Understanding eCommerce Fulfillment: Definition and Process
eCommerce fulfillment is a set of outsourcing logistics services. For example, an online store does not rent its warehouse but delegates this to a fulfillment operator. It takes care of accompanying the goods from order placement to delivery to the end buyer. The high growth dynamics of e-Commerce is the main factor influencing the development of eCommerce fulfillment.
Why does eCommerce need fulfillment services?
Ecommerce fulfillment allows the delivery of goods without investment in logistics. There is no need to search and rent a warehouse, hire employees and pay for their work. All processes can be handed over at once to an experienced fulfillment operator who knows how to:
- Package a particular product
- Ship goods to domestic and foreign marketplaces
- Pass customs control
- Carry out quality control, checking the goods for defects
- Work with returns from buyers
Fulfillment frees up time that can be invested in developing the business: increasing sales, marketing, etc. Many companies choose to use software that automates and monitores fulfillment operations, like order processing, stock management, and provides AI-powered planning.
What are the benefits of eCommerce fulfillment?
Ecommerce fulfillment makes it easy to customize the process from purchase to delivery to the customer. A first-time seller can avoid the costs and mistakes that come with setting up your own logistics system and negative feedback from buyers due to delayed orders or packaging problems. When the processes of transit and contents of shipments are not established, the final price of goods will be high, i.e., less attractive for buyers. Ecommerce fulfillment avoids this and allows you to start selling right away. The costs of organizing logistics are turned from capital to operating expenses, which reduces the launch budget.
Fulfillment operators have experience working with different loads and therefore select the proper packaging and reduce the risk of damage to goods, organize automated sorting and quality control, and have well-established algorithms for dealing with returns due to defective goods.
What eCommerce businesses do fulfillment services suit?
*Small stores and manufacturers. They may have no sales experience, and therefore they require a large set of additional services, for example, call-center services. rental warehouses. Also, fulfillment helps scale and optimize the business: expanding the geography of sales in other regions or countries, the output of the marketplace, and reducing the cost of hiring and training staff.
Fulfillment services are affordable. Receiving goods in the warehouse, storage per day, and picking orders for each item will cost less than doing it yourself. This makes it possible to pay for the number of goods that need to be shipped. If a company wants to open its warehouse, it must pay a fixed monthly rent for the premises and salaries to the staff. This can prove costly if there is no understanding of the volume of orders and shipments. In that case, it’s better to opt for eCommerce fulfillment. Mainly fulfillment services are used by:
- Brands and large chains that are moving from offline to online. They are interested in all the services necessary to operate an online store.
- Small stores and manufacturers. They may have no sales experience, and therefore they require a large set of additional services, for example, call-center services.
Now let’s discuss the most common eCommerce fulfillment models.
Models of eCommerce Fulfillment
The eCommerce fulfillment functions can be performed by marketplaces as well as transportation, postal, and logistics companies. The most basic eCommerce fulfillment models are FBS and FBA:
- FBS (Fulfillment by Seller). The marketplace only delivers goods to the end buyer upon order. When a customer places an order on the marketplace, the fulfillment operator (or the seller himself) must assemble, pack, and label the product according to the marketplace’s requirements and prepare accompanying documents. Then he must take it all to the marketplace’s collection point or sorting center, where the order will be delivered to the customer.
- FBA (Fulfillment by Amazon). The last word in the model name usually indicates a specific marketplace, but the model’s content is the same for all. The marketplace undertakes almost all of the execution of the order, i.e., it acts as a fulfillment operator. In such a chain, it is only necessary to deliver goods to the marketplace: in their packaging, with accompanying documents, and within specific timeframes. The marketplace organizes the receipt, storage, picking, packing, and delivery of goods to buyers.
Any eCommerce company can rent a warehouse for its needs and then provide fulfillment services to other suppliers. But it is time-consuming and expensive, and if you have no experience in eCommerce fulfillment, it will be difficult to manage effectively.
Ecommerce fulfillment processes
To start outsourcing to a warehouse, you need to enter into a contract and then link the IT systems of the vendor and the fulfillment operator together. If standard CRM systems are used, API linking may be sufficient. In this case, the operations performed with the goods will be displayed in the CRM system of the fulfillment operator and the seller’s CRM system. You can also monitor order picking through video monitoring or receive video recordings from the warehouse if the fulfillment operator provides this option. This will help in disputed situations and allow you to track that the order is being transferred to its destination.
