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Fulfillment logistics explained

Feb 13, 2024 - Lars Anderson
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Originally posted 12/31/2022, updated 2/13/2024 by A.Wolfe

As an ecommerce business, designing, manufacturing and marketing your product is only the beginning of cultivating a happy, repeat customer base. The customer journey encompasses more, including purchase, then picking, packing and shipping your product to customers accurately and on time. This post-purchase phase is an enormous driver in customer satisfaction – and fulfillment logistics operations can make or break a company.

To make things more complex, today’s consumer expects faster and more convenient delivery, with 84% of consumers having specifically made a purchase because shipping was free. This article covers each step of fulfillment that your company needs to master in order to provide a seamless experience that drives growth, loyalty and customer retention.

What are fulfillment logistics?

Fulfillment logistics consists of the end-to-end process of managing and executing orders from the point of sale to delivery to the customer. It includes inventory management, order processing, picking and packing, shipping and returns management. Effective fulfillment logistics ensures that orders are fulfilled accurately, efficiently and on time, meeting customer expectations and enhancing satisfaction.

Retailers often rely on advanced technology and strategic partnerships with third-party logistics providers (3PLs) to streamline their fulfillment operations and optimize the entire supply chain. Ultimately, successful fulfillment logistics are critical for driving customer loyalty, repeat business and overall growth.

What does the fulfillment logistics process look like?

The fulfillment process is the backbone of retail operations, encompassing the steps from order receipt to product delivery. It orchestrates a series of processes that ensures seamless and efficient order fulfillment.

Storage

Selecting the right storage for your brand is critical to inventory management and your order fulfillment strategy. Every ecommerce company has unique requirements for storage. A smaller company may be able to get by with storing its product in the owner's garage or a storage unit. However, growth and the ability to scale with the season, economy and other factors becomes essential as businesses get bigger and handle more products and SKUs.

Ecommerce businesses often use a variety of inventory storage methods tailored to their specific needs and inventory types. Common storage options include bulk storage for large quantities of items, rack storage for efficient organization and accessibility and bin storage for small or irregularly shaped items. Each storage method is designed to optimize space utilization, facilitate inventory management and streamline order fulfillment processes. Other storage considerations are things like temperature control, FDA registered or high cyber and physical security.

Order processing

There are three major types of order fulfillment.

  • Self-fulfillment: The company handles every step of the process in-house, including managing inventory, packing the order, shipping and handling any returns. This can work well for one- or two-person companies starting out and running the business out of their home or large retailers that seek more control over their fulfillment operations and supply chain.
  • Dropshipping: The company doesn't make or store the products they sell. Instead, they outsource fulfillment to a manufacturer who makes and ships products according to the company's specifications.
  • Third-party fulfillment: With this method, the company uses a 3PL provider to take care of inventory, packing and shipping. This takes order processing and fulfillment off the company's plate and allows them focus on core business operations, like innovation and marketing. With the right 3PL partner, brands get access to shipping discounts, a multi-node network and specialty fulfillment.

To fulfill orders in-house, it’s essential to optimize the following areas:

  • Supply chain visibility: Visibility across your supply chain lets you identify and prevent potential bottlenecks.
  • Scalable operations: While your brand may be able to handle fulfillment logistics as is, what if your company has a sudden boom and you need to deliver 10x the orders? Can your current operations and processes handle that?
  • Accurate inventory management: Modern OMS (order management system) and WMS (warehouse management system) software gives your real-time visibility. Accurate inventory management and robust technology are essential for ensuring seamless retail operations and meeting customer demands effectively. With precise inventory data and advanced technology solutions, retailers can optimize stock levels, prevent stockouts or overstocking and provide customers with accurate product availability information, enhancing overall satisfaction and driving sales.
  • Visibility for the customer: Customers have grown accustomed to seeing where their order is at all times. Your software needs must be capable of automating notifications and allowing customers to track their items in-route.

Delivery processing

A recent survey found that 85% of customers won't shop with a retailer again after having a poor delivery experience. Additionally, you can expect higher cart abandonment rates if delivery is poor: 88% of customers will abandon their online shopping cart if they see the delivery is too slow or too expensive. So getting delivery right is imperative.

