Ecommerce Fulfillment 101: Beginner's Guide to Ecommerce Shipping & Fulfillment

So you’ve established (or are considering establishing) a successful ecommerce brand, congratulations! 

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Before your business starts scaling, an important aspect of your business to consider is the operational power and strategy behind your order fulfillment. 

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By now, we’re all aware of the impact of an unboxing experience (and how one of our clients gained 5 million views on Tik Tok! [add tweak it club link]).

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Without a robust order fulfillment plan, it can be all too easy for your business to get overwhelmed around the busiest spikes of the year (holiday season,, black friday, etc.). 

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All ecommerce brands (DTC, B2B, and everything in between) need a trusted fulfillment process to ensure accurate and timely delivery to their customers. In this blog, we will go over everything you need to know about Order Fulfillment to help you make the best decision for your business!

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Table of contents:

• What is ecommerce fulfillment?
• What ecommerce fulfillment strategy is best for me?
• Location, Location, Location: Where should a fulfillment center be located?
• How does a 3PL fulfillment center work?
• What services does a 3PL fulfillment center provide?

What is eCommerce fulfillment?

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Ecommerce fulfillment is an essential part of any online store. It involves the process of picking, packing, and shipping orders to customers on behalf of the store. The ecommerce fulfillment process is usually handled by third-party logistics (3PL) providers who specialize in warehousing and order fulfillment services.

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How important is ecommerce fulfillment?

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Improved Inventory Management

‍Utilizing an ecommerce fulfillment service allows for better inventory management. Your fulfillment partner will implement effective inventory practices, such as accurate data collection and storage, aimed at streamlining your business's shipping process.

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Improved Branding and Packaging

‍Partnering with a fulfillment company can enhance your branding and packaging efforts. By outsourcing the preparation and shipping process, your business can differentiate itself from others who handle their own order processing, leading to improved customer satisfaction.

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Improved Returns Handling

‍eCommerce order fulfillment makes managing returns easier. Your fulfillment partner can help to ensure a smooth return process without affecting the customer experience.

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Why does it matter?

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In order for an online business to be successful, efficient ecommerce fulfillment is key. 

A reliable and efficient fulfillment process leads to consumer trust and loyalty by assuring timely and correct delivery, and providing a great customer experience. This can then result in repeat business and positive word-of-mouth referrals. Furthermore, an effective fulfillment process can improve inventory management, and streamline operations. By using a 3PL provider, businesses can ensure that their ecommerce fulfillment needs are met without compromising on quality or efficiency.

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What are the steps in eCommerce fulfillment?

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Receiving & Organizing Inventory

Starting off with the most important part. Your 3PL provider needs to have an accurate item count, SKUs and product information to ensure that you’re able manage and track your inventory efficiently.

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Next is Inventory management. It involves keeping track of the items in stock, their SKUs, and the product's condition. This can be a complex process, but with the right inventory management software, it can be made simpler and more efficient. With this software, businesses can easily keep track of all their items and ensure that they are always stocked with the right products. Additionally, they can also use it to monitor inventory levels and make sure that there are no discrepancies or lost items.

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Here are some key qualities to look for in a 3PL (Third-Party Logistics) provider for inventory management:

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• Inventory accuracy: The 3PL should have a SaaS platform in place to accurately track and manage your inventory levels, ensuring that you always have the right stock on hand to meet customer demand.

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• Real-time visibility: The 3PL should provide real-time inventory updates and access to inventory reports, so you can make informed decisions about stock levels.

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• Stock control: The 3PL should be able to effectively manage your inventory, including receiving and storing stock, processing orders, and handling returns.

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• Integration: The 3PL should be able to integrate with your existing systems and processes, including your order management and accounting systems.

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Picking 

The picking process as a 3PL (Third-Party Logistics) provider involves selecting and preparing shipments to customers. This process, which is an essential part of the fulfillment cycle, needs to be extremely accurate and efficient. Additionally, the 3PL guarantees that the right items are selected, shipments are appropriately labeled, and orders are checked before shipping. The picking procedure's objective is to fulfill orders accurately and quickly, which promotes customer loyalty and raises satisfaction levels.

