The Complete Guide To eCommerce Order Fulfillment
It’s the kind of problem most small business owners feel lucky to have: too many online orders to keep up with. As your customers’ demands start to outstrip your ability to meet them, how can you keep getting all these products out the door in a timely, efficient, and cost-effective manner?
One solution may be to sign up with an order fulfillment service. You may be unfamiliar with the fulfillment definition, or you may be wondering how it works. Keep reading for all the information you’ll need to determine if it’s time for your small business to consider an eCommerce order fulfillment service — and how to choose the right one.
Table of Contents
- What Is Order Fulfillment?
- The 3 Main Types Of Order Fulfillment
- 1) In-House Order Fulfillment
- 2) Outsourcing eCommerce Fulfillment
- 3) Dropshipping
- How To Create An Order Fulfillment Strategy
- Final Tips For Successful Order Fulfillment
What Is Order Fulfillment?
eCommerce order fulfillment is the process of delivering to customers the things they have ordered from your online store. Each time a customer places an order, you need a system in place to ensure that the right product goes out to the right customer in a safe, efficient manner. Order fulfillment incorporates several functions of your business, including collecting the order, locating the physical product, packaging it, and shipping it.
Of course, there are several different ways to approach order fulfillment, each with different strengths and target audiences. Depending on your business’s unique needs, you have choices for how you approach this essential business process.
The 3 Main Types Of Order Fulfillment
Most businesses approach order fulfillment in one of three ways:
- In-House: You or your employees handle everything yourselves.
- Outsourcing: You pay a third party to warehouse your products and ship them as customers place orders.
- Dropshipping: You solicit orders from customers, then place orders directly with a dropshipping partner, generally a wholesaler, to match your customers’ orders. You do not manufacture, warehouse, handle, or ship the products yourself.
Which model is the best fit for your business? Even within a single industry, there’s no one right answer, and you may find that your top choice changes over time, as your business grows and your focus and needs change over time. You might even use more than one model at the same time!
Let’s take a closer look at each method to help you identify which makes the most sense for your business, right now.
1) In-House Order Fulfillment
Many smaller businesses, especially those just starting out, handle order fulfillment in-house. Someone at the business’s physical location logs in customer orders, goes to a shelf somewhere, pull the products to meet fill orders, boxes items up, and sends them out to the customers.
- Full control of the process
- Easy to track inventory
- Direct contact with customers
- Quality control
- Space to store products
- Distracts you from other business functions
The Costs Of Doing Your Own eCommerce Fulfillment
The best part of handling fulfillment in-house is that you maintain control over and responsibility for the entire process of getting products into customers’ hands. You ensure that only high-quality products go out in the mail, you know exactly what ships and when, and customers know who to contact if any problems arise.
However, you may find that as your business grows, the costs of in-house fulfillment grow as well. Here are a few considerations:
- Storage space for products
- Time spent pulling and packing orders
- Cost of packing materials
If you run a home-based business, you may be storing products in a closet, spare room, or garage. What happens when you become so successful that you need more room? Are you prepared to pay for storage space offsite, and how much will that cost?
If you’re office-based, at what point does your order volume become so large that you have to hire a staffer to handle the job of pulling orders, packing them, and shipping them out, so that you have time to focus on higher-level tasks like growing your business?
In-house definitely can be the right choice for eCommerce order fulfillment. As your business grows, though, you may find it’s time to at least consider other options.
2) Outsourcing eCommerce Fulfillment
When you outsource order fulfillment, you pay a third-party service to house, pick, pack, and ship all your products. That third party accepts responsibility for ensuring the products arrive at your customers’ doorsteps in a timely manner and in top condition. Their efforts spare you the hassle of organizing shipping details yourself, and you just might save money on warehousing and shipping expenses.
- Frees up physical space
- No time commitment
- No pressure on your staff
- Need to find a trustworthy partner
- Can be tricky to track inventory
- Limits your control over a key customer contact point
- Added expenses affect your bottom line
How Much Does Outsourcing eCommerce Fulfillment Cost?
