Order fulfillment is a decisive factor in any e-commerce business, whether it’s growing customer expectations or high shipping costs, choosing the right fulfillment model to ensure orders are fulfilled on time is critical. This article will introduce three different fulfillment models to help you find the right one for your company.
What Is eCommerce Fulfillment?
Ecommerce fulfillment is the process of receiving orders, packaging, and distributing products. This may mean that the product may be packaged and shipped to a store for retail fulfillment (also known as business-to-business or B2B fulfillment), or it may be delivered directly to the customer (known as business-to-consumer or B2C fulfillment).
Elements To Consider When Choosing eCommerce Fulfillment Models
E-commerce fulfillment is not one-size-fits-all, and it’s important to choose not only the model that works best for your company but also the model that will grow with your business. So before choosing (or changing) your fulfillment model, it’s important to assess your business needs. The types of products your company sells, order volume, and geographic location are factors you’ll need to consider when choosing a fulfillment model.
The type of product you sell is integral to your choice of fulfillment model. Is your product raw material, a semi-finished product, or a finished product? Can it be sold directly to the consumer or does it need to be reprocessed and re-sold? The answers to these questions determine the type of warehouse, packaging materials, and other infrastructure issues you will need.
If you are a product manufacturer, you may need to process a large number of orders per day, which means you need more warehouse space and process automation to increase the efficiency of order processing. If you are a newly created e-commerce store with a small number of products and a low volume of daily orders, you may consider fulfilling orders in-house yourself.
The order fulfillment location largely determines your shipping efficiency and your ability to meet your customer’s expectations for timely fulfillment. Therefore, please try to set your fulfillment location as close as possible to your customer’s address.
Order Processing & Inventory
Inventory flow is another issue you need to consider, how long does it take to pack and ship your products? Do you need to update your products often? Is there a high rate of returns after the product is sold? It is important to understand your product from an inventory flow perspective when it comes to fulfillment.
3 Types of eCommerce Fulfillment Models
In-House Order Fulfillment
In-house order fulfillment, also known as self-fulfillment, is where the merchant delivers its own packaged product to the customer and the merchant is entirely responsible for all aspects of fulfillment. This model is suitable for small businesses with low order volumes. In-house fulfillment typically takes place at home or in a small rented warehouse, and this model eliminates the cost of outsourced fulfillment, which may include paying storage fees, peak season fees, and other associated costs. There are a large number of social sellers on Facebook and Instagram who pack their orders at home and ship them by courier. This model is time-consuming and as sellers’ orders increase, they move to a different model.
- Low cost
- Full administration
- Doable by everyone
- Increasingly complex
- Space allocation for inventory
- Requires Order Fulfillment Software
When the number of orders becomes too large for the seller to handle on their own, the seller will shift to a third-party fulfillment model. A third-party fulfillment company will handle your entire e-commerce fulfillment process from within their fulfillment center. Third-party fulfillment companies help you save valuable time so you can devote more time to your core business.
- Streamlined process
- Multiple Courier Partners
- Discounted Shipping Rates
- Dedicated Fulfillment Centre for Bulk Inventory
- External dependency
- Poor service of 3PL providers can make or break your business reputation
In the dropshipping model, sellers neither manufacture nor stock the products they sell in their stores. After a customer has placed an order online, the order is automatically or manually sent by the seller to the manufacturer, who ships the order directly to the customer. In dropshipping, the seller has no control over the operation, and the entire fulfillment process is handled by the manufacturer, so customer satisfaction is directly dependent on dropshipping.
- An easy-to-start online business
- Global accessibility
- A singular focus on product sales
- Diverse product catalog
- Less overhead costs
- Fast business growth
- Zero Product customization
- Low-quality control
- Limited Scope of Branding
- Singular parameter (price) for gaining competitive advantage
- Complex coordination among multiple dropshippers
That’s all there is to this article, I hope it helps you choose the right fulfillment model for your company. If you are just starting a business you can choose internal fulfillment orders or drop shipping. If you are an established business you can work with a third-party fulfillment company that can take your business to the next level. Honest Fulphilment is the most trusted dropshipping company that can help you take your business to the next level, want to get more information about us? Click here to get in touch with us.