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Packing

After the products have been picked, it’s time to pack! The packing step in the eCommerce fulfillment process is an incredibly important stage in the delivery of goods to customers. It involves the selection of correct items - be it individual products, or a box full of loose items - being picked by a 3PL warehouse partner and placed into ideal packaging that ensures its safe and efficient journey to its ultimate destination. Packing requires accuracy and attention as wrong products or incorrectly packed products can cause unhappy customers and costly returns which often involves reshipment fees. As such, it is essential that fulfillment centers take this step seriously and strive for accuracy in order to ensure customer satisfaction with each shipment.

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Make sure to use your brand’s custom packaging as this can have a significant impact on the customer’s post-purchase experience and brand’s perception. Custom packaging can include branded shipping boxes, custom-designed packaging materials, and specialized packaging for fragile items. Doing so allows your brand to stand out and differentiate from your competitors. (insert link to guide to ecom packaging blog)

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Shipping

After picking and packing, your package is now ready to begin its journey to the end customer! Selecting the right carrier for you is entirely subjective, as it relies on a number of different factors such as customer location, shipping costs, and package size/weight. Taking all of this into consideration can create quite a splitting headache, which is why most emerging ecommerce brands tend to outsource their fulfillment logistics.

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Bullet points to keep in mind: 

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• Package dimensions (length, width, height) play a crucial role in determining shipping rates.
• Larger or overweight packages may incur additional fees or require special handling services.
• Shipping rates may also vary based on the destination, shipping speed, and shipping method selected.

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Returns

In a perfect world, shipping is usually the last step of the process for an online sale. It’s important to remember that we’re all human, and often we change our minds at a moment’s notice! With that in mind, your business must have easy and efficient return options. Keeping your doors open to your customers after they’ve made a purchase with you will build loyalty and respect for your brand. In a recent survey from Shopify, 92% of customers say they will shop with a brand again after a smooth returns process. That’s HUGE! 

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During the returns process, the most important factor to retain customers is maintaining clear communication. Make sure to confirm exactly what the customer is returning before beginning the returns process. Then, be sure to provide a shipping label and/or packaging for the return. Finally, provide your customer with a tracking number and provide a time frame for the return to be processed.

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Which ecommerce fulfillment strategy is best for me?

As mentioned earlier, finding exactly the right order fulfillment method depends on quite a few factors. Many of which are regularly changing, such as new customer location, business size, and AOV (Average Order Volume) just to name a few. Follow along below to explore the most common fulfillment options in the ecommerce industry!

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• In-House Fulfillment
• Outsourced Fulfillment (3PL/4PL)
• Dropshipping

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In-House Fulfillment

In-House fulfillment is quite self explanatory - it is when a business handles its own order fulfillment with its own facilities, labor, and without the help of a third-party service. For small businesses (~100 orders/month), this is a completely viable route for order fulfillment. Those who sell small quantities of product on Etsy or other C2C platforms may use in-house fulfillment for the simple reason that they simply do not have AOV that requires outside help. That being said, there are a few advantages and disadvantages to In-House fulfillment:

Advantages of In-House Fulfillment

• Easiest to implement: There is no need to hire employees, outsource help, or build logistics infrastructure for In-House fulfillment. Shipping can begin the second you’re ready!
• Lowest cost: In-house means IN-HOUSE; no warehouse expenses, lowered inventory management cost, and no employee training expenses.
• Full control: This last one can be bittersweet - having full control over your order fulfillment means you are able to do everything to your own satisfaction (custom packaging, personal touches, etc.), but also means all of the responsibility is on your shoulders. 

Disadvantages of In-House Fulfillment

• Extremely difficult to scale

In the business world, being 100% self-reliant can cause everything to come to a screeching halt when business booms unexpectedly. Relying on In-House fulfillment will work smoothly, but only to a point.

• Very time-consuming

Simply put; the more orders you receive, the more orders you need to spend time preparing and shipping. Be sure to regularly assess your business practices to determine whether you can reliably handle your increasing order volumes.

• Limited space for storage 

Without using a storage solution, an ecommerce business is limited to using the space available in their home. This is perfectly fine in your early stages, but as business grows it may simply not be feasible to hold enough inventory for all your customers without outsourcing.

• No discounts for shipping costs

3PLs typically have pre-negotiated rates with carriers they use for distribution. Without having negotiated shipping costs, you may end up spending considerably more on shipping than intended. As a result, your product prices will likely rise just to cover these extra costs.

