June 8, 2019  |  MX Data

How to Reduce eCommerce Order Fulfillment Time and Save Money

Getting your products into the hands of customers as efficiently as possible is your key to surviving and thriving in this highly-competitive business landscape. Ever since consumers were introduced to huge and fast retailers like Amazon in the early 2000s, eCommerce saw a shift in customer expectations and behaviors. All these changes have forced retailers to rethink their operations, especially when it comes to order fulfillment pace.

Here are a few facts to illustrate how customer expectations are higher than ever:

  • 50% of consumers abandon their carts due to lengthy delivery time or when a retailer doesn’t provide a delivery date.
  • 96% of consumers who experience excellent delivery services are more likely to shop at the same retailer again.
  • 80% of consumers prefer same-day shipping, while 55% are willing to pay retailers extra for this option.

In this guide, you will get to know the best practices and tools to improve your order fulfillment process to meet the requests of today’s demanding customers. We will show you how to minimize your eCommerce order fulfillment time and save money.

In this ever-changing landscape, the spoils go to companies nimble enough to adapt to changing marketplaces.

The typical steps to a successful eCommerce Order Fulfillment Process:

1. Receiving and storing your sellable goods

Like most of the retailers you have two main options when it comes to receiving inventory.

  1. You can receive and store your products in your own warehouses and/or your brick and mortar stores. This means your company will be responsible for receiving, examining, labeling, stocking the items in your warehouses and/or stores. You will need to deploy the right tools that makes it easier for your team to monitor in real time what comes in and out of the warehouses and stores inventories so that you precisely know your stock status at any time and you can avoid running out of products and therefore avoid missing sales opportunities. That in-house receiving lends itself well to situations when the retailer will do the order fulfillment in-house as well.
  2. You may also opt to outsource the receiving and stocking of your products, which in turn lends itself correctly to situations where you also outsource the order fulfillment process. Your order fulfillment partner will be responsible for managing your online inventory (products sellable online) but still will need to share stock-related data with you so that you stay in the loop and, when need be, place new orders with your vendors to do stock replenishment. Chances are that your fulfillment partner will have his/her own system and it will be vital to integrate it with your own retail systems to have real-time access and accurate data to make informed business decisions.
How to Reduce eCommerce Order Fulfillment Time and Save Money

2. Picking and Packing

Once an online customer pays for one or more items in the shopping cart of your website, you need to start processing their orders as soon as possible.

If you manage your own inventory, your team has to pick the items off the shelves or storage bins in your warehouses or stores participating to the order fulfillment and, forward them to the packing station, where employees assess the items for damages and confirm that the item(s) picked match(es) the item(s) ordered.

This step is crucial as it helps you eliminate shipping errors and therefore it reduces product returns, making you save money and time as a result.

Items that do pass that confirmation process will be packed accordingly and prepared for shipping. 

Retailers who outsource the order fulfillment process only have to forward the order requests. Their partner will do the rest.

3. Credit card settlement

After packing the orders, you usually will need to settle the credit card payment entered by the online shopper at the time he/she placed the order.

Note that depending of your company’s policies regarding the payment of your online orders, you may either:

  1. Have the funds corresponding to the online order total price reserved on your online shopper’s credit card. You will therefore at order time, obtain an funds reservation authorization from your credit card processor and, you will be able, at a later stage (once you have confirmed that you do have the ordered items in stock and that you are ready to ship) to settle the payment with your credit card processor. The funds corresponding to the order will only then be wired to your bank.
  2. Have the funds corresponding to the online order wired automatically in your bank account at the time to online shopper enters his/her credit card information when checking out on your website shopping cart.

Note that, if the first option adds an extra step to your entire online order fulfillment process, it also may save you some time and money when compared to the second option, which systematically charges the online shopper the full amount of his/her online order at the time he/she checks out.

However, should you run, at picking time, into a situation where you realize that you do not have the ordered product(s) in stock or, that the ordered product(s) are in stock but are damaged, you then need to spend time to:

  • Alert the client of the issue
  • Process a full refund of the online order on the shopper’s credit card
  • Update your point of sales system to reverse the sale
  • Adjust your inventory to reflect that you are down one or more items because of a damage or an inventory shortage

In the first option (reservation of the funds on the customer’s credit card and settlement once you confirm that you are ready to ship), you do not need to process a refund on the customer’s credit card if you realize you cannot ship the ordered products, since you have never charged the online shopper’s credit card.

