If you run an e-commerce business, you know that ensuring a seamless shopping experience from ordering all the way to receiving the delivery is essential to increasing customer satisfaction and building repeat business opportunities. This is why having an in-depth understanding of the fulfilment process and making the right choices when it comes to your e-commerce fulfilment strategy are key elements in ensuring business growth.
What is fulfilment?
Starting with the basics, let’s look at what fulfilment means. The term “fulfilment” in retail relates to the process involved in delivering goods to a customer, from the moment the order is received to the moment the package arrives at the customer’s address.
Fulfilment is mostly associated with the e-commerce trade, as shops that sell to customers in person are less likely than online retailers to have to use the mail to deliver an order. As many businesses don’t have the infrastructure to handle the fulfilment process in-house, a fulfilment services provider is often employed to take care of fulfilment.
Here are some of the steps included in the fulfilment process:
- Warehousing products
- Managing stock availability
- Processing payment for received orders
- Packaging the order
- Placing the correct labels
- Shipping and delivering the order
- Keeping the customer notified of the delivery status
- Dealing with returns
Types of fulfilment
There are different ways to approach fulfilment. Generally, there are three types of fulfilment strategy you could go for: a fully hands-on merchant fulfilment, a shared-responsibility dropshipping approach, or delegating your fulfilment to a third-party fulfilment services provider.
The merchant fulfilment approach is a hands-on solution where the responsibility for fulfilment lies solely with the business owner. With no outside parties involved, the retailer will manage and execute all stages of fulfilment in-house, including order taking, stocktaking, invoicing, storage and shipping.
Maintain control: The main benefit of merchant fulfilment is that it allows you to stay in control throughout the entire process, so you can oversee the packaging, labelling and all other details. This gives you the opportunity to make executive decisions and last-minute changes whenever you see fit.
Save money: Doing everything in-house means you won’t have to worry about the added cost of outsourced fulfilment services.
Time-consuming: Packing and labelling can both be extremely time-consuming processes. While you’ll be cutting down on the cost of hiring a third party to deal with this, you will have to account for time in-house to get the job done.
Limited scalability: The above is especially true for bigger businesses. The more orders you have the more difficult it becomes to fulfil the orders by yourself to the point where it becomes impossible. Therefore, if you want to scale your e-commerce operation, you will eventually need to move away from merchant fulfilment.
Hard to organise: Keeping track of all orders, where they are in the fulfilment process and the available stock, can be quite difficult. To be able to manage this, you will have to implement a centralised organisational system.
Dropshipping is the middle ground of order fulfilment strategies. In this scenario, you, as the online retailer, act as a distributor for a certain supplier. Your role is to advertise and sell goods but the responsibility for stocking the product and then shipping the orders to the customers stays with the supplier.
No logistics responsibilities: The challenges of distribution are not something you will have to worry about. Organising and tracking deliveries are both within the duties of the supplier.
No need to deal with warehousing: Storing large amounts of goods requires space, machinery and organisational systems in place. Not having to plan for warehousing is a major weight off your shoulders.
Little to no cost: With warehousing and logistics out of the equation, there are little to none fulfilment-related costs for your business to pay.
Low-profit margins: In a dropshipping business most of the profit for each sale goes to the supplier, which means you will have to rely on high volume sales to make money.
High Competition: Landing an exclusive deal with a distributor is nearly impossible, so chances are there will be many direct competitors selling the exact same product as you at competitive prices. This further hurts your profit margins and limits your opportunities to build a unique brand.
No control over quality: Whether it’s the quality of the product itself or the punctuality of the delivery, you will have no way of directly impacting the quality of the service.
It may sound like the name of a Star Wars robot character but 3PL, in fact, stands for third-party logistics. This fulfilment strategy means that you keep control over the production of your product but the entire fulfilment process, including order processing, storage and shipping, is handled by a third-party fulfilment services provider.
Multiple shipping locations: A third-party provider could give you access to multiple strategically placed warehousing facilities, allowing you to expand your business nationally and even globally.
Same-day shipping: When it comes to online retail, being able to offer same-day or next-day delivery might be what drives the final decision to buy from you. 3PL ensures you can deliver express services.
Professional services: Outsourced fulfilment services are done by specialists in each area, from stocktaking to packing and project management.
Easy to budget for: When choosing a 3PL provider, you will be given a quote to tell you exactly how much you will have to pay. This takes unpleasant surprises out of the fulfilment process.
