What Is Ecommerce Fulfillment?
ECommerce fulfillment is the part of your eCommerce operation that delivers your products to customers. Your e-fulfillment processes include several things. Getting product onto fulfillment center shelves is eCommerce fulfillment. Picking and packing orders is order fulfillment. Shipping times and methods are part of your third-party logistics operations.
In truth, eCommerce fulfillment has been an integral part of your business from the start. When you were packing boxes in your garage, you were your own fulfillment provider. Now that your business has grown, you may need to outsource to a 3PL.
What Is The Difference Between Warehouse and Fulfillment?
What is a Warehouse?
A warehouse is simply defined as a building that is specifically used for storing goods. Warehouses are not used only by manufacturers, but by anyone involved in moving products around the world. This includes importers and exporters, transport businesses, wholesalers, and customers. Warehouses are usually large and plain in design. Often, they’re also situated in industrial parks on the outskirts of a city or town.
What is a Fulfillment Center?
Fulfillment centers are physical spaces where customer orders are processed and fulfilled. These are usually designed to offer cost-efficient, fast order fulfillment. Depending on whether your orders are business-to-business (B2B) or business-to-consumer (B2C), they will go from the FC directly to retailers or your customers’ doorsteps.
Many eCommerce retailers choose to sell through eCommerce channels because it eliminates the need for a physical space. Fulfillment centers enable these online merchants to outsource their warehouse, fulfillment, and shipping needs. It also saves them time, energy, and money, which can instead go directly to manage inventory.
Fulfillment Center vs. Warehouse: The Similarities and Differences
Now that you know exactly what fulfillment centers and warehouses are, we can weigh in on their differences. Here are a few things you should know:
- Both are usually large buildings that are capable of holding inventory for many businesses.
- Warehouses are used as a long-term storage solution, while fulfillment centers offer temporary storage for products that will soon go out for delivery to customers.
- Warehouses only handle storage of customer products; fulfillment centers handle all stages of order fulfillment, including negotiating rates with courier services.
- Warehouse operations are mostly static, while at fulfillment centers, operations are more complex and in constant motion.
- A warehouse is often used by an individual company or business; a fulfillment center can offer its services to multiple merchants who need to fulfill customer orders.
In addition, fulfillment centers offer a number of services that warehouses don’t, including:
- Pickup of products for individual customer orders
- Gathering of inventory
- Order packing
- Shipment labeling
- Managing customer exchanges and returns
- Ability to guarantee next-day or same-day delivery in various locations.
7 Benefits Of Outsourcing Order Fulfillment for Your Retail Business
You can focus on selling (and more)
Let’s start with the obvious: the biggest benefit to outsourcing fulfillment is that you don’t want to do it anymore. Taking the time spent on order fulfillment and instead focus on marketing, customer service, and product management can help ecommerce businesses be more strategic and less operational. There will never be enough time in the day, but using a professional fulfillment center can help sellers be more proactive in other areas of the business.
While order fulfillment is more manageable for smaller businesses, this task becomes particularly challenging and resource-intensive as you scale. As the orders role in from multiple sales channels (in-store, online, sales events), you might find yourself without the time you need for other parts of your job.
But you can leave the heavy lifting to your third-party logistics partner and spend more time on impactful work like design, marketing, and sales.
Reduce operating costs
While outsourcing fulfillment comes at a cost, so does self-fulfilling. The man hours spent packing and shipping are only part of it. Retailers often forget to include inventory storage in their fulfillment expense calculations, but this represents 21% of logistics costs. And if you’re forced to rent warehouse space, your expenses can skyrocket.
By outsourcing fulfillment, you save on overhead and only pay for what you use. Third-party logistics companies usually charge for picking, packing, and shipping as well as the storage of your goods. Shopify Fulfillment Network even offers six months of free storage per item, so you may not even need to pay storage. But even if you do, you’re not paying for rent, utilities, gas for your trips to the post office, or other operating costs associated with self-fulfilling.
And while you may experience a seasonal increase or decrease in sales, that shouldn’t affect your base costs for outsourcing.
Increase shipping speeds
The impact of having multiple warehouses across the country extends to shipping speeds. By placing inventory closer to your buyers, outsourcing fulfillment allows you to provide faster delivery.
This is a massive advantage for retail businesses. A remarkable 67% of US consumers expect their goods to be delivered in two days or less. A strong fulfillment partner may be the only way for you to meet those high demands and compete with the country’s biggest chain retailers.
Communicate accurate shipping information to customers
Provide accurate shipping information to buyers.
Consistency and transparency are so important for online buyers because it gives them the confidence to hit that buy button.
