Running an ecommerce business can feel like hosting a magic show. If you delight your customers with a pleasant experience, you’ll find yourself entertaining a growing audience. But the show’s success also depends on delivering a magical experience without revealing what’s behind the curtain. Likewise, all your customers should see is ecommerce order fulfillment made easy.
In ecommerce, much of that hidden but important work occurs during fulfillment. Getting this phase right means customers have their complete orders delivered — and on time. Learn more about how order fulfillment strategy can improve your operations, meet customer expectations and provide a better overall experience.
What is ecommerce order fulfillment?
Ecommerce order fulfillment is the combination of processes and activities that occur from receiving an order from a customer through the delivery of the product. The process involves receiving inventory, warehousing, picking, packing, shipping an item and handling returns.
While smaller retailers might keep fulfillment solutions in house, many choose to partner with third-party fulfillment providers or other alternatives, such as Fulfillment by Amazon or Walmart Fulfillment Services. This can allow small businesses the advantages of large-scale operations while reaching massive groups of engaged shoppers, such as Amazon Prime members.
How can you improve your order fulfillment?
Order fulfillment can affect your customer experience and operational effectiveness, so it’s important to review and optimize your processes. Here are six ways you can improve order fulfillment, improve efficiency and create a more streamlined customer experience.
Understand your order fulfillment cycle time
Review your order fulfillment cycle time for valuable insight into the effectiveness of your current processes. Tracking this metric helps ensure you maintain high customer service and satisfaction rates. Delivery is a purchase consideration for 95% of consumers, while a negative experience could lead to lost opportunities that go beyond a single customer or account.
While some factors aren’t fully in your control, such as international shipping, you can still do a lot to maintain the lowest possible cycle time. Elements required to evaluate your cycle time include:
Promised customer order cycle time: the expected order fulfillment time that you communicate to your customers.
Actual customer order cycle time: the average time for a customer to receive a product after placing an order.
Cash-to-cash cycle time: the period of time from purchasing raw materials and supplies to receiving payment for the final product.
Supply chain cycle time: the period of time to fulfill an order if the raw materials aren’t in stock and need to be ordered separately
The most common formula to calculate order fulfillment cycle time is:
Total order fulfillment cycle time = Source time + Production time + Delivery time
The source time begins at the moment the customer places an order and continues until your business has the raw materials needed for production. Production time is determined by the time spent manufacturing, finishing and packing the order. Finally, the delivery time includes the time frame between shipping the order from your warehouse and the order reaching its final destination.
Once you understand your order fulfillment cycle time, you can start to identify areas for improvement, such as increasing efficiency through automation.
Maintain an attractive returns policy
Your ecommerce returns policy is an essential part of your order fulfillment process. Fulfillment doesn’t end after your customer receives the order, but only after your customer is satisfied with the content of the order.
Make sure you have a clear returns policy, backed by effective processes that enable returns and refunds. Your returns policy affects customer purchasing decisions throughout the buying cycle. Some customers will look elsewhere if you don’t have an attractive returns policy or they can’t understand it.
Meanwhile, how you handle returns also matters: Of the 60% of online shoppers who make at least one return or exchange per year, 95% will make another purchase if the return experience was positive.
Utilize safety stock
In order to guarantee a quick and efficient order fulfillment process, you should carry just enough stock to avoid the risk of a stockout.
Safety stock, or holding a specific amount of product in stock at all times, can help absorb swings in demand, such as sudden and unexpected spikes in order volume. However, if your minimum safety stock quantities are based on a period of average demand, your inventory levels could be too high, which affects your warehouse footprint and overall costs.
Instead, measure safety stock quantities using statistical methods that focus on spikes rather than average customer demand. Smaller companies or those with sparse product demand, however, may be better suited for the demand-driven material requirements planning (DDMRP) approach, which responds to actual demand by dynamically adjusting stock levels.
Classify your inventory
Another simple way to improve the fulfillment process for ecommerce orders is to classify your inventory, otherwise known as organizing your warehouse.
