Understanding Ecommerce Fulfilment: Everything You Need To Know in 2024

Almost all successful ecommerce businesses have one thing in common - a well-designed ecommerce fulfilment strategy. It doesn’t matter whether you have the best products, your website is epic, or your sales funnel drives your customers to the checkout effortlessly. If your ecommerce fulfilment isn’t executed appropriately, you may start losing customers and eventually, your online business may fail. Effective and well-planned ecommerce fulfilment strategy is key to your brand’s reputation and business' success. It will help improve conversions, increase revenue, retain and bring more customers, and expand your ecommerce business. 

Big ecommerce giants like Amazon have set the bar for ecommerce fulfilment. They’ve revolutionised the digital shopping experience by offering fast, efficient, and reliable customer services. Shoppers can order a product online with just a few clicks and have it arrive at their doors without long waiting times. Shipping is critical to business success. Research conducted by Baymard Institute in 2022 found that:

• 48 per cent of shoppers will abandon their carts due to high shipping, tax, and other fees, 

• 22 per cent of shoppers will abandon their carts due to slow delivery, 

• 17 per cent of shoppers will abandon their carts due to the lengthy and complicated checkout process, and 

• 9 per cent of shoppers will abandon their carts due to limited payment methods.   

Keeping this in mind, as a supplier, you should have a robust ecommerce fulfilment strategy for the smooth functioning of your online business and keeping your customers happy and satisfied with your services. But before you design an efficient order fulfilment process for your online store, you need to understand what ecommerce fulfilment is and how it works. Our beginner’s guide will walk you through the ins and outs of ecommerce fulfilment for your online store.          

What is order fulfilment?

In ecommerce, order fulfilment refers to the end-to-end process of delivering an order to customers once they hit the purchase button. In simple words, ecommerce fulfilment is the general process of fulfilling orders. It involves storing and managing inventory, processing orders, picking and packing products, shipping products to customers, and processing returns. It’s no surprise that ecommerce fulfilment involves a lot of moving parts. The better you manage them, the greater your chances of success. 

Ecommerce fulfilment is at the heart of every business. It applies to both business-to-business (B2B) orders and business-to-customers (B2C) orders. For B2B orders, large quantities of products are shipped to other businesses, whereas for B2C orders, products are shipped to a customer's address. Without order fulfilment, there are no sales. And without sales, there’s no business.

In the following section, we’ll walk you through the order fulfilment process and discuss each component in detail.    

How does the fulfilment process work

Order fulfilment is the backbone of any ecommerce business. It encompasses various phases of a product’s journey, from the moment a customer purchases a product to its delivery at a specified address. The right ecommerce fulfilment strategy can help your business gain an unbeatable competitive edge over your competitors, manage customer orders efficiently, and send shipments on time. 

Order fulfilment can take place in more than one distribution centre. The following are the stages of the ecommerce order fulfilment process.  

Receiving inventory

Before you can fulfil orders, you need inventory. Getting inventory from your manufacturers or suppliers is the first step in the ecommerce order fulfilment process. It refers to receiving and storing inventory at a fulfilment centre. The incoming products may have SKUs, which help in receiving and storing products and retrieving them from the internal storage when needed. 

This stage involves:

• Counting items to ensure the actual number of items matches the number of items ordered

• Thoroughly inspecting products for any damage

• Entering products into the warehouse management system (WMS)

• Applying a barcode label to each SKU for product identification and tracking   

An ecommerce business needs to have a steady supply of inventory to sell and fulfil orders. Make sure you establish better collaboration with manufacturers and suppliers to ensure a stable and efficient supply of products for you to do business. Being easy to reach and speedy communication can help prevent problems you may encounter in the fulfilment process and resolve them faster. Additionally, consider investing in technology for the smooth functioning of your ecommerce business. 

Inventory management and storage

The next step in the order fulfilment process is inventory management and storage. These processes go hand-in-hand. Inventory management and storage refers to the proper organisation and storage of products. Keeping a systematic record of products helps you stay up-to-date on products that are out of stock and need to be replenished. Furthermore, it enables you to analyse your customer’s demand and plan and streamline your demand and supply.

