E-commerce Fulfillment: Everything You Need to Know

What is E-commerce Fulfillment?

E-Commerce Fulfillment is the process of receiving orders from an online shopping cart (or Web store) and picking, packing, and shipping them to individual customers across the globe. Ecommerce fulfillment differs from other forms of fulfillment in terms of the source of the ordering, since it takes place online, as well as the destination of the orders – individual consumers. Other types of fulfillment include retail fulfillment (shipping of orders to business retail locations), marketing and collateral fulfillment (shipping of orders to employees or internal business locations), and various B2B (business to business) fulfillment services, which focus on shipping orders to businesses rather than consumers (B2C – business to consumer).

What is Order Fulfillment?

Order fulfillment describes the general process of fulfilling orders – from receipt of orders, to storing of product, to picking, packing, and shipping orders to their final destination. Order fulfillment differs from e-commerce fulfillment in that it is more all-inclusive – it includes all types of fulfillment of orders, whereas ecommerce fulfillment only describes the fulfillment of online orders through online merchants’ Web stores and shopping carts. The processes are largely the same when comparing order fulfillment with e-commerce fulfillment, although some of the steps vary depending upon the specific channels of fulfillment.

What Steps are Involved in the Outsourced Ecommerce Fulfillment Process?

When outsourcing e-commerce fulfillment with a professional fulfillment services operation, there are a multitude of steps in the overall process. Each of these steps will be describes in further detail below, but in general they include: Account set up, Receiving inventory, Receiving orders, Fulfillment of orders (including the information that is included in the package as well as the packaging itself), Shipping of orders, Tracking of Shipments, Inventory control and syncing, and Handling returns.

Account Set Up

Professional e-commerce fulfillment centers utilized sophisticated warehouse management systems in order to manage multiple clients’ orders, inventory, and shipping. At the onset of a new partnership, the fulfillment provider will need to establish a connection with your shopping cart so that they will receive orders as consumers purchase items on your Web store, create all of your unique SKU’s in their system, sync all of your desired shipping carriers and shipping service levels, and record any other important information needed to successful manage your account.

Some fulfillment centers have their own proprietary warehouse management systems, which were custom coded by their own in-house developers. In this case, they may have a great deal of potential to customize to meet your specific needs. However, be certain that they have a solid system that has been successful over large volumes of orders and you may want to make sure that they have adequate technology staff to maintain and remain proactive to all of their client’s needs. Some fulfillment centers utilize warehouse management software that they purchased or lease to use. These software packages run the gamut from extremely expensive and stable but somewhat inflexible to entry level systems that are flexible but may lack some of the speed of implementation of new custom requests. When reviewing the options, be sure to get a demo of all of the potential systems so that you can see for yourself which option best suites your needs.

With so much attention on ecommerce sales, fulfillment companies and warehouse management software providers have spent a great deal of time building platforms that offer easy integration with shopping carts. Especially in the case of the most widely used shopping carts and Web stores, integration may only require a few clicks of a button.

Receiving Your Inventory

As a part of the account set up process, the fulfillment company will need to obtain all of your product information and SKU’s so that they can load them into their system. Your product information includes all of the items in your inventory, their descriptions, sizes, colors, variants, and any necessary kitting, assembly, or packaging that is required before fulfillment of orders to customers. Once all of this data is loaded in their inventory system, you can send them any inventory of product that you’d like them to warehouse at their facility in order to adequately fulfill product orders. Most companies utilize some sort of forecasting in order to determine the appropriate inventory levels to maintain at the warehouse. So that the fulfillment center knows precisely what to expect in an incoming receipt, they will most likely require a PO (purchase order) listing all of the items on the upcoming shipment. The center will also need to know if the product is bar coded or labeled in any way so that they can clearly identify each unique item and SKU. If your product isn’t labeled or bar coded, most sophisticated e-commerce fulfillment centers have the technology and printing capabilities to print and adhere these labels to all of your products for an additional cost.

Time to receive your initial inventory and any subsequent receipts will vary, depending upon the size of the receipt, the scheduling of the warehouse, and the processes and technology systems used at the fulfillment company. Furthermore, it is important to discuss all of the aspects of receiving prior to the arrival of the first shipment, including how to inspect product for damage and how much inspection is required. The more inspection, the greater the cost of the fulfillment company to process the receipt – but too little inspection could result in incorrect counts of product and unidentified damage.

Most fulfillment houses will be able to send you alerts when your inventory SKUs reach a certain agreed upon low level. Also, be sure that you find out the extent to which their inventory syncs with your inventory, since you always want to be sure that your stock on your shopping cart matches what they actually have in inventory. Nothing is worse than a customer ordering product that shows a positive stock level on the Web store but doesn’t have any inventory on hand at the warehouse.

How to Link Your Shopping Cart with Fulfillment Centers

Most ecommerce fulfillment houses will have a multitude of options for actually receiving your online orders. These options range as listed below. If you need help selecting a shopping cart solution, click here for our guide to shopping cart selection.

  • Manual Order Entry: Some companies will need a fulfillment center that can manually enter orders. IN particular, this method is helpful for miscellaneous one-time orders, special orders, or business-to-business or wholesale orders. In general, however, this should only be used infrequently, as “manual” orders can always be entered incorrectly, which an incorrect order being sent to the recipient. The manual order may be entered into a portal (online web page) offered by the fulfillment center, or it may be sent to the warehouse via email or fax.
  • File Upload: File upload, frequently using a CSV (comma separated value file such an Excel file), is common for order transmission, especially when there are a bulk of orders over a short period of time, such as during a flash sale or Kickstarter campaign. In this method, you will be able to send the fulfillment company an Excel file of all of the orders, which they will upload into their warehouse management system. The center may require that the file include certain fields and organized in a specific manner. Some companies will do the “scrubbing” of the file for you.
  • Web Services: The vast majority of professional fulfillment services that focus on ecommerce sales will utilize some form of web services to receive your orders. Usually implemented via some sort of API (application programming interface), this is simply a computer program that pulls the orders from your Web store at given intervals and passes the order data to the fulfillment center. While many companies claim that their web services are real-time, most process the orders in batch during certain intervals, such as every 15 or 30 minutes.

