{"id":4386,"date":"2019-04-10T10:27:38","date_gmt":"2019-04-10T17:27:38","guid":{"rendered":"https:\/\/www.parcelpending.com\/?p=4386"},"modified":"2023-03-29T19:16:09","modified_gmt":"2023-03-29T19:16:09","slug":"what-is-the-order-fulfillment-process","status":"publish","type":"post","link":"https:\/\/www.parcelpending.com\/en-us\/blog\/what-is-the-order-fulfillment-process\/","title":{"rendered":"What is the Order Fulfillment Process?"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">What is order fulfillment?<\/span><span style=\"font-weight: 400;\"> It <\/span><span style=\"font-weight: 400;\">is the backbone of any e-commerce or online business. It doesn\u2019t matter how good your marketing is if you can\u2019t get the product to the consumer in a timely, cost-effective manner. The ordering process has five major functions that must be fulfilled to deliver merchandise accurately and on time<\/span><span style=\"font-weight: 400;\">. <\/span><span style=\"font-weight: 400;\">There are a number of companies out there <\/span><span style=\"font-weight: 400;\">that <\/span><span style=\"font-weight: 400;\">provide solutions to help you fulfill your company\u2019s specific <\/span><a href=\"\/en-us\/blog\/how-to-adapt-your-order-fulfillment-strategy-for-the-changing-retail-landscape\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">order fulfillment strategy<\/span><\/a> <span style=\"font-weight: 400;\">needs.<\/span><\/p>\n<h2><strong>The Five Major Functions<\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">The order fulfillment process encompasses all of the supply chain functions involved in receiving, processing, and delivering customer orders to their final destinations. These functions are completed at a <\/span><a href=\"\/en-us\/what-is-a-fulfillment-center\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">fulfillment center<\/span><\/a> <span style=\"font-weight: 400;\">closest to the shipping destination to ensure the shortest shipping time possible. The five key functions of the order fulfillment process are:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><b>Receiving: <\/b><span style=\"font-weight: 400;\">Merchants first receive inventory from manufacturers or suppliers<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Inventory Storage:<\/b><span style=\"font-weight: 400;\"> Once inventory is received, it is indexed and stored away for later resale, generally in a warehouse<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Order Processing:<\/b><span style=\"font-weight: 400;\"> During <\/span><span style=\"font-weight: 400;\">this phase, <\/span><span style=\"font-weight: 400;\">the <\/span><span style=\"font-weight: 400;\">customer order<\/span> <span style=\"font-weight: 400;\">is <\/span><span style=\"font-weight: 400;\">placed online or over the phone, and a clerk is dispatched to retrieve the order and prepare it for shipping<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Shipping:<\/b><span style=\"font-weight: 400;\"> Once an order has been picked from storage and appropriately packed, it is sent to shipping where the most efficient method of transport will be determined and the order is sent out<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Returns Processing:<\/b><span style=\"font-weight: 400;\"> When items are returned, the appropriate refund must be assessed and items must be placed back into inventory<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Together, these steps make up the\u00a0part of the order fulfillment process that takes goods and resources from those who produce them and places them in the hands of those who want them. In some cases, this means taking goods produced by a manufacturer and delivering them directly to an individual consumer. These are known as \u201cdirect to consumer\u201d or \u201cD2C\u201d orders. In other cases, goods or commodities are taken from a producer and delivered to another business, either for resale or to use in the manufacturing of their own products. This is known as \u201cbusiness to business\u201d or \u201cB2B\u201d.<\/span><\/p>\n<h2><strong>The Receiving Process<\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">During the receiving process, items delivered to the fulfillment provider warehouse are offloaded and accounted for in five different steps: Counting; inspection for accuracy; inspection for damage; SKU indexing; and SKU application.<\/span><\/p>\n<h3><strong>Counting Inventory<\/strong><\/h3>\n<p><span style=\"font-weight: 400;\">When a shipment is received, a receiving clerk will go through and count the number of units delivered to ensure that the appropriate number has been received. If the number of units received does not match the number on the invoice, the items will first be entered into inventory and the discrepancy will be addressed with the supplier in one of three ways.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">If the number of units received is less than the number ordered, an additional shipment may be requested or a discount may be applied to a future order.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">If the number of units received is more than the number ordered, the fulfillment center may be required to pay for the additional items or simply place a smaller order the next time around.<\/span><\/li>\n<\/ul>\n<h3><strong>Inspect for Accuracy<\/strong><\/h3>\n<p><span style=\"font-weight: 400;\">After every unit has been counted, they will then be inspected to ensure that they are the actual items that were requested. If the wrong items were received, the fulfillment center will reach out to the supplier and request a swap. In such cases, a discount is often applied to make up for the inconvenience.