As a supplier, you need an organised solution (warehousing) to store products before they are ready to be shipped to your customers. You should implement proper inventory management and storage systems to keep your products safe and secured and protect them from any potential damage. Each product must have a separate, dedicated storage location, so it's easier to track the item in your warehouse. 

Besides, you should perform regular audits to ensure your inventory management and storage system works efficiently. Additionally, consider inspecting products to ensure they are in good condition, and if you come across any damaged products, discard them and make preparations to arrange replacements.   

Order processing

After a customer places an order and completes a transaction on an ecommerce website, the order processing begins. It includes picking items in an order, sending the products to the packaging centre, and preparing the order for shipping after thoroughly inspecting for any damage. This process involves a series of steps, which must be carried out efficiently to ensure the SKUs match the order and no damaged products are shipped to your customers. 

Often a packing slip is provided, which mentions the SKUs, product colours, sizes, quantities, and storage locations of the ordered items. It helps to locate and retrieve items from the warehouse shelves. The packing slip also includes instructions on which packing materials to use and if custom packaging or inserts are required to ensure the safe delivery of products. 

If your inventory has a wide range of products, you’ll have to keep different packaging materials such as bubble wrap, air fills, carton boxes of all sizes, packaging tapes, and poly bags. It'll ensure that the packaging materials suit different product types and prevent damage in transit. Furthermore, the packaging materials are selected to achieve the lowest dimensional weight for speedy shipping and lower shipment costs. Once the items are ready to be shipped, a shipping label must be included in the package.   

Many businesses are now investing in automation and technology to make the picking and packing process faster and hassle-free and to achieve maximum efficiency. It helps streamline warehouse operations, minimise human intervention, and reduce costly errors. Big names such as Coca-Cola and Amazon have started implementing innovative technologies for faster and more efficient order processing.   

Shipping and delivery

The next most critical part of the ecommerce order fulfilment process is shipping and delivery. Once the order has been processed, arrangements are made to ship the package to your end customer. The parcel is sent to a shipping service provider, who determines the best shipping method and cost based on the package weight or dimensional (DIM) weight. 

The weight and size of the products could influence the shipping costs. Heavier, bigger, and hard-to-pack products may be expensive to ship, while lightweight and smaller-size products may be relatively cheaper. Most carriers have packaging rules to optimise their profits from the available shipping space. Failing to meet those requirements can result in delayed shipments, or they might even refuse to ship the package. There are several other factors that affect shipping costs, such as packaging materials, distance from the destination, and shipping surcharges, which you should bear in mind. 

Once the package has left the shipping facility, the shipping centre will update the status of the package. Then, you’ll receive tracking information, which you can share with your customers to keep them up-to-date with their deliveries.        

Today, customers are accustomed to two-day delivery and even next-day delivery options. They expect speedy and on-time delivery. Delayed shipments can upset your customers. A 2019 report states that shipping can affect your relationships with potential customers. An alarming 77 per cent of global survey respondents have abandoned a purchase due to unsatisfactory shipping options, and another 58 per cent have actually stopped shopping with particular suppliers due to a negative shipping experience. Another survey conducted by Forbes states that nearly 84 per cent of respondents purchased products because of free shipping, and 30 per cent of respondents said they increased the size of their orders to qualify for free shipping.

Speedy, on-time delivery with good packing and free shipping equates to a better customer experience. It shows that you care and helps build customer loyalty. Furthermore, it can enable you to grow your business and keep the profit wheel spinning.  

Exchanges and returns processing

The final step in the ecommerce order fulfilment process is preparing for exchanges and returns. This final stage is also called reverse logistics in the ecommerce fulfilment process. Product returns and exchanges are a normal part of every ecommerce business. If you provide the option to return or exchange purchased items or even get a refund, you would be able to influence your customer's buying decisions. It gives customers a sense of security to make a purchase. You should be able to handle return, refund, or exchange requests efficiently because it influences your brand’s ultimate impression in your customer’s minds.  

