, returns, labor costs, and other expenses are calculated.
Efficient inventory management, warehouse space allocation, order processing, and other fulfillment procedures lead to fewer unnecessary costs.
A smooth ecommerce order fulfillment process also reduces the number of returns and other costly mistakes.
#2 More Sales
When you run an ecommerce business, the way you meet your customers’ needs affects the size of your customer base and the number of sales.
Offering a pleasant ecommerce order fulfillment experience is a way to obtain more customers and keep them satisfied.
When a customer orders a product, they expect to receive the item as fast as possible. The more you manage to meet their expectations, the more they will choose your online store over your competitors.
Reliable order fulfillment procedures give your customers the assurance that the orders will be delivered fast and with no damage. This increases customer loyalty and encourages shoppers to buy more in the future.
#3 Improved Reputation
Nowadays, customers will judge your online store based on the way you fulfill the orders.
Customers always expect to receive a complete order without any damage, and with no delays. If you wish to have a good reputation in the ecommerce world, order accuracy is one thing to focus on.
If you fail to keep up with customer expectations, they will turn to your competitors, causing harm to your company’s reputation.
Investing in the quality of ecommerce order fulfillment services will help you maintain the reputation of a reliable business.
What Do Ecommerce Fulfillment Services Look Like?
Ecommerce fulfillment is more than just packing orders and shipping. When done right, it helps online businesses run smoothly and stand out from the competition.
Here are the key segments of ecommerce fulfillment services:
Checkout is the first component of the ecommerce fulfillment process.
It is the point where a customer visits an online store, adds items to their shopping cart, and places an order.
The order is then sent to the company’s POS system.
It is important to note that successful order fulfillment planning needs to start before the customer adds products to the cart.
Before you can ship orders to customers, you need to have inventory.
Businesses use different types of inventory management options such as micro ecommerce fulfillment centers, regional fulfillment centers, or even local stores.
Keeping the inventory up to date is essential for the success of any online business.
Mistakes in inventory management lead to unhappy customers and lower retention rates.
Inventory also needs to be properly organized with factors such as stock turnover and product expiry dates in mind.
When an online customer places an order, the fulfillment center starts picking and packing the items for delivery.
Order processing includes getting the right products together, packing the items, and preparing the shipment for the delivery pickup.
It can also include details on packing materials that should be used, or any instructions when it comes to custom packaging and additional inserts.
In the end, a shipping label is added to the package.
Once the order processing is done, the order has to be shipped, using the most appropriate shipping method.
In this phase, either a driver picks it up from the fulfillment center, or it is prepared for in-store pickup.
Some sellers use only one shipping carrier such as USPS, while others require more options.
Usually this is due to different product sizes, specific shipping requirements, and the need to ship internationally.
Some companies use a logistics provider to finalize ecommerce shipping fulfillment.
Returns are a significant component of ecommerce fulfillment.
More than 60% of online shoppers will review a return policy before they decide to place an order.
Allowing customers to return online orders in a fast and convenient way is a sign of good customer service.
A functional returns strategy requires returns processing and an up-to-date inventory management solution that ensures customers will get their money back shortly.
When a product is returned and appropriate to restock, inventory should be instantly updated so other ecommerce fulfillment channels could run smoothly.
How to Optimize Ecommerce Fulfillment in 2022?
Take a look at six ways you can optimize your ecommerce fulfillment strategy:
#1 Provide ecommerce fulfillment services customers want to use
Optimizing ecommerce fulfillment in order to meet your customers’ expectations can be a rewarding investment.
Take a look at some of the most popular options among online shoppers:
- BOPIS (buy online pick up in store). BOPIS provides shoppers with the convenience of coming to the physical store when they want and receiving their orders fast.
Since BOPIS requires serious inventory management organization, it turns stores into fulfillment centers. BOPIS also requires additional staff training since the staff is expected to organize pickup, while still offering great customer service.
- Curbside pickup. This is another product of the COVID-19 era that is exploding in popularity. According to Digital Commerce 360’s research, 6.6% of the 1000 biggest retail chains offered curbside pickup in early 2020.
By early 2021, it was offered by 50.7% of top retail chains. Customers are now approaching deliveries with safety in mind, and this is a critical point for companies to introduce curbside pickup.
- Same-day shipping. According to the Global Consumer Insights Survey, 41% of online shoppers are willing to pay extra for same-day delivery.
Unfortunately, there are many retailers that are not set up to provide same-day delivery due to the high costs of such fulfillment operations. Expectations are also constantly rising, and many shoppers need even more to be happy so they expect on-demand delivery.
- Scheduled delivery. Even when customers are not in a rush to receive the order as soon as possible, speed is still an important factor to include in your ecommerce fulfillment optimization.
It is very important to inform customers about the expected delivery time and to respect the promised timeline. Almost 24% of online shoppers would drop the order if delivery dates were not provided.