<\/span><\/p>\n<h3><strong>Inspect for Damage<\/strong><\/h3>\n<p><span style=\"font-weight: 400;\">Once every unit has been accounted for, they will then be inspected for damage. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">If it is found that units have been damaged en route to the fulfillment center, a replacement order or discount request may be submitted to the supplier.<\/span><\/p>\n<h3><strong>Add Items To Inventory<\/strong><\/h3>\n<p><span style=\"font-weight: 400;\">After inspection, an SKU code is assigned to each unit and entered into the fulfillment center\u2019s inventory software. A SKU (stock keeping unit) code is used to identify specific characteristics of a unit, such as its manufacturer and price, and track it through the fulfillment process.<\/span><\/p>\n<h3><strong>Apply SKUs<\/strong><\/h3>\n<p><span style=\"font-weight: 400;\">Once items have been entered into the warehouse management software, a physical SKU label or barcode is applied to each unit, and the unit is ready for storage.<\/span><\/p>\n<h2><strong>The Inventory Storage Process<\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">The storage process involves the strategic placement of each unit within the storage facility so that they may be retrieved as quickly and accurately as possible. Typically, individual SKUs are placed in designated storage bins so that employees don\u2019t have to spend extra time sifting through different items to retrieve the one they need. When there is too much inventory to fit in designated bins, overflow is sent to a separate storage area. Bins are replenished from overflow storage as inventory moves out. <\/span><\/p>\n<h3><strong>Hot SKUs<\/strong><\/h3>\n<p><span style=\"font-weight: 400;\">The items that sell the most frequently, known as \u201cHot SKUs,\u201d are typically placed closest to the packaging stations so they can be retrieved quickly. Occasionally, bins will need to be reorganized as certain SKUs gain in popularity. Fulfillment centers rely on tracking software to tell them when certain SKUs get \u201chot\u201d <\/span><span style=\"font-weight: 400;\">to <\/span><span style=\"font-weight: 400;\">reorganize for maximum efficiency.<\/span><\/p>\n<h2><strong>The Order Processing Phase<\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">Order processing involves every step from the time an online order is received to the time it becomes ready to ship. The most efficient way to go about this process is to integrate<\/span> <span style=\"font-weight: 400;\">order <\/span><span style=\"font-weight: 400;\">fulfillment software <\/span><span style=\"font-weight: 400;\">with the business\u2019 shopping cart. By doing so, <\/span><span style=\"font-weight: 400;\">the <\/span><span style=\"font-weight: 400;\">customer\u2019s <\/span><span style=\"font-weight: 400;\">order<\/span> <span style=\"font-weight: 400;\">is <\/span><span style=\"font-weight: 400;\">automatically received by the fulfillment center as soon as they are placed, and the process of picking and packing the order can begin.<\/span><\/p>\n<h3><strong>Picking<\/strong><\/h3>\n<p><span style=\"font-weight: 400;\">\u201cPicking\u201d is the part of the order fulfillment process where employees <\/span><span style=\"font-weight: 400;\">fulfill orders<\/span><span style=\"font-weight: 400;\"> by physically retrieving the items from bins and transporting them to the packaging area. The methods and technologies involved in picking items from storage will vary widely depending on the size of the operation. Smaller <\/span><span style=\"font-weight: 400;\">warehouse <\/span><span style=\"font-weight: 400;\">operations<\/span><span style=\"font-weight: 400;\"> will simply require an employee to walk over to the appropriate bin and pick out the unit they need. Industrial-scale operations with vast warehouses might require a trained equipment operator and support staff to retrieve large units stacked meters high. It is important to maintain <\/span><a href=\"\/en-us\/how-to-maximize-warehouse-efficiency\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">warehouse efficiency<\/span><\/a><span style=\"font-weight: 400;\"> so pickers can find and transport the necessary items to the packaging area as quickly as possible.<\/span><\/p>\n<h3><strong>Packing<\/strong><\/h3>\n<p><span style=\"font-weight: 400;\">The next step after order picking is packing. This part of the order fulfillment process<\/span><span style=\"font-weight: 400;\"> involves preparing the unit to be shipped to its final destination. Packing employees will need to account for things like:<\/span><\/p>\n<ul>\n<li><b>Fragility: <span style=\"font-weight: 400;\">Fragile items must be packed with insulating materials like bubble wrap and foam packing peanuts to keep them safe during transport.<\/span><\/b><\/li>\n<li><strong>Weight:<\/strong> <span style=\"font-weight: 400;\">Heavy <\/span><span style=\"font-weight: 400;\">shipping orders<\/span><span style=\"font-weight: 400;\"> might need to be cushioned or placed on pallets to avoid damage to the transport vehicle, other units in the same shipment, or the units themselves.<\/span><\/li>\n<li><strong>Dimensions:<\/strong> <span style=\"font-weight: 400;\">Units that lack a flat bottom surface or have awkward dimensions will need to be packed in such a way that they may be transported without sliding or tipping over. Often, this means packing items in boxes and\/or stacking them on pallets that can be stowed efficiently during transit.<\/span><\/li>\n<li><strong>Health Hazards:<\/strong> <span style=\"font-weight: 400;\">Items that pose a potential risk of injury due to excessive size, weight, or chemical makeup must be restrained and marked to warn anyone handling them of potential danger.