According to one study, just over 60% of buyers are more likely to purchase if they see the delivery times in their shopping cart. And that transparency works in reverse. Some 47% of buyers will avoid reordering from a business if there’s a lack of delivery transparency.
Outsourcing your fulfillment helps you provide accurate delivery information at checkout. When you self-fulfill, a busy day at the store, a snowstorm, or your car breaking down could easily impact your ability to meet a delivery promise. But your fulfillment partner should be rock solid. They have the experience, the man power, and the contingencies in place to provide accurate shipping information and deliver on time year-round.
Extend your reach as a retailer
Go national. Go global. Whether you receive an order from another state or from another country, with the right order fulfillment provider, you’ll be ready to take your business to the next level.
When you self-manage shipping, it can be really intimidating to try and figure out shipping rates and predict shipping times (how much for Hawaii again?). International shipping rates are even more complicated because they involve different regulations, currencies, and best practices. As a result, many retailers keep their shipping options fairly local or regional.
But outsourcing fulfillment can help you extend your reach and unlock a wider market. Many fulfillment companies have the network in place to ship and deliver orders to any part of the world.
If your people, processes, or existing equipment is not operating as efficiently as it needs to in order for you to be profitable, full or partial automation might be the solution to your problem. Automation of repetitive tasks can not only drive down labor costs by allowing your workers to focus on more value-adding services; it can also improve efficiencies by ensuring that all processes are occurring in the most logical and streamlined way.
Automated storage and retrieval systems (AS/RS), sortation, autonomous mobile robots (AMRs), and goods-to-person technologies can all be leveraged to improve your order picking and inventory replenishment practices. Similarly, automated packaging and robotic palletization can help you keep keep shipping fees as low as possible.
Organize and streamline your back office
Third-party logistics companies are often at the forefront of technology when it comes to ecommerce. Not only do their systems integrate with your ecommerce store, they frequently increase your visibility into core aspects of your back office, including:
- Inventory management
- Item tracking
- Shipping and handling
- Carrier selection
- Payment processing
Having access to all of this information in one place can actually help you stay more organized. You can spot inventory shortages, notice patterns about your buyers, and keep better track of the money.
Make customers happier
It might seem obvious in retrospect, but it needs to be highlighted. Faster, cheaper shipping, accurate delivery information, global reach, and more time spent on marketing and sales leads to more, happier customers. This is the entire goal of your business, and outsourcing fulfillment can make a massive impact in helping you achieve it.
Some Questions to Ask Before Choosing Your Order Fulfillment Company
What processes do you have in place to enhance the customer experience?
We all know consumers are now in the driver’s seat. Their buying choices are endless. They have the ability to research a product (through customer reviews and comparison shopping) and post their own comments for the world to see. Brand loyalty has never fought a tougher battle.
So how do you keep customers happy and buying more? Much like the three keys to real estate (location, location, location) the key to consumer happiness is customize, customize, customize. Today’s consumers demand a personalize approach to their buying habits.
You spent a lot of time and capital building your brand and developing a unique customer experience for your online shoppers. Do not let that experience stop at your fulfillment center. Make sure the fulfillment center understands your brand and customer profile so they can ensure a unique consumer experience at every touch point.
Do fulfillment centers handle inventory management?
Yes! Fulfillment centers receive inventory, sort and shelf products in their respective bin, shelf, or pallet locations, and keep track of units on-hand. The goal of warehousing inventory in a fulfillment center is to turn over stock quickly and ship orders out as efficiently as possible.
Most fulfillment centers will provide technology to help ecommerce businesses manage their inventory from afar, including inventory tracking tools that help you know when to proactively reorder product to prevent stockouts.
Can You Access Real-Time Inventory Updates?
It’s important to know your product levels. An important question to ask a potential fulfillment center is how their warehouse system will connect to your online store.
Customers want to know right away if a product is actually sold out. Ask if inventory levels will update as soon as someone makes a purchase or if there is a delay.
Keeping systems in communication and current lets you better manage products and keep you from ordering more than you need.
What is a good price for fulfillment solutions?
When self-fulfilling customer orders, you will be responsible for procuring and paying for your warehouse space and equipment, staff salaries, warehouse management system, workers’ comp and liability insurance, boxes and packing supplies, postage, and more. Given the many direct and indirect logistics costs, the exact cost is often underestimated.
The cost of outsourcing fulfillment will vary among fulfillment companies, but typically your fees will include receiving your inventory, warehousing or storing items, and shipping products. Depending on the fulfillment provider, there may also be individual fees for each task, such as warehouse picking, packing, among other line items.