When you consider the price tag for outsourcing eCommerce fulfillment services, it’s important to look not only at the costs but also at some potential areas of saving. As you think about whether this method of order fulfillment would be the right choice for your eCommerce business, consider what you’ll pay and what costs you can avoid.
- Fees to fulfillment partner
- Cost of shipping products to partner warehouse
- Fees to pick and package orders
- Cost of extra inventory to store
- Savings on warehouse cost/space
- Savings on staff hours
The calculations you make will be unique to your business. If you’re shipping very small products, for example, you might find it makes financial sense to keep fulfillment in-house longer. If you are selling large, expensive products with a good profit margin, but only ship a few units a week, the time you spend on order fulfillment may not be a big concern.
On the other hand, if you’re already outgrowing the space you use to store products, or if you’re at a tipping point that makes you start to think about hiring staff, it’s definitely a good idea to look into the benefits and savings associated with choosing to work with an eCommerce fulfillment service.
The 5 Best eCommerce Order Fulfillment Services
The good news is that, if you decide to work with an order fulfillment service to handle your eCommerce shipments, you have plenty of good choices. Each of the following is a well-known fulfillment service that’s trusted by many small businesses. Their methods and prices may change, but each shipping company can deliver the fulfillment services you need.
1) Amazon FBA
If you’re already selling on Amazon, or want to jump into the mega online marketplace, Fulfillment By Amazon could provide an easy transition to outsourcing order fulfillment. Fulfillment By Amazon (FBA) Multi-Channel Fulfillment puts Amazon’s powerhouse to work for you. Multi-channel fulfillment lets you fulfill orders from many different sales channels, including your own website. FBA enables Prime fulfillment options for your products listed on Amazon. As a bonus, using FBA will increase the likelihood of your product being featured on Amazon. Because Amazon operates more than 50 fulfillment centers in the United States, you can distribute your products across multiple warehouses. This means your deliveries should incur shorter shipping times. Using FBA will also allow you to offer 2-Day Prime Shipping and Free Standard Shipping to customers who purchase on Amazon.
FBA is best for merchants who already sell on Amazon in addition to their own online store. Furthermore, FBA will be most profitable for merchants who sell small, lightweight products, as they incur the lowest fees. You won’t be able to include most branded marketing, as shipments will go out with Prime Packaging and Amazon does not allow the inclusion of materials that link to websites outside Amazon.com.
A 3PL (third-party logistics) company that seems determined to compete on at least one front with Amazon, ShipBob promotes two-day shipping, anywhere in the U.S. And they promise to take care of the logistics, so you enjoy the benefits without having to stress about doing the work to make it happen. Because ShipBob maintains eight fulfillment centers in the U.S. (in California, Texas, Pennsylvania, Florida, and Tennessee), you can keep costs low while still accessing the speedy shipping your customers crave. As a scalable solution, ShipBob is appropriate for businesses large and small. And it integrates with many major eCommerce platforms, including Shopify, BigCommerce, WooCommerce, and Amazon. Unlike Amazon FBA and some other eCommerce fulfillment providers, ShipBob does not charge for picking and packing small orders, only for receiving and storing inventory and for shipping orders. Vendors can use custom packaging with ShipBob.
3) Red Stag
Red Stag Fulfillment grabs attention with its pledge of same-day shipping and fulfillment from its two warehouses (for orders received by 3 or 5 p.m.) and a guarantee of 100% accuracy and on-time processing, with 97% of shipments reaching customers within one or two days and 99.9% within three. That could be enough to give you a competitive edge. Red Stag works with its clients on inventory management using a proprietary web-based warehouse management system. Although Red Stag promises to reduce inventory loss and damage, the company also handles returns processing and reverse logistics, because you can’t avoid customer returns entirely.
Although Red Stag can handle large, heavy packages, most of its eCommerce orders weigh less than 10 pounds, with many under one pound. There are no minimum shipment levels, but the company says it’s best suited for vendors that ship 200 or more packages a month. Red Stag offers a 30-day trial period that lets you sign up for fulfillment risk-free. At the end of the month, if you aren’t satisfied with what you’ve seen, you’ll pay nothing beyond postage.
