Understanding Order Fulfillment To Implement Strategies For Its Improvement
- 19 May 2023
While e-commerce might seem like an easy way of doing business, only the people involved know the sheer amount of juggling that is required. So why do they do it? ddddd
The simple answer is to redefine customer fulfillment and add value.
With customer expectations increasing manifold, there are more things associated with order fulfillment than just processing a sales order to customer expectations.
It is now extremely crucial for the success of a business to have a well-defined order fulfillment strategy. Why? The answer is simple!
A BUSINESS SURVIVES ON SALES AND SALES SURVIVE ON ORDER FULFILLMENT!
What is order fulfillment?
Consisting of 8 important components, order fulfillment involves the sequential execution of all these steps in their correct order.
- Inventory sourcing: While there might be multiple sourcing points, what is important is to ensure that each incoming inventory is:
○ Inspected and
○ Entered into the inventory database
This will ensure complete sync between the purchase order and the materials received.
- Inventory storage: After goods are received and inventoried, they have to be segregated and stored in their allotted spaces for long-term and short-term storage. Since items are generally kept in stock for the time required for their proper distribution, ensuring premium storage is important.
- Order processing: Based on the customer order specifications, ordered products are sorted. For e-commerce websites, proper integration of order management software within the shopping cart automates this process and makes it accurate. These ordered materials are then shipped to the nearest distribution for further processing.
- Picking: The sorted customer order items are then selected from the warehouse and sent to the respective packing areas.
- Packing: After receiving the selected customer items, they are packed based on the customer’s specifications and the fragility of the items chosen. Dimensional weight optimization is another factor that is taken into consideration while packing. This helps to optimize space in the delivery vehicles and lower shipping costs.
- Shipping: These packed items are then sent to appropriate transportation channels to ensure their shipping to the distribution centers nearest to the customer’s delivery locations.
- Delivery: The orders are then finally delivered from these distribution centers to the delivery address input by the customer.
- Returns processing: There might be times when the customer might want to return the ordered and received materials. Some of the reasons for the same might be wrong shipment, inferior quality of goods, delivery delay etc.
Once a return is initiated by the customer, a return label is generated when the item is picked from the customer. This item is then taken back to its originating warehouse and restocked. After this, a refund is initiated and the customer gets back the money paid for the returned items. This is a critical process and needs to be executed very carefully to ensure there neither the customer nor the manufacturer/distributor incurs any loss.
Challenges faced in order fulfillment
No matter how simple the process might seem to be on paper, it is very difficult to execute it flawlessly. Some common kinks and obstacles faced include:
- No stocks of ordered items: This is a common problem faced by most e-commerce companies. Inventory management is a critical aspect of order fulfillment since not having stocks of the desired items can lead to customer dissatisfaction which can be difficult to undo.
- Ordering too many: Customer demands vary from time to time making it difficult for e-commerce companies to decide on the optimum quantity of stocks to be maintained. Too many of a product can lead to inventory aging while ordering too less might lead to customer dissatisfaction.
- Logistical issues: This is a critical pain area for all e-commerce companies. Some common logistical issues faced include delayed or missing deliveries, broken and battered item delivery, wet packaging etc.
- Supply chain execution: This deals with the proper execution of all the processes associated with order fulfillment. Using an appropriate software management system is a must to ensure flawless execution of all the different steps of the process.
Best practices for superlative order fulfillment
However, achieving efficacy in the order fulfillment process becomes easy with the adoption of a good order fulfillment strategy. Some of the best practices that should be included in this strategy are:
- Return process streamlining: While few think it important to handle returns efficiently, the ones who do enjoy a loyal customer base. Hence, focusing on this aspect is extremely important. Having a good after-sales policy makes for a good reputation for the company. This results in enhanced sales and customer value addition. Additionally, it also makes it easy for the internal logistics team to execute the return process. Thus, they can meet customer demands with greater accuracy quickly.
- Inventory management: Another aspect that can potentially redefine ecommerce ROI is good inventory management. Ensuring the customer never wants those items that he desires to place an order for is important. It is also conducive to enhanced customer satisfaction. Some metrics which make for a good inventory management strategy include knowing about:
○ Backorder rates
○ Demand forecast accuracy
○ Inventory shrinkage
○ Ratio of lost sales
○ Customer satisfaction score
○ Fill rate etc.
Good warehouse management also makes for a great order fulfillment strategy. If the warehouse is properly organized and inventoried, finding stocks becomes easy and losses suffered due to missing stocks get minimized.
- Process automation: Each step of the order fulfillment process needs to be automated. While this may require a good amount of upfront investment, it pays off in the long run by:
○ Minimizing costs
○ Making the processes time-efficient
○ Improving working conditions
○ Making for safe operations
By reducing instances of package handling by touching, ecommerce companies can prevent potentially damaging conditions like:
○ Product damage and shrinkage
○ Employee injuries
○ Packaging errors etc.
Minimizing human contact with the packages also results in reduced friction.
- Customer service software: Choosing a customer service software that syncs easily with the implemented order fulfillment software will prevent these processes from working in silos. When they are seamlessly integrated they help ecommerce companies to ensure all-round satisfaction with greater efficiency and accuracy.
- RFID technology for inventory tracking: RFID or Radio-Frequency IDentification is one of the modern technologies for tracking and managing inventory stocks. It far outweighs traditional systems by:
○ Offering ecommerce companies the ability to gain a better understanding of their inventory
○ Using additional metric-based levels of inventory analytics
Having a good order fulfillment strategy helps to ensure better customer service thereby resulting in happy customers and enhanced value-added sales; something that every ecommerce company strives to achieve.
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