Minimising wasteful activities and improving online order fulfilment efficiency should be a goal for any product business. This allows you to spend less on running the business without sacrificing customer satisfaction.
This article offers 12 tips for improving your online order fulfilment, and a few best practices to follow if you plan on outsourcing to a third-party service. But first, let's recap the definition.
What is online order fulfilment?
Online order fulfilment is the process of fulfilling an order placed by a customer – either online, through an ecommerce store or marketplace, or offline, but fulfilled using an online system. Order fulfilment begins as soon as an order is placed and ends when the customer receives all the products they've requested.
Online order fulfilment statistics
- The global retail eCommerce CAGR is estimated at 11.3% for 2023-2027
- 89% of consumers say 1-2 day shipping is fast, while only 42% consider 3-4 day shipping fast.
- The average cost to fulfil an order for online retailers is 70% of the average order value (AOV).
- Fewer than 27% of brands always offer site-wide free shipping for domestic orders.
- 44% of consumers are likely to become repeat buyers after a personalised shopping experience.
Online order fulfilment begins and ends with the customer: Improving it means giving the customer exactly what they want.
Benefits of online order fulfilment optimisation
It's important for businesses to optimise the order fulfilment process, as this will contribute to greater commercial success and growth.
The benefits of more efficient fulfilment include:
- Reduced costs
- Faster fulfilment times
- Higher repeat purchase rate
- Happier customers
- Better brand reputation
- Minimal returns
- Better pricing with your suppliers
- Higher employee job satisfaction
This list is by no means extensive. Below, we detail 12 of the most effective tips for optimising online order fulfilment.
How to improve the online order fulfilment process: 12 tips and strategies
"For more than a third of businesses, the biggest logistical challenge the pandemic caused was pressure to fulfill more orders, faster, and at lower cost."
Online order fulfilment is not a single process, rather the integration of numerous contributing workflows. The following tips are designed to help you optimise those workflows and improve efficiency every step of the way.
1. Ensure the accuracy of your inventory
One of the quickest ways to lose a customer is through inaccurate inventory records – especially if they purchase a product online, only to be told it is no longer in stock.
To avoid this situation, those in charge of inventory management need to consistently check the real stock levels against the company records and update them in real-time.
By using inventory management software that supports tools such as barcode scanning, you can efficiently track and check stock levels with ease.
2. Optimise your slotting
Slotting optimisation refers to the location of items in the picking area of the warehouse so that frequently purchased items are placed together and close to the entry so that walking and transferring activities are minimised.
However, it must be implemented carefully because you could create a new problem of congestion if all frequently purchased items are in too close a proximity to each other.
3. Optimise box selection
This refers to prediction or calculation of the weight and dimensions of items in an order so that the smallest box or set of boxes can be accurately picked to hold the order. This is essential to reduce packaging materials and shipping costs which are contingent on box weight and dimensions.
4. Fix reporting gaps
It's impossible to improve a process and find solutions to problems without sufficient information. Identifying problems and categorising them involves reports from line staff and managers who have had to deal with issues or who have analysed processes in depth.
If you have access to a business intelligence dashboard, you'll have a greater ability to make smart business decisions based on real data.
Part of identifying reporting gaps might also be allowing your staff to dream and asking them to write down how things would work in the ideal world to make their job easier.
Each of the steps in your online order fulfilment process can be broken down into smaller parts to make it easier to identify areas for improvement.
5. Integrate information for speed and accuracy
Accurate orders rely on the flow of information from the point of sale to the warehouse where it will be packed. This process needs to be accurate every step of the way if orders are to be fulfiled quickly and accurately.
To improve this process, an honest audit is required at frequent intervals so that any obstacles in the process can be dealt with quickly.
A centralised inventory system that speaks to your sales and accounting channels can also ensure better cohesion across the business.
6. Implement demand forecasting
Forecasting customer demand for each sales channel will help to ensure you are never holding too much (or not enough) stock.
Use a tool like Unleashed's AIM to better understand your customer behaviour and be prepared for fluctuations in demand at any given time.
7. Break each process down into smaller parts
By taking each of the individual processes from your order fulfilment workflow and dissecting them into small steps, you can easily identify bottlenecks and unnecessary motions to remove.
In the put-away process, for example, there may a step in which the task of moving goods from the receiving bay to the shelf creates downtime for a particular employee. When you break the process down, you may find that task could be split between two employees and allow each to perform their role more efficiently.
8. Simplify your returns process
Customers sometimes need to make changes to their order or return stock based on your businesses returns policy. Allowing some leeway in processing orders helps better your order fulfilment process.
Set up an easy-to-follow returns process so that you, your customers, and your staff always know exactly what to do if an item must be returned.
9. Evaluate customer promises
Every company has a reputation to uphold. Some companies choose to enhance their reputation by making a high-quality product; others aim to provide goods at a low price, and some companies aim to deliver their products quickly.
Delivering products in a short time frame is great in theory, but if your order fulfilment process is lagging, then this promise could suffer.
Look at the frequency of delivery vehicles and how you can guarantee faster shipping. If you can streamline the distribution element of your online order fulfilment process, customers will take notice.