- Alternative pickup locations. Offering additional pickup locations is a win-win situation for you and your customers. It can help you avoid costs that come from missed deliveries while offering shoppers the convenience of picking up packages whenever it works best for them.
You can use anything from lockers to local corner shops and partner retail stores.
#2 Use technology to streamline ecommerce fulfillment centers
Using the latest technologies can streamline fulfillment procedures by dealing with and optimizing the following components:
- Item tracking
- Inventory management
- Carrier selection
- Payment processing
The right software will help you make use of existing resources such as your locations and staff to perform segments of fulfillment such as packing orders, allocating deliveries based on inventory, in-store deliveries, and more.
Optimizing fulfillment with technology will help you build customer loyalty by offering accurate and efficient deliveries and pick-ups.
When you decide to optimize your fulfillment processes with technology, first you need to digitize and connect your fulfillment center, retail, delivery, and CRM teams and their databases.
Ideally, all the systems and technologies behind your fulfillment operations should be unified, with all the data available on a single platform. This will allow you to manage fulfillment in a cost-effective way.
#3 Focus more attention on hyperlocal ecommerce fulfillment
More localized services bring benefits such as more speed and lower costs.
Focusing on hyperlocal ecommerce fulfillment requires perfect inventory management and logistics.
At any point, you must know:
- Where the inventory is
- What is available for pickup
- When it will be available
- How long it will take to reach the customer
- How the order will be delivered
If you do it correctly, doing fulfillment services on the local level will enable you to provide same-day or even two-hour delivery.
Hyperlocal fulfillment depends on technology to make sure that fulfillment centers can deliver the right orders at the right time.
Technology will enable your business to always display and offer accurate options.
If a product is located in a local fulfillment center, you can offer same-day delivery or pickup.
By providing accurate shipping information, you will gain a stellar reputation when it comes to delivery.
#4 Decide whether to outsource to a 3PL ecommerce fulfillment provider
Deciding whether to outsource to a third-party ecommerce fulfillment business is one crucial question for ecommerce businesses.
Outsourcing ecommerce fulfillment can fall anywhere between using a dedicated fulfillment center and expanding and using additional centers.
There are a large number of ecommerce fulfillment providers out there that are focused on providing superb fulfillment services.
For example, Amazon has become the standard for satisfying customer expectations.
Ecommerce fulfillment pricing models differ among providers.
Ecommerce businesses that don’t want to deal with fulfillment often choose marketplaces as a solution, since they eliminate the need for a website and help companies outsource everything.
Although using marketplaces is convenient, it comes with one big disadvantage.
At the end of the day, businesses have no customer data or any kind of performance stats they could use to improve marketing efforts and build loyalty.
If you are considering using 3pl ecommerce fulfillment, there are several benefits you should know about:
- Always using the optimal providers for your business needs.
- Using the right fulfillment services for every delivery
- Ability to optimize for cost and availability
- Automated delivery procedures
- Synchronized packing, shipping, and inventory management
- Consistency in brand experience and customer satisfaction
- Ability to measure and improve performance
- Powerful integrations
#5 Use software to automate your ecommerce order fulfillment
Using software to automate ecommerce order fulfillment operations will improve your:
- Customer loyalty
- Reduce the shipping costs
- Overall shipping operations
Automating order fulfillment for ecommerce will provide your shoppers with a creative range of shipping options.
When repetitive tasks are automated, staff can focus on more significant points that bring more value. Automation cuts out a large portion of staff inefficiency and allows you to scale and provide some in-demand shipping offers such as same-day delivery and free delivery.
It can also guarantee that inventory stats are accurate across different channels, which leads to higher delivery performance and greater customer satisfaction.
Automated ecommerce fulfillment solutions guarantee that everything is being done in the most logical way. It will help you improve speed and efficiency while reducing costs.
#6 Measure your ecommerce fulfillment services to improve them
Data collection and analysis is one of the best ways to improve your ecommerce warehousing and order fulfillment procedures.
Some of the simple data points that companies keep track of are the inventory on hand, product size, quantity shipped, order data, etc.
In order to see your operations on a granular level, you need to identify and measure the most important KPIs for your business.
KPIs will help you evaluate your current performance, target points for improvement, and measure the effectiveness of the improvement measures you already introduced.
Take a look at three important ecommerce metrics that could help you measure and improve fulfillment services:
- Order picking accuracy. This metric can help you evaluate the productivity and accuracy of employees and systems. Tracking it as a percentage will help you recognize patterns and help you tackle peaks in order demand with a lower error rate and fewer returns.
- Warehouse capacity. This piece of data helps you see patterns in warehouse space usage during average and peak periods. It can help you recognize opportunities to cut warehousing costs or expand seamlessly.
- On-Time Delivery. This KPI is often shown as a percentage of total orders. It is a crucial metric to evaluate the efficiency of your shipping processes and find chances for improvement. It also affects customer satisfaction.
Now that you’re aware how to optimize ecommerce fulfillment, you can go beyond that.