<\/span><\/li>\n<li><strong>Cost:<\/strong> <span style=\"font-weight: 400;\">In shipping, space is the most precious commodity. Items that take up more space cost more to ship. It is important to package items such that they take up the least amount of space possible to keep shipping costs low.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Once items have been picked and appropriately packed, they are then sent to the shipping center to be delivered.<\/span><\/p>\n<h2><strong>The Shipping Phase<\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">In the shipping center, shipping managers will determine the most efficient method for transporting each unit to its end destination. For smaller online sellers, this may be a simple matter of determining the correct amount of postage and placing it in outgoing mail. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, businesses who need to ship oversized units, large quantities, or items that have special handling requirements may need to enlist freight services or specialized couriers to transport their goods. It is up to shipping specialists to determine the most efficient and cost-effective method to get it done.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The shipping center is also responsible for updating customers and the<\/span> <span style=\"font-weight: 400;\">order <\/span><span style=\"font-weight: 400;\">fulfillment software<\/span><span style=\"font-weight: 400;\"> once items have been shipped out for delivery. At this point, an order is considered to be fulfilled unless, of course, a unit must be returned.<\/span><\/p>\n<h2><strong>Returns Processing <\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">While sometimes overlooked as a part of the fulfillment process, returned items are very much under the oversight of the fulfillment team. The internal side of returns processing looks much like the fulfillment process outlined above. Units returned to the <\/span><span style=\"font-weight: 400;\">fulfillment<\/span><span style=\"font-weight: 400;\"> warehouse<\/span><span style=\"font-weight: 400;\"> must be:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Counted<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Inspected for accuracy<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Inspected for damage<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Re-entered into the order fulfillment software<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Replaced into storage<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">It is also very important for online merchants to <\/span><span style=\"font-weight: 400;\">manage customer expectations by <\/span><span style=\"font-weight: 400;\">establish<\/span><span style=\"font-weight: 400;\">ing<\/span><span style=\"font-weight: 400;\"> an external returns policy and list<\/span><span style=\"font-weight: 400;\">ing<\/span><span style=\"font-weight: 400;\"> it clearly on their website for reference. Customers should be made aware of where to send returns and how to go about it. Other terms such as refund and replacement policies should also be outlined here.<\/span><\/p>\n<h2><strong>But Wait, There\u2019s More<\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">The five processes listed above make up the entirety of the order fulfillment process, but there are numerous ways to handle the fulfillment of shipments depending on the specific needs of your <\/span><span style=\"font-weight: 400;\">e-commerce <\/span><span style=\"font-weight: 400;\">company<\/span><span style=\"font-weight: 400;\">. Small, uncomplicated e-commerce businesses may be able to simply track, store, pick, and pack inventory from their home\u2019s garage and ship them out via postal service. Larger, more complicated businesses, or those who simply lack the expertise, may choose to outsource these functions to <\/span><span style=\"font-weight: 400;\">a <\/span><span style=\"font-weight: 400;\">professional <\/span><span style=\"font-weight: 400;\">order fulfillment service <\/span><span style=\"font-weight: 400;\">that <\/span><span style=\"font-weight: 400;\">specialize<\/span><span style=\"font-weight: 400;\">s<\/span><span style=\"font-weight: 400;\"> in the fulfillment process.<\/span><\/p>\n<h2><strong>Third Party Logistics (3PL)<\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">Third-party logistics companies are built to service the needs of those who are otherwise incapable, or unwilling to handle extensive or complex order fulfillment needs. In addition to handling receiving, storage, processing, shipping, and returns, the various types of 3PLs are optimized to provide ancillary services like on-demand transportation and data analysis to help organize merchandise and anticipate lead times.<\/span><\/p>\n<h3><strong>Transportation-Based 3PLs<\/strong><\/h3>\n<p><span style=\"font-weight: 400;\">Transportation-based 3PLs arose out of the need to ship goods beyond a business\u2019 immediate geographical region. For businesses who fulfill various orders nationwide or internationally, it is far more efficient and cost-effective to utilize the extensive transportation networks provided by a third-party logistics provider than it would be to hire in-house haulers or private couriers to travel between regions. By partnering with a transportation-based 3PL businesses you harness the advantages of:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A more extensive transportation network<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">More diverse fulfillment and shipping capabilities<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Managing internalization by outsourcing documentation, dealing with customs, duties etc.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Limiting overhead<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">You are probably already familiar with some of the largest transportation-based 3PLs like FedEx, UPS, and DHL. While these companies can be extremely helpful in the fulfillment process, there are other types of 3PLs built to handle other logistic concerns.