A survey found that 85% of customers won't shop with a retailer again after a poor delivery experience. Additionally, 88% of customers will abandon their online shopping cart if they see the delivery is too slow or expensive. This means getting delivery right imperative.

Here are some essential steps to enhance your delivery processes:

  • Optimize packaging size to reduce employee time and material costs, ultimately lowering shipping expenses.
  • Utilize lightweight materials such as bubble envelopes and foam inserts to minimize shipping costs.
  • Bundle shipping costs into product prices for a streamlined customer experience.
  • Implement local delivery services for faster shipping nationwide by partnering with a third-party fulfillment company with a network of warehouses.
  • Stay informed about carrier rate changes and regularly obtain new quotes to maintain cost-effectiveness in your delivery operations.

Returns management

Returns management is vital: Last year, the National Retail Federation pegged retail's return rate at 16.5%, or about $816 billion worth of merchandise, while at the holidays it was projected at close to 18% or nearly $171 billion. The way you handle returns directly impacts customer satisfaction, retention and overall brand reputation. By providing a smooth and hassle-free returns process, you can build trust with customers, encourage repeat purchases and minimize negative feedback or complaints.

  • You can implement simple strategies to improve returns management, including:
  • Optimizing packaging to reduce return shipping costs.
  • Using return management software to streamline processing and tracking.
  • Offering flexible return options like in-store returns for online purchases and providing clear and transparent return policies to set customer expectations.
  • Proactively communicating and notifying customers throughout the returns process to enhance t, ultimately strengthening customer relationships and driving long-term loyalty.

Common fulfillment challenges facing ecommerce companies

With the supply-chain challenges of the past few years, it’s become even more important to avoid common fulfillment issues by implementing an optimized fulfillment strategy for shipping products. Let’s go over some of the common challenges to fulfillment and logistics and how you can avert them.

Inventory management

Brands experience inventory management challenges in maintaining accurate stock levels across multiple sales channels. It can also be an issue minimizing stockouts while avoiding overstocking and effectively managing perishable or seasonal inventory. Optimizing warehouse space and streamlining inventory replenishment processes can pose significant challenges for businesses. Successfully addressing these challenges requires implementing robust inventory management systems, leveraging data analytics to forecast demand accurately and establishing efficient inventory control practices to ensure inventory accuracy and availability.

Demand forecasting

As customer demand fluctuates with seasonal shifts, trends, and economic factors, maintaining optimal inventory levels becomes crucial for efficient warehouse management. Overestimating demand can result in excess inventory occupying valuable shelf space, while underestimating it leads to backorders and customer dissatisfaction. To tackle this challenge, businesses should invest in sophisticated forecasting software capable of SKU-level demand prediction across fulfillment centers, ensuring balanced inventory levels to meet customer needs without excess or shortage.

Manufacturer communication and supply chain execution

Even with optimal planning and processes, unexpected spikes in demand can cause you to run out of inventory. This is where it's critical communicate effectively with your manufacturers. It's essential to choose strategic partners who will respond to you and adapt to fulfill your orders quickly.

It's also important to address supply chain execution: The process of moving goods through the supply chain, from procurement to last-mile delivery to the customer. Tasks involved in supply chain execution include manufacturing, distribution, warehousing, transportation and fulfillment. Your strategies should include:

  • Factoring in lead times for production and warehouse receiving
  • Forecasting demand accurately
  • Spreading inventory strategically across different warehouse locations to minimize delivery time to customers
  • Monitoring warehouse inventory levels
  • Packing and sending orders

Delivery tracking and efficiency

Brands can find it difficult to optimize delivery routes and minimize transit time, which affects real-time tracking accuracy and managing last-mile logistics effectively. To combat these challenges, businesses can implement solutions such as leveraging route optimization software and GPS tracking technology to streamline delivery routes, implementing barcode scanning and RFID systems for accurate package tracking, and partnering with reliable logistics providers equipped with advanced tracking capabilities and efficient last-mile delivery networks. Additionally, investing in customer communication tools to provide timely delivery updates and proactive problem-solving can build trust and increase customer satisfaction. In short, accurate and efficient order tracking is an excellent way to earn repeat ecommerce customers.