Consider designing an efficient return, exchange, or refund policy for your products and put it on your website to make it clear to your customers. Be prepared to process a return, exchange or refund request if a customer returns an order. Return processing begins with including a return label with the original customer’s order. Once the returned products reach you, inspect their quality/condition, check the reason for return, and sort them. Depending on the product's condition, quality, and return reason, you can restock the product, discard it if it's malfunctioning, or return it to a manufacturer to get a supplier credit or refund.    

Your ecommerce order fulfilment strategy should focus on creating positive customer experiences. Understanding what’s most important to your customers and addressing their needs is key to creating a positive experience. The tricky part is setting the best ecommerce order fulfilment plan for your business. You may have to put much thought into it because it depends on various factors.

In the following section, we’ll help you understand the three different ecommerce order fulfilment options available to you and discuss their advantages and disadvantages so you can choose the right one for your business to meet customer expectations.

Types of ecommerce order fulfilment models 

There are three ecommerce order fulfilment models to choose from when building an online store: self-fulfilment, third-party fulfilment (3PL), and dropshipping. Businesses should select a fulfilment model that can deliver the best results at a minimal cost. 

Let’s dive deeper into each ecommerce fulfilment model to identify which fulfilment model is the best for your online retail business.

Self-fulfilment

Self-fulfilment, also known as in-house fulfilment, is an approach where you complete all the stages of the ecommerce order fulfilment process on your own, without relying on a dropshipping service provider or third-party logistics provider. In simple words, self-fulfilment means performing all ecommerce fulfilment tasks internally. It's an incredible option for some home-based businesses, particularly those with modest order volumes and established businesses that want to gain complete control over their business operation. 

If you're a small-sized, home-based ecommerce business, you could start with self-fulfilment because it’s a low-cost option. All you need is a spare room where you can carry out order fulfilment tasks such as managing inventory and packing products. Make sure you have dedicated space to perform fulfilment tasks so that you don’t have to relocate every now and then. Errors can become more prevalent when you’ve got a poorly structured order fulfilment set-up, which leads to unhappy and dissatisfied customers leaving you with negative reviews that can affect your business’ success and growth. 

Self-fulfilment in the starting phase takes up your valuable time and effort, which you could spend on launching marketing campaigns, acquiring new customers, or developing new products. As you grow, you may face a different set of problems as you will need your own warehouse to fulfil orders. Below, we’ve discussed some advantages and disadvantages of the self-fulfilment model.  

Advantages of the self-fulfilment model

• Easiest to implement

• Complete control over the business operation

• All operations under one roof

• Low-cost option

• Freedom to customise packaging

• Perfect for startups and large enterprises 

Disadvantages of the self-fulfilment model   

• Time-consuming and can be burdensome

• Limited manpower

• No shipping discounts

• Limited storage space

• Difficult to scale

• Needs order fulfilment software for smooth functioning of business

Third-party logistics fulfilment (3PL)

As your ecommerce business grows, the order fulfilment process can become complex. At this point, it’s ideal for ecommerce companies to outsource tasks to a third-party logistics company to provide warehousing and fulfilment services. It’s the best solution for growing ecommerce businesses to manage their business operations efficiently. A third-party logistics (3PL) company will perform all tasks of the order fulfilment process within their fulfilment centre. It includes receiving, inventory management and storage, picking, packing, labelling, shipping and delivery, return processing, and quality control.  

Choosing a third-party logistics company for your order fulfilment can offer you several benefits, such as better operational efficiency and accuracy. It saves you packing boxes and shipping inventory yourself. You also get reduced shipping costs because a 3PL company gets discounted shipping rates based on their volume of shipments. Additionally, your products will quickly reach your customer’s doorstep because a logistics company operates distribution centers in different locations.   

Remember, each 3PL company is unique and offers varying services such as B2C order processing, B2B order processing, custom packaging, and batch distribution. The third-party order fulfilment service providers can also provide personalised services depending on your specifications. Whether you want to free up some time, manage your ecommerce fulfilment, or lack the resources to get the job done efficiently, hiring a third-party logistics company to manage the process can help you meet customer demand comfortably.