10. Maximise order picking efficiency
The order picking process is a crucial component of order fulfilment. Ensure inventory is clearly labelled and easily accessible for workers in the warehouse or store to find and pick to fulfil an order.
Identify areas of the picking process where any activities take too long to achieve or for areas where frequent failures occur. This can highlight inefficient processes and identify opportunities for improvement.
Getting in sync with your distributors and suppliers can help improve efficiency when fulfilling online orders.
11. Streamline delivery
Getting products into the hands of the customers and on time is a huge task.
If you’re using multiple distribution centres make sure the inventory control processes are ready to manage the extra load. You’ll need to ensure that each distribution centre has a healthy balance of stock to deal with the influx of orders.
Take a closer look at shipping patterns and make sure the right inventory is in the right distribution centre to decrease shipping costs and expedite shipping times.
12. Work with your suppliers
Supplier relationships are a huge asset to have that can support your order fulfilment process.
If you are running an ecommerce business, you will have interactions with many different suppliers. These suppliers will provide materials for products, supply equipment for warehouses and will be the ones who deliver the actual merchandise.
Having good working relationships with your preferred suppliers is optimum, but also having solid relationships with backup suppliers is important. A strong network of suppliers will ensure that you can deliver goods to your customers and if something goes awry in the process it is likely that they will be more willing to help you.
Online order fulfilment challenges: 5 mistakes to avoid
If you've decided to outsource online order fulfilment to a third-party service, you need to go about it the right way.
Avoid the following mistakes when dealing with a third-party fulfilment service.
1. Selecting a fulfilment partner recklessly
It's always tempting to go for a partner that charges significantly lower rates. However, always do your background checks because opting for a low-priced company may cost you more in the long run.
Investigate why companies are able to offer extremely low prices: is it because they may not have updated technology, have low controls and metrics, or have the least amount of customer service?
While price isn’t always an indicator of how good or bad a company’s service may be, very low prices may raise a red flag – so do your homework.
Choosing the fulfilment company close to your business may also sound like a great idea, but a location close to you shouldn’t be the only thing taken into consideration. Selecting a location closer to your customers will help speed up delivery time and may end up being a more beneficial option.
2. Not planning for implementation
Fulfilment providers do a lot more than just pick, pack and send your products to customers. They can provide a vital competitive edge in today’s marketplace if you allow them to contribute to early discussions and planning sessions.
However, the onboarding phase can be a mammoth task. You've got to make sure you're both on the same page when it comes to lead times, returns management, storage conditions, packaging, supplier management, and any other fulfilment tasks.
If you rush the handover or implementation stages, the risk of costly mistakes occurring is much higher.
For businesses seeking to outsource online order fulfilment, the partner selection process should be taken very seriously.
3. Not setting clear performance expectations
100% fulfilment rate is always the goal. However, errors happen in the fulfilment process.
The key is understanding why they happen and fixing the root cause so the same errors are not repeated. This can be done by setting up fulfilment KPIs and metrics to track.
Mutually agree with your partner on reasonable performance expectations given your volumes, the level of automation in the fulfilment warehouse and other factors. Then work out a process for KPI management.
4. Lack of management after initiation
For the fulfilment process to operate successfully over time, the partnership players need to be in sync on KPIs and expectations. Agree on the key metrics to measure and how often performance reports will be delivered.
This reporting process should be supplemented by regular meetings to review performance and address any tactical or strategic issues that may arise.
5. Failing to communicate
Many companies hold back information when it comes to sharing sales and inventory-related projections.
However, letting your fulfilment partner know about your projections and seasonal demands ahead of time is crucial so that it can make proper arrangements to be able to handle the influx of orders about to come its way.
The fulfilment company will need time to adjust and flex their fulfilment capacity. This is usually something they can get done with ease when it has advanced notice but can be a difficult task when given short notice. So communication is key.
Online order fulfilment methods
How you manage your online orders is entirely up to you.
However, different fulfilment methods come with challenges and costs that must be considered before deciding which will be best for your business.
Let's quickly go over a few of the most common online order fulfilment methods.
1. Third-party order fulfilment
Third-party fulfilment is the process of engaging a third-party logistics (3PL) provider to outsource various services such as inventory control, purchasing, and shipping.
3PL order fulfilment enables business owners to step away from the operations side of the business and focus on other areas like growth and customer management. The provider will typically supply a fulfilment warehouse for their clients to store the goods they sell. Products will be delivered to and shipped from this facility by the 3PL.
2. In-house fulfilment
In-house fulfilment or self-fulfilment is where orders are managed and shipped directly by the business selling that product.
Businesses that wish to fulfil their own online orders will need to invest in a storage facility, such as a warehouse, factory, or retail store. While in-house fulfilment enables more control over what goes in and out, it requires additional staff and software that must be accounted for when forecasting expenses.
3. Supplier-managed fulfilment (dropshipping)
Dropshipping or supplier-managed fulfilment involves shipping products directly from the original vendor or manufacturer to the customer.
In this situation, the merchant or online retailer does not physically involve themselves with the order fulfilment process.
While dropshipping offers cost-savings benefits and allows merchants to sell products with minimal operations knowledge, it comes with a higher risk of returns as there is no way of quality checking orders before they're shipped.