One of the most common ways to do this is to group stock based on how fast it moves. This helps your business by:
Enabling you to maintain sufficient stock levels of fast-moving items.
Grouping fast-moving items in particular areas of warehouses or fulfillment centers and slow-moving items in different sections.
This [practice helps ensure appropriate stock levels for each product category. Reorganizing your warehouse by the speed of your stock can also reduce the time it takes to process orders, making fulfillment more efficient.
Automate your order processes
Automation is at the pinnacle of an effective order fulfillment process. Many online stores begin their journey, however, by manually entering data. This can cause the majority of order fulfillment time to be spent completing repetitive tasks.
This practice is inefficient and creates lower-quality work due to the repetitive and simple nature of the job. By integrating and automating your order management, your team can input data once and enable orders to be generated automatically.
Workflows and tasks such as shipping invoices and follow-up reminders can also be automated, which decreases operational costs, reduces the risk of human error and unlocks time for additional sales opportunities.
An inventory and order management system can provide visibility across your entire business process. This can help you target areas within your business for efficiency improvements. For example, introducing barcode scanners allows you to quickly and easily update inventory management systems as new product batches arrive at your warehouse.
Minimize warehouse employee decisions
Make your warehouse employees’ lives easier and more efficient by minimizing the number of decisions they need to make. Teams are more productive and less likely to make errors when tasks are easily understood and repeatable.
Common decisions during the order fulfillment process include determining which orders to fulfill and in which order. Product locations, packing and shipping are other considerations that may require decisions.
Order management systems can help automate many of these repetitive decisions. For example, you can have software map the best picking routes so your team always knows where to go when picking items. Some systems can also select the most cost-effective and efficient shipping rates and carriers for each of your orders by using information such as weight, shipping address and required delivery date.
Validate your metrics
Metrics enable a higher level of analysis into the effectiveness of your processes, but you also need to understand how and why your successes (and failures) occur throughout order fulfillment cycles.
Whether your goal is to improve efficiency, increase customer satisfaction or reduce delivery time, there are many metrics that can illustrate performance of your order fulfillment process. Let’s look briefly at 10 such metrics.
Percentage of on-time shipments
This metric compares the number of orders dispatched on or before the requested shipping date against the total number of orders shipped within a given time frame.
Average delivery lead time
This is the time it takes to get an order to a customer. You can work out specific lead times depending on particular product lines or categories.
Fulfillment cost per order
How much do you spend to complete an order? You can include elements such as indirect labor, communication, supplies, shipping costs and anything else associated with delivering products to your customers.
Order error rates
This is the number of orders that are processed incorrectly compared with the total orders in a selected time period. Error rates can be further isolated and examined at different stages of 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 of product demand and the efficiency of your procurement.
Supply chain agility
Supply chain agility is a set of metrics designed to quantify your ability to adapt to change within the marketplace. This metric set often includes factors such as adaptability to positive and negative changes and how long it takes for your company to respond.
Your return rate is an excellent indicator of customer satisfaction. It is based upon the total orders sent back compared with the total orders shipped in a time frame.
This metric is based on what it costs your business to process a return. You may calculate it on costs incurred or the average time it takes to process a return.
Customer retention rate
Your retention rate is an extremely important metric to track, as it measures the quality of your overall ordering experience.
Customer satisfaction levels
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. Approaches include short surveys, questionnaires, monitoring online reviews and social media, and talking directly to customers over the phone.
Easy order fulfillment for retailers and customers alike
Order fulfillment processes can make or break an ecommerce business. Your sales channels, customers, workflows and inventory will continue to change and grow. Regularly review your fulfillment process for opportunities to become more efficient and productive.
Ecommerce order fulfillment made easy is only achieved through hard work and diligence. When your processes are streamlined, your operations will run smoothly at every step of the fulfillment cycle. Your customers will see the magic you deliver and return again and again.
These benefits extend beyond just your business. Learn how automation can improve your customer experience, too.