One important detail to determine when utilizing more automated methods of order transfer is “when” to actually trigger an order for fulfillment. Frequently, orders get changed – so if the order gets sent to the warehouse too early, it may be shipped before a change can occur. On the other hand, customers are demanding quicker order deliver each and every year, so passing the data as soon as possible is important. In the least, be sure to determine when the fulfillment center’s cut off time is for changing orders and for shipping orders the same day.

If you need assistance with connecting your shopping cart to your warehouse or internal order management system, take a look at our review of integration tools for e-commerce.

Printing and Packaging Online Orders

The packaging and contents of an online order are almost as important for some businesses as the actual contents – so care must be taken when figuring out the standards for printing and packaging orders. Typically, a fulfillment center will place the contents of an order into a standard box and will include at least a packing slip. However, for companies that require more customization, a custom printed box can be utilized in many warehouses. However, some larger companies, such as fulfillment by Amazon, will not allow you to utilize your own custom box. Similarly, many fulfillment companies will allow customers to add their own custom logo to packing slips, and they may also allow you to require the insert of other materials, such as invoices, promotional and other discounts, and even gift wrapping of the package.

Everything Shipping – Address Verification, Discounts, and Confirmations

The amount of shipping services offered vary from fulfillment center to fulfillment center. In the very least, you will agree upon the shipping companies to be used and the services levels that will be offered. Standard options include USPS, UPS and FedEx, with ground and expedited options usually the standard. If your needs are more specific, such as international shipments, be sure that the center has these options.

Smaller fulfillment houses may not have any technology systems to assist in more robust shipping options. For smaller retailers, this may be sufficient. However, for high volume shippers, it may be important to select a company that offers sophisticated shipping rate options (which provide real-time rate quotes so that consumers can choose the lowest rate or quickest options) or address verification systems (which verify addresses before shipping so that shipping errors are minimized).

One thing that you’ll have to decide before launching your shipping program with your outsourced fulfillment provider is whether or not you’ll ship on their freight accounts. Oftentimes, because fulfillment companies ship products in volume for a multitude of clients, they receive aggressive shipping discounts from the small parcel or LTL carriers. This allows them to offer you a better rate than you might be able to receive yourself. However, if you ship in high volume yourself, you may not be able to receive better rates from the fulfillment center than you get yourself.

Finally, as it relates to shipping, it is important to discuss tracking confirmations. Confirmations are vital to your customers since they allow for the monitoring of the shipping of the order to their address. Most e-commerce fulfillment companies will allow you one of two options for sending your clients tracking email notifications. First, you may want them to send you the tracking information in bulk one ore more times per day (usually sent at the end of the day once all of the shipments have been closed out). Then, you can send tracking emails to your customers directly from your shopping cart. This process is usually automated so that you don’t have to perform any functions manually. Second, they center may also be able to send the tracking email from their system directly to your customers. Some centers have enough technology that they can actually brand them with your specific logo and branding message.

Who Will Handle Returns?

One final detail is to determine who will handle returns. The returns process involves issuing the customer an authorization to returns the goods, inspection of the goods, and either removing the goods from further inventory (if damaged) or returning the inventory back into the warehouse if the inventory is still in good condition. If the process of inspecting and returning the product to “sellable” condition is difficult, it may be in your best interest to handle the returns process yourself, unless the fulfillment center is fully versed in returns processing. Furthermore, if the fulfillment center does handle your returns, you’ll want to be sure that their technology systems can handle receipt of notification of a return so that they are “in the loop” in the communication process for the returns.

Do All Fulfillment Centers Specialize in E-commerce?

No, all fulfillment centers do not specialize in e-commerce fulfillment. Some companies specialize in general product fulfillment, while others specialize in business-to-business and retail fulfillment. Make sure that you check the specialization of any vendors that you’re considering, since ecommerce does require a particular set of skills.

Small Volume versus Large Volume and Commodity Types

Another important factor to consider when choosing an ecommerce center to ship your products to your online customers relates to the volume of your shipments and the type of products that you sell. First, some companies work with only high volume shippers – those online retailers that ship thousands of orders per month. Other companies are happy to help smaller businesses and don’t typically have the minimums and set up fees that larger volume fulfillment centers require. Second, no fulfillment company specializes in every type of product. Therefore, you should check to see if your proposed vendors can help with your products. Different product types include products such as dry products, food grade products, climate controlled, refrigerated and frozen products, supplements, chemicals, hazardous products, and many, many more.

Other Services Provided by E-commerce Fulfillment Specialists

Fulfillment firms that focus on e-commerce fulfillment oftentimes have gained a high level of knowledge about the overall online marketing process, and therefore can assist you with other aspects of your business to help you grow your sales. Some companies offer additional services, such as management of your sales channels (Amazon, eBay, etc), online marketing services such as SEO (search engine optimization) and Pay Per Click advertising, digital photography, website design, and management of your products and descriptions. Check with your potential providers to see if they have these service offerings. Even if you don’t choose to use these additional services, it can be invaluable to choose a fulfillment firm that offers them because they may be able to act as a great consultant when you have to make important decisions regarding your online strategy.