With three warehouses strategically located across the U.S. (in Pennsylvania, Florida, and California), ShipMonk is situated to hook you into shipping that’s both speedy and affordable, thanks to discount arrangements with major carriers. ShipMonk can process international orders, too, and offers free integrations with about five dozen shopping cart platforms. Custom packaging and gift messages are encouraged, though each will incur additional fees. ShipMonk charges pick fees based on your shipping volume, with up to 500 orders per month incurring a $2.50 fee per order. Storage fees are based on product size, with each SKU item needing its own bin or pallet. The more you ship, the lower the fees, so ShipMonk probably is most cost-effective for higher volume eCommerce businesses.
This eCommerce fulfillment company operates two warehouse facilities and uses those to define shipping strategies. Surrounding each Whiplash facility is an “economy” zone, where shipments will reach 80% of the population within two days, at an economy price. Outside those two zones, shipments require an “upgraded method,” meaning they take a little longer and/or cost a little more. Whiplash works with major U.S.-based shipping carriers and includes international options in Canada and the U.K.
The Whiplash platform allows users to control order routing with rules and bulk editing tools. You can pause and edit orders, customize each touchpoint with customers, and track each item’s status and history. Whatever shopping cart platform you use, there’s probably an integration you can install. You can also create orders individually and import them via CSV. Whiplash charges a minimum monthly storage fee of $250 in addition to per-package fees and shipping costs. It’s probably best suited for eCommerce vendors doing high-volume business.
Dropshipping is a different eCommerce model, and it requires a different approach to fulfillment services. As a dropshipper, you do not create or hold any product inventory. Instead, you’ll work with a partner, most often a wholesaler and sometimes a manufacturer, with whom you’ll place orders for products only after your customers place an order with you through your website. Your dropshipping partner stocks the item and then ships it to your customer, without your ever having touched the product.
- Low cost of entry
- No storage fees
- No overhead
- Purchase only what you have sold
- Low profit margins
- Hard to differentiate your marketplace
- Limited contact with customers
- Limited control over shipments
How Much Does Dropshipping Cost?
Although it can be a moderately risky business model, dropshipping is worth investigating for two reasons: its low cost of entry — you don’t have to buy an inventory to get started — and its ongoing low overhead.
Because you won’t be storing any products at your place of work or a warehouse, your monthly costs will be limited to paying for the products you sell, once customers place an order with you, and paying your wholesale partner to ship them out to customers on your behalf. That’s it, other than the costs of running and maintaining a website for online selling.
The Best Dropshipping Options
As you consider dropshipping partners, heed a word of caution. Dropshipping presents a good business opportunity for careful users, but it’s a field that’s ripe for scammers, unfortunately. As the eCommerce vendor, you’re responsible for placing the order, but your dropshipping partner is responsible for order fulfillment. So if you choose an unreliable source for your products, you may wish you had proceeded a little more slowly and done more research to find reliable dropshippers.
If you’re new to the idea of dropshipping, it might be smart to start with a well-established wholesale option. Here are a few to choose from:
Become a member of the Oberlo community (it’s free to join), and you unlock access to your own online store with a free Shopify trial. Then you can add products to your new store by searching in Oberlo or in AliExpress. Be sure to watch the linked videos to get an overview. Then follow the instructions to take your site live. Of course, you’ll want to put a little more thought into it, but when you’re ready to go, it’s easy to do. And if you already have a Shopify store, you can add Oberlo products easily.
Oberlo can be a particularly good option for someone who has an established online store and wants to add some related products to round out your offerings. Look under each item to see how many times it’s been downloaded and what kinds of reviews it’s garnered.
If you have a product category in mind, head over to Sprocket to explore your options. If you have an online store built on Shopify, WooCommerce, Wix, or BigCommerce, you can connect it instantly and get started in dropshipping. Sproket offers thousands of new products you can list on your own store, and there are also used items available at reduced prices. The shipping price is listed underneath each product, so you can factor in shipping costs as you set your prices.