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Outsourced Fulfillment (3PL/4PL)

Outsourcing to a 3PL benefits ecommerce brands who lack the resources to store, pack, and ship inventory themselves. By outsourcing the entire fulfillment process, you don’t just free up time and resources, you enable your team to focus on things like marketing and business development. You also leverage the 3PL’s lowered shipping rates, data insights, shipping network, and industry expertise to your advantage.

For an emerging brand, keeping fulfillment services In-House may seem like the most cost-effective solution. However as a brand grows, fulfilling orders requires increasing amounts of time and money. As a result, customer experience and order efficiency suffers over time, in addition to exponentially increasing fulfillment costs. Partnering with a trusted 3PL will provide an end-to-end fulfillment solution that feels in-house, without any of the stress behind managing your logistics. As stated before, not every solution is “one size fits all,” here are some tips on outsourcing to a 3PL!

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Advantages of Outsourced Fulfillment

• Industry Experience

Benefit from your 3PL’s industry knowledge and experience in the industry, rather than learning everything yourself and implementing your own solution. 

• Lowered operations costs

Most 3PLs offer adjustable (if not fully custom) pricing models for each of their clients to keep up with fluctuating demand for your products. In addition, using a 3PL avoids being locked into long-term contracts.

• Large network of providers

With warehouses spread across different locations, a 3PL is able to reduce both shipping time and cost by selecting a warehouse closest to your customer base. 

• Optimized shipping and returns

Provide your customers with an improved customer experience through efficient and timely deliveries, while providing tracking information throughout the delivery process.

• Data-driven feedback

After integrating your store platform with your 3PLs inventory management program, you will have access to a wide range of information regarding your order fulfillment. For example, data such as return rates, average delivery time, and real-time inventory updates. These insights help you make strategic decisions for your business, ultimately improving your potential to scale.

• Scalability

Now, this is THE BIG ONE. Relying on a fulfillment partner to handle your logistics saves you a LOT of time for you to focus on branding, advertising, and product development. As all of your hard work pays off and customers begin to flow in, your 3PL will have no problem scaling right there with you!

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Disadvantages of Outsourced Fulfillment 

• Saturated market - MYRIAD of options

The recent boom in ecommerce businesses, the logistics industry has been racing to keep up with demand. As a result, the number of options for 3PLs has skyrocketed, each with a different set of capabilities, locations, and prices. Beginning the search for the right 3PL is a stressful process all on its own, but we have a blog to provide some insight along your journey!

• Giving up some control over product shipping/returns

One of the most difficult factors to consider when searching for a fulfillment partner is understanding that you will need to relinquish some control over your product. We know! That business is your baby! Not to worry; fulfillment partners understand how important your brand is. We are here to serve as an extension of YOU, not just to provide a service.

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Location, Location, Location: Where should a fulfillment center be located?

The Importance of location in E-fulfillment Services: Like real estate, e-fulfillment services are all about location. Although your business may be based in a remote area, it's essential to have your inventory located in a central location. This way, you can deliver to most consumers within two business days.

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For nationwide distribution, you'll need multiple fulfillment centers to reach your customers efficiently. Having centrally located fulfillment centers can get your orders delivered within two days or less to most of the contiguous 48 states.

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Why does it matter?

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Having well-placed fulfillment centers can lower shipping costs. Shipping carriers charge based on zones, and the more zones an order crosses, the more expensive it is to ship. High shipping costs are a significant reason for shopping cart abandonment in eCommerce. Fast, affordable, or even free shipping is crucial for eCommerce success. Before choosing a 3PL provider, analyze your sales trends and review the zone chart of the warehouses you're considering to ensure you get the coverage you need. 

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What is a 3PL?

A third-party logistics (3PL) provider is a company that specializes in offering a diverse range of logistics services to businesses. These services can include storage, transportation and order fulfillment, to name but a few. By owning the necessary physical infrastructure and resources needed for effective logistics such as warehouses and vehicles, 3PLs provide a cost-effective and efficient solution for companies looking to enhance their supply chain operations. 

