Your ecommerce order fulfillment process plays a pivotal role in the success of your growing ecommerce business. It affects both the customer experience and the effectiveness of your operations.
However, by creating an excellent post-purchase experience for your audience, you can quickly turn order fulfillment from a cost center into a revenue driver for your company.
So, how exactly can you improve your ecommerce order fulfillment process?
In this article, we share seven ways to improve your order fulfillment so that you can boost the efficiency of your business and create a more streamlined customer experience. But first, what is order fulfillment?
Order fulfillment is a series of steps from receiving an order from a customer, right through to delivery of the product. The process involves receiving inventory, warehousing, picking, packing, shipping an item and even the handling of returns.
One of the first things to do when it comes to improving your ecommerce order fulfillment process is to work out your order fulfillment cycle time.
For starters, it’ll give valuable insight into the current effectiveness of your order fulfillment.
It’s important to track this metric as a fast fulfillment process can affect customer satisfaction rates, which ultimately determines the success of your online business.
In the ecommerce industry, it’s not uncommon to find that the order fulfillment cycle takes days or even weeks. Some things are outside your control, such as international shipping.
That said, it’s important to maintain as low cycle time as possible.
There are many different methods in to calculate this, including:
This is known as the expected order fulfillment time that you tell your customers and is a good benchmark to keep track of the following metrics.
This is the average time it takes for a customer to receive a product after placing an order on your website, which you should aim to reduce as much as possible.
This represents the time taken from spending money on raw materials and supplies to when you receive the money from the products as finished goods.
Supply chain cycle time is how long it takes to fulfill an order if the raw materials aren’t in stock. It’s the cycle time plus the time it takes to order and receive supplies.
The most common formula for working out your order fulfillment cycle time is:
Total order fulfillment cycle time=Source time + Production time + Delivery time
Source time:From the moment the customer makes an order online to your business recognizing that it has the correct raw materials available to start the order.
Production time:The time it takes to manufacture, finish and pack the order.
Delivery time:The timeframe between shipping the order from your warehouse to it arriving at your customer’s specified delivery location.
Once you understand your order fulfillment cycle time, you can start to identify areas for improvement, such as increasing efficiency through automation or similar.
Your ecommerce returns policy is an essential part of your order fulfillment process.
But how exactly does this support your business?
Simply put, order fulfillment doesn’t end once your customer receives the order.
Rather, it ends once he or she is happy with the content of his or her order from your company.
Therefore, you need to have an effective returns policy in place so that you can process returned orders and issue refunds as and when needed.
What’s more, a returns policy also has a big impact on whether or not a customer completes a purchase with your business.
In order to guarantee a quick and efficient order fulfillment process, you always want to ensure that you carry just enough stock so that you are never at risk of a stock out.
One way in which you can achieve this is through safety stock.
Safety stock is when you have a set number of products always in stock, so that you never run out and can always fulfill orders. The purpose of this is to absorb the variation in demand, such as sudden and unexpected spikes in order volume.
However, if you currently set your minimum safety stock quantities based on a time period of average demand (e.g. days or weeks) then it’s likely your warehouse is carrying too much inventory, and this has a tangible impact on your warehouse footprint and fulfillment costs.
Instead, you should be measuring your safety stock quantities using statistical methods that focus on measuring spikes rather than average customer demand.
On the other hand, if you’re a small company or have sparse product demand, such methods may be hindered by an insufficient number of data points.
For such businesses, it may be better to take an approach known as Demand Driven MRP (DDMRP) as this provides an inventory control mechanism that responds to actual demand by dynamically adjusting stock levels.
Another simple way to improve your ecommerce order fulfillment process is to work on classifying your inventory, otherwise known as organizing your warehouse.
One of the most common ways to organize your products is putting stock together based on how fast it moves. This helps your business in two key ways:
Classifying your inventory in this manner ensures that appropriate stock levels are maintained for each product category and that you also don’t run out of stock.
In addition to this, by reorganizing your warehouse by how fast stock is moving, you reduce the time taken to process an order – making your order fulfillment much more efficient.
Automation is at the pinnacle of an effective order fulfillment process.
At the start of their journey, however, many eCommerce businesses will manually enter data into each system and spend the majority of the order fulfillment time completing repetitive tasks.
Not only does this decrease the efficiency of your employees and your business as a whole, but it can also lead to low quality work due to the repetitive and simple nature of the job.
By investing in automation, your team will only need to input data once.
Integrating and automating your order management enables orders to be generated automatically, invoices pre-pared to send when shipping and reminders to follow up with customers to ensure satisfaction and repeat sales.
And that’s not all.
Automation also decreases your operational costs and greatly reduces the risk of human error at the same time as creating sales opportunities.
With an inventory and order management system in place, you will benefit from more visibility of your business processes as a whole. You can then analyse each of these and identify ways to speed each one up.
Another idea is to introduce barcode scanners so that you can quickly and easily enter inventory into your systems as new product batches arrive at your warehouse.
Start thinking about how to make your warehouse employees’ lives easier and more efficient. For example, minimizing the number of decisions made by your team.
Warehouse employees tend to be much more productive and less likely to make errors when tasks are understood and can be repeated. Decision-making interrupts this flow and requires time and effort, which ultimately prolongs the order fulfillment process.
Here are some common decisions that may need to be made when fulfilling orders:
So, how exactly can you minimize these decisions?
Much like the point above, an order management system can help automate many different repetitive decisions. One example is that such a system can help map the best picking routes for your team to know where to go when picking items for orders.
Some inventory and order management systems can also select the more cost-effective and efficient shipping carrier for each of your orders, using information such as weight, shipping address and required delivery date.
Metrics provide a level of analysis into the effectiveness of your processes, but you also need to back up the how and the why – otherwise your process may fall apart.
After all, you can only resolve issues after they have been recognized.
Analyzing all your typical blind spots will allow you the ability to anticipate potential problems and in doing so eliminate the risk of any such occurrence from arising.
Whether your goal is to improve efficiency, increase customer satisfaction or reduce delivery time, there are many appropriate metrics to measure the performance of your order fulfillment process.
Here are some of them:
Compare the number of orders dispatched on or before the requested shipping date with the total number of orders shipped within a given timeframe.
This is the time it takes to get an order to a customer. You may work out specific lead times dependent on particular product lines or categories.
How much do you spend to complete an order? You may include elements such as indirect labor, communication, supplies, shipping costs and so on.
This is the number of orders that are processed incorrectly compared to the total orders in a selected time period. These can be assessed at different stages or order fulfillment, including picking, packing and shipping.
Your inventory turnover is calculated by dividing the cost of goods sold by the average inventory level. It’s a key indicator for demand of products and efficiency of procurement.
Supply chain agility is a set of metrics designed to quantify your ability to adapt to change within the marketplace. It often factors in adaptability to positive and negative changes, how long it takes for your company to respond and values that are based on risk.
Your return rate is an excellent indicator of customer satisfaction as it is based upon the total orders sent back compared to the total orders shipped in a timeframe.
This metric is based on what is costs your business to process a return. You may calculate it on costs or the average time it takes to process a return.
Your retention rate is an extremely important metric to keep track of as it measures the quality of your overall ordering experience.
Although it can be a bit tricky to work out exactly how happy your customers are, there are a variety of ways in which you can measure this. For example, short surveys, questionnaires or even talking directly to your customers over the phone.
As you’ll know by now, ecommerce order fulfillment can make or break a business.
You always need to be working towards creating a more efficient and streamlined process to ensure that your operations run smoothly, and customers are left highly satisfied.
Speak to us to find out how Linnworks can connect and automate your commerce operations so you can capture every revenue opportunity.