Advantages of the third-party logistics fulfilment (3PL) model

• Best suits small and growing ecommerce businesses

• Better operational efficiency and accuracy

• Reduced shipping costs

• Fast shipping

• More time to work on marketing campaigns

• Larger network of providers

• Leverage industry expertise 

• Optimised shipping, handling, and return processing

• Outsource to a larger fulfilment center

• Easy to scale

• Frees up time and resources

• Assists with international shipping

Disadvantages of the third-party logistics fulfilment (3PL) model

• Dependency on the third-party logistics (3PL) provider

• No control over the order fulfilment operations

• Quality can be compromised 

• Availability of several 3PL providers; hard to choose

Dropshipping

Dropshipping is an order fulfilment process where a business sells products without keeping any physical inventory. The suppliers take care of the entire fulfilment process. They stock and manage inventory and send orders to customers directly from their warehouse. It takes the load off the retailers’ shoulders as they don’t have to worry about managing inventory, picking, packing, or delivering goods to customers. 

When a customer places an order on the retailer’s online store, the order gets automatically passed to the supplier, who then dropships the product directly to the customer. For dropshipping, the suppliers need to have their own warehouses and dropshipping capabilities to be able to fulfil the orders. The picking, packing, and shipping orders lie entirely in the supplier’s hands. 

Dropshipping is the best solution for both retailers and suppliers. If managed properly, it can extend your selling capacity and scale up your business at a marginal cost.

Advantages of the dropshipping order fulfilment model

• Hassle-free way to sell products

• Helps reach a wider audience

• Easy to start and scale ecommerce business

• Leverage industry expertise

• Outsource supply chain management

• Better operational efficiency and accuracy

• Faster order processing and shipping

• Helps create positive customer experiences

• Frees up time and resources

• More time to focus on marketing activities and acquiring new customers

• Ideal for new entrepreneurs or starters

Disadvantages of the dropshipping order fulfilment model

• Little to no control over the order fulfilment process

• No scope for customisation

• More competition

• Lower profit margins

• Creates dependency on supplier stock and customer service

Now you understand the difference between self-fulfilment, third-party logistics (3PL) fulfilment, and dropshipping business model. In the following section, the Dropshipzone experts share tips on planning your order fulfilment strategy. 

Tips on how to plan for your fulfilment strategy

Accurate and timely ecommerce fulfilment is essential to any ecommerce business. To stay ahead of the competition, you should effectively plan your ecommerce fulfilment journey. The following are some tips for planning your fulfilment strategy. 

Start with basics

The best practice for order fulfilment is to organise the processes. It’s best to start from the basics. Streamline your receiving process so that shipments are processed instantly. It’ll prevent backlogs and cut down waiting times for your customers. Organise the products in your warehouse considering their demand, with top-selling items easily accessible. Revise your shipping strategies to create opportunities to lower delivery costs and improve customer service. Make sure you choose a shipping service provider that offers fast shipping at a reasonable price. Additionally, you could automate the order fulfilment processes for speedy order processing.  

Warehouse location matters

The location of the warehouse greatly matters in an ecommerce business. It ensures speedy delivery of the products and reduced shipping costs. Both fast shipping and delivery costs play a crucial role in influencing customers’ purchase decisions and managing customer expectations. It can also create a positive brand impression in the customer's mind. So the experts at Dropshipzone recommend selecting the fulfilment centre close to your customers. It’ll ensure that the products reach their destination quickly and in the most cost-effective manner.  

Software integrations

Before the development of order management software, product orders were received via call, fax, or direct mail. After the customers placed their product orders, the fulfilment staff manually checked inventory and warehouse to see if the products were in stock, updated the inventory list, printed out packing slips, and dropped them at the post office. The advent of order management software has changed the ecommerce landscape, making the ecommerce fulfilment process more efficient and reliable.