Why a third-party logistics provider is an excellent solution

Fulfillment logistics involves a lot of time and effort. However, third-party logistics fulfillment services can help your company save time and money while promoting business growth. While investing in third-party ecommerce logistics and order fulfillment means entrusting a significant aspect of the customer experience to someone else, it can also lead to benefits. Let's discuss how.

Increased inventory space and better warehouse management

Flexibility is essential for effective inventory management. For example, you might need more warehouse space to store products in the run-up to a holiday, or you might need less space if your manufacturing has production delays. If you own or rent your warehouse and fulfill orders in-house, you have a set amount of space to store your goods in, making it challenging to adapt when conditions change. However, with a third-party logistics provider that offers flexible storage, you can pay for only as much warehouse space as you need.

Another pro is staffing. This is a key area where 3PL providers can help. They specialize in fulfillment and, therefore, have hiring and training practices down pat and employees with expertise. By handing over fulfillment operations, you focus on your core business instead of logistics management.

Optimized packaging and shipping costs

A 3PL (Third-Party Logistics) provider plays a crucial role in optimizing packaging and shipping costs for businesses. They assess the specific dimensions and weight of each product, enabling them to customize packaging to fit snugly and efficiently, reducing unnecessary space and minimizing shipping costs. 3PLs also leverage their expertise and industry knowledge to select the most cost-effective packaging materials and methods without compromising product protection or presentation. By utilizing advanced packaging techniques such as right-sizing and bundle packaging, they streamline the packing process and enhance shipping efficiency.

3PLs have access to bulk discounts on packaging materials due to their high shipping volumes and pass these savings onto their clients. They continuously monitor carrier rates and surcharges, adjusting shipping strategies accordingly to minimize expenses and avoid unnecessary charges. Moreover, 3PLs often negotiate favorable shipping rates with carriers based on their collective shipping volume, further reducing shipping costs for their clients. If they have a multi-node network, they can store products closer to customer bases, further reducing costs. Partnering with an experienced 3PL is an excellent optimize packaging and shipping costs and ensure efficient order fulfillment while maximizing cost savings.

Swift delivery times and efficient shipping methods

A 3PL can determine the best way to ship a product: Air, land or sea. Each has its benefits and drawbacks, and considerations include the type of product, speed of delivery, safety during transit and shipping cost. A 3PL who knows the ins and outs of each shipping method will be able to balance all factors to offer unique services like same-day delivery and eco-friendly shipping.

Accurate demand predictions

3PLs use predictive analytics to determine how much inventory to store at specific warehouses. With advanced technology that lets them forecast what customers will buy, 3PLs process orders more efficiently and reduce out-of-stock rates. With highly optimized forecasting and storage, 3PLs may even be able to deliver orders to customers in as little as a few hours. Essential to this process is accurate forecasting and having enough product where demand is high (e.g., more snow shovels at a midwest warehouse than at a Florida warehouse). Faster delivery increases customer satisfaction and reduces your costs by not having product sitting in a warehouse taking up space. You can then invest that cash on hand in other areas of your business to generate more revenue and improve investor sentiment.

Improved returns processes and customer satisfaction

Returns cost ecommerce businesses a great deal time, stress and money, especially if you're a high-volume brand. Partnering with a 3PL experienced in ecommerce fulfillment services can dramatically reduce returns by ensuring orders are accurate. However, if a return is necessary, a 3PL can optimize returns management by streamlining the process and reducing turnaround time. They typically provide a dedicated returns processing facility or area equipped with advanced technology for efficient inspection, restocking and disposition of returned items. 3PLs may also offer customizable return solutions tailored to the specific needs of their clients, ensuring seamless returns processing and enhancing customer satisfaction.

Take your fulfillment logistics to the next level with Cart.com

Partnering with an exceptional 3PL for ecommerce omnichannel fulfillment can revolutionize your business operations. With our cutting-edge technology and expertise, we seamlessly integrate your online and offline channels, ensuring a cohesive customer experience. Let us optimize your inventory management, order fulfillment and returns processing, while you focus on growing your business. Contact Cart.com today to elevate your brand with our tailored solutions and stay ahead in today's competitive market. 

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