<\/span><\/p>\n<h3><strong>Distribution-Based 3PLs<\/strong><\/h3>\n<p><span style=\"font-weight: 400;\">Distribution and warehouse based 3PLs are built to streamline the internal functions of the fulfillment process. They specialize in handling storage, shipment, and returns while leveraging data analysis to more effectively manage storage and anticipate lead times.<\/span><\/p>\n<h3><strong>Storage Management<\/strong><\/h3>\n<p><span style=\"font-weight: 400;\">By storing merchandise with a 3PL, businesses relinquish all duties involved to a company <\/span><span style=\"font-weight: 400;\">that <\/span><span style=\"font-weight: 400;\">specializes in managing them efficiently. They are optimized to store, pick, and pack goods more efficiently than the average business can. They also tend to have large networks of warehouses to operate from so that your product can be stored closer to its intended destination. The closer your merchandise is to its destination, the quicker it can be delivered.<\/span><\/p>\n<h3><strong>Anticipating Lead Times<\/strong><\/h3>\n<p><span style=\"font-weight: 400;\">Anticipating lead times effectively is crucial to avoid out stocking. When a customer places an order for an item that is out of stock, deliveries get delayed and businesses risk losing the customer out of frustration. 3PLs are professionals in this area, and hiring one will rid a business of the need to stock and keep up with fluctuations in demand for their goods.<\/span><\/p>\n<h3><strong>Information-Based 3PLs<\/strong><\/h3>\n<p><span style=\"font-weight: 400;\">Information-based 3PLs are built to a business\u2019 entire logistics network by providing insight on trends in an entire industry. They cover every facet of the fulfillment process and provide analytics on:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Freight auditing<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Cost accounting<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Monitoring tools<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Booking<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Tracking<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Tracing<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Inventory management<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">For smaller e-commerce companies, many of these functions are handled in-house, and the additional percentage in terms of cost is negligible and unavoidable due to <\/span><span style=\"font-weight: 400;\">the <\/span><span style=\"font-weight: 400;\">lack of alternatives on <\/span><span style=\"font-weight: 400;\">a <\/span><span style=\"font-weight: 400;\">small scale. However, for large scale businesses, where a single percentage point of additional cost could mean losing hundreds of thousands of dollars out of the bottom line, streamlining these operations is crucial to the overall success of the business.<\/span><\/p>\n<h2><strong>The Best Option For You<\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">Streamlining the order fulfillment process is an effective way to save time, improve customer satisfaction, and increase the profitability of a business. It is important to learn about the various functions and how each one can be optimized for efficiency and enhance the overall order fulfillment strategy. Small business owners may be able to afford the luxury of keeping these operations in-house and retain control of their order fulfillment systems as a whole. Larger operations may need to relinquish some control of their <\/span><span style=\"font-weight: 400;\">order fulfillment solution<\/span><span style=\"font-weight: 400;\"> and take on additional risk<\/span><span style=\"font-weight: 400;\">s<\/span> <span style=\"font-weight: 400;\">to <\/span><span style=\"font-weight: 400;\">fulfill orders<\/span><span style=\"font-weight: 400;\"> efficiently. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">In any case, thorough research and intimate knowledge of your business<\/span><span style=\"font-weight: 400;\">&#8216;s<\/span><span style=\"font-weight: 400;\"> unique requirements will help you choose the best option for your <\/span><span style=\"font-weight: 400;\">order<\/span><span style=\"font-weight: 400;\"> fulfillment <\/span><span style=\"font-weight: 400;\">strategies<\/span><span style=\"font-weight: 400;\">. Ready to take your company\u2019s operations to the next level? <\/span><span style=\"font-weight: 400;\">Learn more about how you can improve your business\u2019s <\/span><a href=\"\/en-us\/blog\/how-to-improve-last-mile-logistics\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">last mile logistics<\/span><\/a><span style=\"font-weight: 400;\"> in our related blog post.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>What is order fulfillment? It is the backbone of any e-commerce or online business. It doesn\u2019t matter how good your marketing is if you can\u2019t get the product to the consumer in a timely, cost-effective manner. The ordering process has five major functions that must be fulfilled to deliver merchandise accurately and on time. There [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[9,14],"tags":[],"class_list":["post-4386","post","type-post","status-publish","format-standard","hentry","category-blog","category-blog-retail"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.2 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>What is the Order Fulfillment Process? | Parcel Pending<\/title>\n<meta name=\"description\" content=\"Ready to enhance your order fulfillment strategy? 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