Software integrations can help manage orders across sales channels and keep your ecommerce order fulfilment process running smoothly. Once the order is placed, the software alerts the fulfilment staff to pick, pack, and ship the goods to the customers. After you receive the tracking information, it can be sent back to the platform and shared with the customer to keep them up-to-date. Software integrations help reduce costly errors, thereby increasing accuracy in the order fulfilment process. It also ensures faster ecommerce order processing. Learn more about the incredible benefits that order management software offers.   

Set your return policy 

Having a good return policy is a crucial factor in a purchase decision. It gives customers a feeling of security and that what they’re buying is guaranteed to be of good quality. Without a clear and concise return policy, your customers may become suspicious and avoid buying the products. So, it’s essential to have a well-thought-out and clearly displayed return policy for your products to attract and encourage your customers. Make sure your return policies are fair, and if you have conditional agreements, such as time limits, they should be clearly defined and expressed at the time of purchase to prevent customers from feeling cheated.   

Which e-commerce fulfilment model is best for your business?

Each business is unique and has its own needs and goals. There’s no one ecommerce fulfilment strategy that will suit all businesses. The following are the most crucial factors to consider when choosing your ecommerce fulfilment strategy. It’ll help you determine which fulfilment model is best for your business.

Factors to consider for determining your ecommerce fulfilment strategy

Business size

Your business size will help you determine which order fulfilment model is best for your business. If you’re just starting your ecommerce business, a self-fulfilment model is the best choice. A self-fulfilment model is a low-cost option because it allows you to complete all the stages of the order fulfilment process yourself. You don’t need to rely on a dropshipping service provider or third-party logistics provider when you’re a small-sized, home-based business. 

On the other hand, it makes more sense to outsource fulfilment when you’re an established business. Managing the order fulfilment process becomes complicated as your business grows, and you might get past the point of being able to fulfil orders efficiently and on time.    

Sales volume

The number of orders you fulfil each month is another factor that can help you determine which order fulfilment solution will work best for your business. When your small-sized business scales up, you may start receiving multiple orders. At this point, you may find it hard to catch up with the customers' orders due to the limited resources available. It, in turn, may affect how you do the job and result in costly errors, damaging your business’ reputation and increasing the rate of unsatisfied customers. Your business’ reputation and order fulfilment satisfaction rate decides your business’ fate in the long run, so you don’t want to mess it up. 

Location

Your business location and customer location also help determine the order fulfilment solution you choose for your business. No matter what fulfilment solution you choose, you should ensure that it offers the fastest delivery to your customers. To provide fast delivery service to your customers, you should try to minimise the number of shipping zones your average order travels. It also reduces shipping costs, which is a bonus for your customers. Whether your customers are clustered in a single location or multiple regions, it's best to fulfil orders from densely populated and centrally located areas for faster and cost-effective delivery. 

Sales channels and technology

Another factor you need to consider when choosing an order fulfilment strategy for your business is the number of sales channels and technology you use. The order fulfilment model you select should be able to support various sales channels and order fulfilment technology. It helps streamline the ecommerce order fulfilment process, makes it easier to manage, and improves customer satisfaction. Be sure to monitor how an order fulfilment service provider processes the order. Warehouse management software can help to easily manage all the stages of the ecommerce order fulfilment process. Additionally, having the right inventory management software enables you to keep a check on inventory levels across various locations to avoid stockouts.   

Potential ecommerce order fulfilment challenges

Ecommerce fulfilment is not as easy and straightforward as it seems. Unexpected problems may arise that infuriate your customers, damage your reputation, or cause business loss. In this section, we’ve discussed the major glitches and challenges that prevent business growth.

Poor inventory management

Sometimes, you may run out of stock even before you realise it. There’s nothing more frustrating than customers purchasing an item only to learn that it's out of stock and that they need to wait. It leads to dissatisfied customers, failures in creating positive customer experiences, and harm to brand reputation, forcing you to issue refunds and incentives to disappointed customers to repair the damage caused. To avoid such problems, you should create an inventory management strategy that keeps track of each item and ensures it updates automatically. If you’re facing a product shortage issue, you should notify customers sooner than later.  