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In contrast to traditional shipping or transportation companies, 3PLs are not limited to simply transporting goods from point A to B. Rather they assume responsibility over an entire aspect of the supply chain process - be it storage, inventory management or order fulfillment - allowing businesses to focus on their core capabilities. This allows them to benefit from 3PLs’ superior experience and technology in managing logistical operations which can reduce errors, delays and other costs associated with the supply chain process. 

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How does a 3PL work?

A third-party logistics (3PL) fulfillment center is a partner for e-commerce businesses when it comes to storage, distribution, and shipping needs. Once the products have been shipped to the center, it efficiently manages the process of inventory storage, order picking, and product distribution. With advanced technology and resources at its disposal such as barcode scanning, automated picking systems, and order management software, the 3PL center is able to guarantee accuracy in order fulfillment.

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When an order is placed by a customer, it is first retrieved from the storage at the center with utmost precision. Afterward, each order is packed according to the customer's requirements before they are prepared for shipping. The 3PL center also facilitates returns and restocking in addition to other related processes. When everything has been set up, the 3PL center then ships it out directly to the customer. 

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The presence of a third-party logistics (3PL) fulfillment center provides many benefits for e-commerce businesses, such as:

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• Reduced labor costs for order & inventory management
• Increased efficiency via automatic procedures
• Lowered shipping costs through increased buying power
• Improving the customer experience
• Full control over inventory levels through a centralized SaaS platform

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Furthermore, 3PL centers can provide additional services that may not be available internally such as large item packaging or international shipping expertise. All of these benefits allow businesses to focus on growing their business while leaving their logistical operations up to experienced professionals.

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What is a 4PL?

A fourth-party logistics (4PL) provider is a company that acts as a coordinator or integrator of all the different logistics services for a business. Unlike third-party logistics (3PL) providers, 4PLs do not own any physical assets. Instead, they are specialized in bringing together various service providers, such as carriers, warehouses, and 3PLs to create an efficient and cost-effective solution for the business.

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Advanced technology and data analytics are integral tools used by 4PLs to optimize the supply chain and improve operational efficiency. The 4PL serves as a single point of contact for the business and has complete control over the entire logistics process from procurement to delivery.

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How does a 4PL work?

While 4PLs operate in the same industry as 3PLs, their responsibilities vary greatly. Rather than providing a physical service, 4PLs behave as more of a “consultant” for ecommerce brands. Their services entail the management of all supply chain related activities for their client.

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More specifically; when a brand partners with a 4PL, they are relinquishing full control of all supply chain-related aspects to their business. Through their arsenal of connections, the 4PL will contract every single step of the process; from product procurement to product delivery. 4PL service providers help with the vendor evaluation and onboarding stages, ensuring that the appropriate systems, procedures, and KPIs are implemented to ensure the smooth operation of your business.

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What’s the difference between a 3PL and 4PL?

Many businesses struggle with the distinction between a 3PL and a 4PL provider. To put it loosely, 3PL fulfillment services will take care of the physical delivery of your products; that includes warehousing and packing orders. A 4PL, on the other hand, offers a full suite of support and includes every step of the supply chain process from sourcing to delivery.

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These are some of the major differences between a 3PL and a 4PL:

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3PL providers:

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• Offer specific logistics services such as storage, transportation, and order fulfillment
• Own the physical infrastructure and resources required to perform logistics functions
• Are hired by businesses to handle a specific aspect of their supply chain
• Provide a cost-effective and efficient solution for businesses looking to streamline and improve their logistics processes

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4PL providers:

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• Act as a coordinator or integrator of all logistics services for a business
• Do not own any physical assets but bring together various service providers to create a comprehensive solution
• Act as a single point of contact for the business and manage the entire logistics process, from procurement to delivery
• Offer a more integrated and coordinated approach to supply chain management
• In summary, 3PL providers offer specific logistics services, while 4PL providers offer a more comprehensive and integrated approach to supply chain management.

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Conclusion

Whew, that was a lot huh? Thanks for sticking around! As we mentioned earlier, the world of eCommerce is a dynamic, fickle beast. From generating your first 100 sales to handling the grueling rush of the holiday season, giving your business a strong backbone for order fulfillment will provide a sense of peace knowing that all of your customers will receive their orders on time.

It is never too early to begin searching for a fulfillment partner, feel free to reach out to us here if you have any questions!

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