After signing the contract and linking the IT system, you transfer the logistics operations to the fulfillment company. However, it’s worth keeping in mind that fulfillment operators don’t work with all items. They will not work with anything the law forbids remotely selling: for example, they will not accept alcohol or cigarettes. Nor will they be able to outsource the storage of perishable goods: flowers and foodstuffs. However, in the latter case, canned goods and groceries (things that can be stored for a long time) can be outsourced to a fulfillment company. Some fulfillment operators do not work with furniture and large appliances since they take up a lot of warehouse space.
Giving a full logistics cycle to a fulfillment company is unnecessary. You can sign a contract only for individual services and pay for them separately. The set of services depends on each individual fulfillment company. It may include direct logistics operations, as well as other related services:
- Delivery of goods from suppliers to the warehouse
- Acceptance of goods, checking them for defects
- Storage of goods
- Order picking and packing
- Delivery of orders to customers, payment acceptance
- Customer service (work with returns, negative customer feedback)
- Call center operations
- Tracking of orders
- Photography and video-shooting for filling product cards
- Informing buyers about the delivery via SMS, email, and social networks
- Creation of advertising materials: banners, branding, graphics
Let’s discuss each step of eCommerce fulfillment, from receiving goods to returns.
Ecommerce fulfillment: receiving the goods
A fulfillment operator accepts incoming items. He unpacks each pallet, counts the number of boxes, and checks the quantity on a per-unit basis. Then they are sorted by item, labeled, and unique barcodes are affixed to them to automate the rest of the process. If necessary, items are weighed. Operations are performed in front of cameras, which helps resolve disputes over faulty packaging or missing items. All details are transmitted in the form of a report to the customer. Items are then placed in warehouses.
Ecommerce fulfillment: storage of goods
After acceptance, the goods are sent to storage. A fulfillment operator selects a different storage location for each type of merchandise. For example, precious goods and papers are placed in particular areas controlled more strictly than other racks. Storage time is a charge. Therefore, goods should be sent to the warehouse in such a quantity that they will be quickly sold out. Ecommerce fulfillment: completion of order When a customer orders, the goods go to the picking stage. The warehouse receives information about what items need to be sent. Warehouse technicians consult the list and use automated systems to find the necessary items. Then they assemble the order depending on the type of goods: dishes, clothes, etc. The order can consist of a single item or several items. The fulfillment operator can supplement the order with samples, booklets, and other bonuses at the customer’s request. Orders then go to packaging.
Ecommerce fulfillment: packaging of order
The fulfillment operator selects lightweight but reliable materials for packaging, depending on the type of goods. They evaluate which items should be placed in bubble wrap, which should be put in a box, and which should be placed in a paper bag. Packaging is usually included in the rate. Some fulfillment operators also offer a packaging branding service. Packaged goods are handed over for delivery.
Ecommerce fulfillment: shipping of order
Fulfillment operators deliver to pick-up points or the customer’s address independently and through delivery services. Shipping can be supplemented by call-center services (receiving orders and delivery coordination), tracking goods with complete information about the parcel, and informing customers via SMS, email, and social networks.
Ecommerce fulfillment: returns
Fulfillment operators are ready to handle returns and negative feedback from customers. This is especially true when selling clothes and shoes because if the customer has received the wrong size, style, or color, it’s the responsibility of the person delivering the goods.
Logistic processes are tied to a fulfillment operator, so choosing a reliable partner and making regular service payments is crucial. A fulfillment operator should have a good reputation on the market and allow a minimum number of errors at all stages of order dispatching.
A well-organized document flow is also important because bills of lading and other documents will be issued to the customer with a certain periodicity. It is also worth considering that the business owner will not have free access to the warehouse of a fulfillment operator. This means there will not be an opportunity to monitor the number of goods or the quality of packaging at any point. However, the video control systems that fulfillment operators install in their warehouses allow them to assess this remotely.
Vanessa Friedman is a content marketing professional who helps companies attract visitors, convert leads, and close customers. Previously, Vanessa worked as a marketing manager in a tech software startup company. In case of any inquiry or suggestion, you can always reach out to her at [email protected].