Excellent order fulfillment practices helps businesses optimize their customer relationships, increase revenue, and avoid unnecessary transaction disputes and chargebacks.
Did you know, in a study of 2000 US Shoppers by Avarto, more than half (54%) shoppers abandoned an online purchase because delivery was costly?
The majority (83%) prioritized free delivery as the most crucial factor when considering online order fulfillment, while 53% valued the speed of delivery. 25% of the shoppers surveyed canceled their orders because delivery was too slow for their needs.
A new customer visit to your Shopify store is always worth celebrating, but you only take a sigh of relief when the order is fulfilled and the customer is happy with their delivery.
What makes Direct-to-Consumer (DTC) e-Commerce compelling is not just the online shopping experience but on-time delivery, fewer fulfillment errors, extra service, and convenience. These are the things that customers value. And when you fall short in responding to those essential values, you risk alienating or losing customers.
Order fulfillment is a core business process that involves various crucial steps:
- Packing the right product
- Putting it in the correct box
- Shipping it to the right address
- Ensuring the customer knows the delivery status
- Gaining the customer’s approval on its arrival
So, today, we are here to share everything you need to know about creating an incredible order fulfillment journey for the customer on a Shopify store.
Let's dig in!
How Does the Order Fulfillment Process Work?
The complete order fulfillment lifecycle is an umbrella of inventory management, supply chain management, order processing, quality control, and customer support. Much of the order fulfillment process can take place under one roof in a well-organized warehouse (for product sellers) -- depending on the size of your business.
Many small businesses handle order fulfillment in-house, while large enterprises require a more complex, multi-layer distribution funnel.
But in either case, the main goal is efficiently getting the customer what they ordered as quickly, reliably, and inexpensively as possible.
Here’s what that looks like in practical terms:
- A merchant orders from the manufacturer
- Manufacturer ships product to the merchant’s fulfillment warehouse
- Product received and checked into stock
- Customer’s place orders on merchant’s Shopify store
- Money goes into merchant’s business bank account
- Merchant packs order and fulfillment team or company picks order from the warehouse
- Delivering company transports the package to its destination
- Order arrives at the door of a happy customer
Order Fulfilment Challenges for Shopify merchants
Order fulfillment challenges run the gamut from supply shortages and inventory management issues to demand and logistics planning failures to kinks in the supply chain.
Below are notable order fulfillment challenges you should bear in mind.
Running out of stock leads to customer dissatisfaction, failures in the overall customer experience, and harm to brand reputation. It is difficult for companies to repair the damage once it's done. Anticipating inventory shortages and communicating such delays effectively with your prospects will save you lots of headaches in this direction.
On the other hand, keeping too much stock on hand drives up storage and carrying costs. It also increases your risk since the demand for those items may drop before you get them sold. It's crucial to apply wisdom and credible business metrics for demand planning.
Slow or missing deliveries, broken items, and battered or wet packaging are all factors that can harm a company's reputation and future sales and, in turn, its profitability. Outsourcing your order fulfillment can help mitigate this risk.
Supply Chain Execution (SCE)
An adequate supply chain strategy entails evaluating cost versus benefit tradeoffs regarding operational choices. There is no silver bullet for this. You have to figure out what works for your business.
SCE typically involves using multiple applications, such as order management, inventory management, warehouse management, transport management, and logistics software.
Order Fulfilment Models provided by Shopify
Based on the needs of your Shopify store, Shopify has three different options you can use to fulfill the orders you receive:
Automatic Order Fulfilment
Automatic order fulfillment means you don’t have to sit in front of your computer when you receive an order – because the fulfillment process is automated.
This process only makes sense if:
- You are using a Third-Party fulfillment service
- Your sales do not require packing and shipping. For example, digital downloads
- You do not have any items available for pre-order
Manual Order Fulfilment
Manual order fulfillment makes sense for most stores, as it gives them control and the ability to monitor their inventory levels. Manually fulfilling orders allows the seller to be more involved in the ordering and shipping.
Consider manual fulfillment if:
- You occasionally run out of stock
- You have products for pre-order
- You produce goods to order
- You want to offer your shopper partial fulfillment
Partial Order Fulfilment
There could be instances when a customer orders for multiple products, and one or more items in question are out of stock or on pre-order. For example, when you receive an order for a product out of stock or pre-order. And the same buyer has already paid for multiple products on sale. You will then be left with the option to send the available items separately to avoid keeping the customer waiting for those items you don't readily have in stock.
How Do You Choose an Order Fulfilment Strategy?
Shopify businesses have several choices when deciding on an order fulfillment strategy. Depending on the skills and resources available in your company, you may prefer either internal fulfillment or outsourced fulfillment.
To make the right decision for your Shopify store, look at the following:
- the products you sell,
- potential fulfillment options, and
- fulfillment costs first.
A detailed financial analysis should guide you to the best solution.
What are the Modes of Order Fulfillment Available to Shopify Stores?
There are four order fulfillment models: in-house, outsourcing, dropshipping, and hybrid. Each model fills specific business needs.
- In-house: The in-house model means performing all things order fulfillment internally.
- Third-party: This model entails outsourcing all order fulfillment activities to an order fulfillment vendor or another third party.
- Drop-shipping: The order is produced and shipped by the manufacturer. On the pro side, this lowers the barrier to entry and minimizes overhead costs, key for start-ups and e-commerce companies. It also eliminates the middleman, which can potentially save the buyer money. On the cons side, it can also strip control from merchants, particularly regarding inventory management and order fulfillment. It can also significantly delay shipments to customers since many manufacturers are far from the merchant's customer base in other countries. In that case, shipping may take more time and cost more, or a distribution center is set up, and the items ship from there.
- Hybrid: A hybrid model combines two or more of the three models above. For example, a company may choose to handle order fulfillment of all or just popular products internally and outsource fulfillment during peak periods, such as the holidays, and drop ship big and bulky items directly from the manufacturer.
Order Fulfilment Best Practices
Efficiencies to be gained in order fulfillment largely depend on practical organizational skills.
Hence, oder fulfillment best practices boil down to: organize, organize, organize.
Start with the basics. Streamline your receiving processes, so incoming shipments are processed quickly, and the manufacturer returns damaged goods swiftly. That will go a long way in preventing back-orders or long wait times for your customers, which could result in chargebacks.
Organize your warehouse for more efficient picking times. Place hot-ticket items upfront and close to human or robot pickers and packers. Place other items in your warehouse according to demand, with items least needed at the very back.
Organize shipping and logistics, so you get the fastest possible delivery times to customers at the least cost. But also plan a shipping backup strategy if something goes wrong or carriers unexpectedly raise rates too high for your margins.
Prepare for customer service and returns as much as you try to leave every customer with a perfect experience. Mistakes, defects, and delays happen from time to time. Whether the issue was your fault, your customer’s, or a vendor’s, it’s best to be prepared to make it right.
Automate as much as you can to save labor costs, improve working conditions, and make operations safer.
Manual operations may be the most feasible and cost-effective option for small businesses, but they can quickly become a risk as you grow. You'll likely run into human error and still rely on manual processes that prohibit the same level of performance.
Using a fully-automated system helps you track orders, inventory, and shipments from end-to-end for enhanced visibility, the best customer and employee experience, and ideally maximized profits.
Whether you're are in the exciting beginning stages of a start-up or have decades of order fulfillment experience, it’s never too late to look at your order fulfillment and management systems with fresh eyes. You could find opportunities to cut costs while offering an improved customer experience. That's a win-win for any business and its valued customers.