Missing deliveries or damaged products

No matter how diligently you plan your fulfilment strategy or manage inventory, you’ll face slow or missing deliveries, broken or damaged products, or faulty packaging issues at some point in time. It can cause potential harm to your brand’s reputation, future sales, and profitability. In such cases, you have to deal with furious customers tactfully. Make the return process easy, and don’t charge them for returned merchandise. This way, you have a great chance of turning your mistake into a positive customer experience, which they’ll appreciate.   

Demand planning

Both overstocking and understocking can be a problem. Overstocking can result in increased warehousing costs, less cash flow, and unsold items, and understocking can lead to missed sales opportunities, unhappy customers, and higher costs to acquire inventory at the last minute. Therefore, You should wisely predict product demand to keep adequate stock. You can do it by analysing your sales cycle to get some insights into product demand.  

Less time to focus on more strategic tasks

Ecommerce order fulfilment leaves you with little time to focus on strategic tasks such as growing your customer base, marketing your brand, and launching new products. These tasks have great potential to generate more revenue and scale your business. Since you don't have much time to focus on growth-oriented business activities, your business may become stagnant. Having a good action plan and focusing your best time, energy, and resources on these tasks will help you scale your business and bring more cash flow.    

Summary

Selecting an appropriate ecommerce fulfilment model may help a business thrive. It also equates to happy and satisfied customers. The best order fulfilment solution for your online business depends on the nature of your business, the products you sell, your location, and several other factors. 

By having a quick look at the following, you’ll understand which ecommerce order fulfilment model may be ideal for your business.

Self-fulfilment model may be ideal for your business if:

• You’re a small, home-based or established business

• You want a low-cost option and stay profitable

• You want to manage your business operations on your own

• You want to keep inventory on hand

• You want to use your own packaging and labels

Third-party logistics (3PL) fulfilment model may be ideal for your business if: 

• You’re a small and growing business

• You want to increase efficiency in order fulfilment

• You want to outsource your storage, shipping, customer service, and return processing

• Your order fulfilment is slow and affects the customer experience

• You want to increase customer reach and scale your business

• You want discounted shipping rates

• You require more time to focus on your marketing activities 

Dropshipping fulfilment business model may be ideal for your business if: 

• You’re new to ecommerce

• You’re looking for an easy way to start and scale your ecommerce business

• You don’t want to deal with physical products

• You require more time to focus on marketing activities

• You want better operational efficiency and accuracy

• You want faster order processing and shipping 

Dropshipping involves outsourcing everything from product sourcing to order fulfilment. A supplier handles the product sourcing, storage, shipping, and delivery of products to the customers. You don’t have to deal with physical goods. It’s a hassle-free way of selling products online as the dropshipping service provider takes care of everything. 

If you favour dropshipping, Dropshipzone is a way to do dropshipping. It’s Australia’s first and leading B2B marketplace that connects suppliers with retailers. Dropshipzone empowers Australian SMEs to start and grow their ecommerce business. It’s a solution for suppliers, and it's also a solution for retailers wanting to start an ecommerce business without inventory. 

Dropshipping for suppliers is easy. It’s a three-step process. 

• Upload your products to Dropshipzone and reach thousands of retailers.

• Set your own selling price on Dropshipzone to earn good profits.

• Fulfil your orders and get paid through Dropshipzone’s secure payment system.   

When a customer makes a purchase on a retailer’s website, the retailer places the order on Dropshipzone. Once the order is placed, the Dropshipzone supplier confirms the order and initiates the order fulfilment process. The supplier picks the right product from its warehouse shelves, packs and adds the shipping labels, and finally ships the order directly to the customer. After the order has been fulfilled, the supplier gets paid through the Dropshipzone payment system.  

Want to know more about dropshipping for suppliers at Dropshipzone? Visit our FAQ page to find answers to the most common questions. Alternatively, you can speak to our customer service team via email at supply@dropshipzone.com.au or contact us to get your questions answered. 

Become a supplier at Dropshipzone today to unlock new opportunities and accelerate your sales.