Commitment to a single 3PL: Choosing a fulfilment services provider is naturally followed by signing a contract and committing to long-term services. It takes time and effort to research suitable options and to compare quotes from competing providers.
Transferring goods to a warehouse: Another thing to put on your list of added costs is that it is your responsibility to deliver your goods to the third-party provider’s warehouse.
Personalisation isn’t a given: Adding branded packaging or sending a handwritten “Thank you” note with each order aren’t part of the basic fulfilment process and you will be charged extra for those.
What do the third-party fulfilment services include?
A third-party fulfilment services company is a business that is solely devoted to building expertise in the different stages of the fulfilment process.
There are three main things a fulfilment centre operator will do for you:
- Inventory storage for all your goods
- Pick & pack order processing
- Shipping for all orders
Of course, those are just the core services. Third-party logistics can also include a number of added-value services, including:
- Reducing the cost and speeding the deliver of blister packaging
- Kitting similar products together to minimise cost
- Personalised/branded packaging
- Dealing with returns, including reverse logistics and even refurbishing
- Safe disposal of discontinued products
Outsourced fulfilment services benefits
Choosing to go down the 3PL path not only takes a huge load off your shoulders but it also allows your business to grow faster as it frees up your time, gives you access to expert services and presents you with opportunities to scale your business.
Some of the main benefits of third-party fulfilment services are:
The more your business grows, the bigger the volumes of orders you will have to deal with. Using third-party fulfilment services allows you to grow your fulfilment capabilities at suitable rates.
- Reduced shipping cost
fulfilment specialists deal with large shipping volumes daily, therefore they have established relationships with carriers and can secure better rates.
- Increased efficiency
Using the help of a fulfilment centre means that only trained personnel will be involved in the fulfilment process. With existing systems in place, a 3PL provider can easily manage the warehouse staff without a need for supervision from you.
- Automated order processing
From the shopping cart to the warehouse and the customer’s front door – the whole process will be automated.
- Detailed reporting and tracking
Outsourced fulfilment services providers use a comprehensive digital system which allows you to keep track of every order and gives you detailed reports on all transactions. Order tracking should also be an available function for both you and the client.
- It’s budget-friendly
Third-party fulfilment for large shipping volumes usually is cheaper than handling the process in-house, as you won’t have to commit to long-term warehouse leasing, employ more permanent staff or invest in upskilling. Not to mention, it’s easier to budget for as you will know exactly how much you need to pay in advance.
- Easier returns
Automated returns handling and processing are some of the added benefits of third-party fulfilment. Certain providers will even deal with refurbishing returned items and restoring them to a sellable condition.
- Less stress
Letting someone else deal with the hassle of warehousing, stocktaking, shipping and delivery issues frees you up to spend time on sales and marketing and reduces the amount of stress you are under. Also, in case you have questions about fulfilment issues, you have an expert support team to answer them for you.
- Professional advice
Sometimes organising your fulfilment can be challenging. Having a team of experts to give you advice can be a huge asset to your operation.
- Opportunities for global expansion
By offering a number of domestic and international warehousing locations, a 3PL provider can increase the speed of delivery and enable a global market expansion for your business.
How is the cost of fulfilment calculated?
There is no generic answer when it comes to the cost of fulfilment. Many factors influence the price you will be asked to pay, so a fulfilment services provider will always start by giving you a free quote.
Depending on the size of your order, whether you need express services or not, where your clients are based (in the UK or international), the estimated cost will vary. Some of the things that you are likely to be charged for in a fulfilment quote are:
- Onboarding fees for new customers
- Cost of delivering your goods to the warehousing facility
- The assembly of the final products (if applicable)
- General storage fee and additional storage requirements fee(e.g. special temperature)
- Packaging fees per individual item or by pallet
- Labelling and placing barcodes
- Express delivery services
Some fulfilment specialists also offer additional services, such as sending related items together rather than individually (also referred to as kitting), refurbishing returned items and ensuring retail compliance.
COVID-19 and fulfilment
The COVID-19 pandemic has had a massive impact on all areas of business, including shipping. With lockdown rules and physical shop closures, having an online presence and a well-developed e-commerce network has become incremental to business survival for many retailers.
As people are forced to stay at home, the demand for online shopping has increased. However, third-party fulfilment providers are experiencing a number of challenges related to the pandemic.
Due to sickness and childcare needs during school closures, warehouse staff may be forced to stay home and warehouses may need to work at a reduced capacity. In some cases, this may even lead to warehouse closures.