It’s free to start using Sprocket. It can be a good option for anyone who wants to get started in eCommerce. With bestsellers and trending items highlighted on the site, you can see what kinds of items might be good for you to add to your store.
Alibaba is China’s biggest online marketplace, and AliExpress is its retail eCommerce platform. To access its products, you just need a website enabled for eCommerce. List items from AliExpress, wait for orders, then pass those orders to the Chinese supplier, who will ship directly to your customer.
AliExpress is suited for dropshippers who want to access an incredible range of products on the cheap, including electronics, jewelry, and trending kids’ items.
How To Create An Order Fulfillment Strategy
You may be intrigued by the possibilities eCommerce order fulfillment offers your small business. Or you may be ready to make arrangements with one of the top eCommerce fulfillment companies already mentioned. Either way, you have a little more work to do before you make any decisions.
Analyze Your Current Fulfillment Process
Any time you are looking to make a change in your core business strategies, you should start by looking at the way you’re doing things now. What improvements are you trying to make? If you want to improve delivery times, you may have different criteria for choosing a fulfillment partner than if your goal is to save staff hours. Identify areas for improvement, then look at the possible partners and evaluate their offerings against those goals.
Pick The Right Fulfillment Model
Your analysis of your current process may turn up opportunities for improvement that don’t require radical changes to the fulfillment methods you’re using now. For example, if one of your goals is to save money on shipping, you may be able to make small adjustments to your processes and see big savings. Investigate the cost of the method you choose, too. Will outsourcing order fulfillment really save you money in the long haul, when you factor in the indirect costs, like shipping your products to the fulfillment center? How do those costs compare to adding hours to a part-time staffer’s schedule or hiring someone new? The answers to questions like these will depend entirely on your business goals and your own unique situation. Answering the questions you uncover will lead you to the best choice.
Set Your Budget
Once you make a decision and choose an order fulfillment company you think you’d like to work with, connect with a customer service rep to discuss costs. When you provide detailed information about your average monthly shipments, product dimensions and weight, and so on, you should be able to get an accurate quote that details what you can expect to pay. With that number as a goal, you’ll have a way to analyze your results at the end of the quarter or the year, so you can see if your decision is paying off. Don’t be afraid to put a value on your own time, and your staffers’ too. If outsourcing makes your eCommerce business run more smoothly, that’s a serious intangible benefit; you can’t necessarily put a price on it, but you should not undervalue it!
Final Tips For Successful Order Fulfillment
If you decide it’s time to outsource order fulfillment, these tips may help you make the best choice of partners:
1) Choose a fulfillment company that integrates with your online store.
You’ll avoid a lot of hassles if you choose a company that offers pre-built integration with the shopping cart platform you use. Benefits include things like syncing orders and inventory automatically, and having orders placed at your store sent directly to the fulfillment center to start the order process without your direct involvement.
2) Consider warehouse placement.
Shipping costs depend on the distance a package must travel to reach its destination, as well as its size and weight. You can’t necessarily control your products’ dimensions, but you can choose a fulfillment company that has facilities placed strategically around the country or, if your market exists as geographic clusters, near where your customers live.
3) Don’t overlook branding.
Some fulfillment companies welcome specialized packing and inserts. If that matters to you, make sure you know if your top choice offers those options — and find out how much you’ll pay for the privilege.
5) Don’t rush the research.
Read through current customer reviews, study the terms of service, call each option for a quote, and ask for references from a company similar to yours in terms of size and needs.
Like any other part of business, eCommerce fulfillment can involve trial and adjustment. Whatever method you decide to test, give it time to deliver results. Put a date on your calendar now, though, so you know when it’s time to take a look and see if your decision is paying off. In a few months, or after your busy season has passed, you’ll have more information that you can use to determine if you’ve made the right choice — or if it’s time to give something new a try.
Next Up — Dropshipping: A Quick Guide to Getting Started
See More Articles From Our Shipping Series