Furthermore, postal delays are to be expected both nationally and internationally, while border closures can affect international business and even result in the inability to deliver goods.
All of the above are issues that a competent 3PL provider will have considered and accounted for in their strategy.
Is third-party fulfilment right for you?
In the beginning, most start-up e-commerce businesses manage fulfilment on their own but as they grow, many switch to outsourcing for their fulfilment needs. However, deciding whether the time has come for you to choose 3PL can be tricky.
The decision is ultimately down to each individual business’ needs and capabilities but there are four main factors to consider when deciding whether to outsource:
If being responsible for order fulfilment prevents you from growing your business because you are too preoccupied with stocking, packing and shipping, then you should probably look into outsourcing.
If you have cyclical order increases, you may find that when you have fewer orders your deliveries are done on time but when you find yourself in a busy period, fulfilment quality is lacking. This is a clear sign that it’s time to look for a third-party fulfilment partner.
If your business is growing and you suddenly find yourself swamped with new orders, you would have an increase in sales to celebrate on one hand and an unmanageable volume of orders to handle on the other. You shouldn’t let that stop you from expanding your business, all you have to do is outsource fulfilment to a specialist in the field.
The bigger your business gets, the bigger your warehousing needs become. Therefore, when you are running out of space to keep your inventory, you should find a warehousing provider to help you out.
Of course, third-party fulfilment isn’t right for every business. That being said, you probably shouldn’t outsource if:
- You only deal with a small volume of orders
- You sell highly-personalised, one-of-a-kind items, usually one per order
- You don’t have enough funds to pay a 3PL
How to choose a fulfilment partner?
If you have decided that it’s the right time to start using third-party fulfilment services, the next step is to choose the right fulfilment partner. It’s important to take the time to find the right fit. Starting with comparing quotes is the natural thing to do as the cost will play a major role in the final decision. However, you should also know what questions to ask a fulfilment services specialist in order to fully understand what you are getting for your money.
Here’s a list of things to consider we have gathered for you:
Have they worked with clients similar to you?
Having similar experience ensures inside knowledge about potential issues associated with your specific industry.
What technology do they use?
Allowing for easy integration is extremely important to building a functional fulfilment process. Some fulfilment services will offer better tech that allows for more automation and even gives you smart suggestions for development.
What data and reporting do they offer?
Knowing your customers and understanding your performance is key when running an e-commerce business. The reports you receive from your 3PL provider should give you enough actionable data to be of use when planning your overall strategy, as well as with making decisions related to purchasing and inventory.
What added value services do they offer?
Some businesses can benefit from a range of added value fulfilment services but not all third-party providers offer those. Even if you don’t currently require any extras, choosing a provider that has the capability to offer those if you need them in the future can be a smart decision.
Where are their warehouses located?
The location of the 3PL provider’s warehouses is important because it can impact the cost and speed of shipping. This is why you should look for someone who can offer a warehousing solution close to your target market.
Do they offer express shipping?
Same-day and next-day delivery are big drivers for conversion. You would benefit from working with a fulfilment specialist who can offer this type of express service.
What is your five-year plan?
Even though this question is directed to your own business rather than the fulfilment services provider, it plays an important role in finding the right partner. If you are looking to expand internationally in the near future, finding a 3PL provider with global shipping capabilities is important.
What is their COVID-19 strategy?
As we mentioned in Chapter 2, the COVID-19 crisis poses several risks to the fulfilment process. Your fulfilment service provider should be able to communicate clearly their strategy for dealing with those. Don’t expect an answer set in stone though, as the situation is constantly evolving. What’s important is that the provider acknowledges the issue, shows a good understanding of the situation and demonstrates a willingness to communicate openly with you to set realistic expectations.
How can ADP Distributions help?
At ADP Distributions, we rely on our 50+ years of combined experience to help businesses with their e-commerce fulfilment needs. We value each of our clients and we provide a tailor-made service to suit your individual requirements. With our fast, reliable and affordable fulfilment services, you can focus on making a profit while we take care of the rest. Here’s what we have to offer:
- Modern UK-based fulfilment centre
- Same-day and Overnight services
- Global fulfilment services for the international market
- Tracked delivery options
- Easy to use online ordering
- Stock control and inventory management
- A bespoke approach to every client
For a relationship with a fulfilment partner you can trust, get in touch with ADP Distributions today and let us take care of your order fulfilment from start to finish.