4. Shipping

You are now ready to ship. You will need to select the appropriate shipping carrier along with the adequate shipping method.

Top eCommerce Shipping Best Practices For 2019

The selection of the shipping carrier may depend of several factors. The size and content of your packages, the locations which you shipping from and to, the various shipping methods offered by the shipping carriers, the shipping prices quoted by the various shipping carriers, etc..

Alternatively, you may also decide to have one of your staff members to go to the local post office and ship the orders through the post office.

In any case, whatever the way you end up shipping your goods, you will need to save the tracking number provided by the selected carrier so that you can forward this information to the online shopper to allow him/her to monitor his/her order shipping status.

5. Returns Processing

In today’s digital era, customers who are dissatisfied with their orders will often request a Return Merchandise Authorization (RMA).

You need to account for these situations as it is a fairly standard practice to accept sold products back from your customers.

Not accepting returns may put you at risk, when a frustrated customers report their bad shopping experience on Social Media. This should be something you want to avoid at all cost, so that you can keep good ratings.

Fulfillment Strategies to Save You Time and Money

1. Select the right fulfillment solution

If you want to speed up your order fulfillment time cycle and reduce employee costs, you need to use the right fulfillment model for your business.

We review below four different fulfillment options. Each comes with its own strengths and weaknesses. Get to know each one to identify and choose the best solution for your company based on your products, order volume, and management systems.

1. In-house order fulfillment

As mentioned above, retailers who embrace in-house order fulfillment must carry out every step in the fulfillment process. Startups often prefer to choose this method to reduce costs, but to move the business forward retailers usually switch to a different fulfillment method to be able to dedicate their energy on innovation, creating marketing campaigns, and engaging more customers instead of packing and shipping boxes.

Once companies see significant growth, they might invest in their own facility where they can do self-fulfillment more efficiently, but if they do so, they will have to manage and monitor, eCom systems, warehousing systems, shipping systems, and so on.

Managing and monitoring disparate systems which host their data in distinct data containers that do not communicate is not time and cost efficient.

Investing in a retail integration platform is key to integrate all your disparate retail channels and sync all their respective platforms.

A proper integration will not only save valuable time and money but also will surely eliminate mistakes and human errors made when too many manual steps are being performed to record the same information over and over again.

A smart integration platform enables you to streamline your operations and eliminate manual errors while drastically cutting your order fulfillment time cycle and labor costs.

2. Third-party fulfillment partner

If you are not equipped to efficiently fulfill your eCom orders within your organization, you may need to seek the assistance of a third-party logistics company (3PL).

These companies specialize in storing retailers products in their warehouses and they are taking over the online orders fulfillment process for you.

These 3PL vendors have their own management platforms and again, before you embark with one of these companies, make sure that they will offer you ways for you to import and export information in and out of their management platforms.

One of the main advantages of this solution is that you won’t need to invest in fulfillment software, interface with shipping carrier’s platforms, buy or rent warehouse spaces, hire warehouse staff, etc… However, past a certain order volume, it might become fairly expensive to use a 3PL vendor to handle your orders fulfillment and you might want to reconsider the option of doing it yourself.

Every 3PL company is different: some handle B2B orders, others offer special services like custom packaging, fulfillment by Amazon preparation, and so on.

You need to have a clear idea of your budget, your needs, your wants and your growth plan to wisely choose the 3PL company that best suits your company.

3. Dropshipping

In the instances where you do not stock specific goods and/or you are not the manufacturer of the goods you sale online, you may choose the option to dropship your eCom orders.

In these cases, you fully rely on the product manufacturers to create, store, and ship their products to directly to your customers.

When doing dropshipping, you will want to consider and discuss with the manufacturers, the shipping options that they offer.

  1. Can they print your logo on the packing material?
  2. Can they customize their shipping labels to reflect your company
  3. name and address? Can they do blind shipping?
  4. How much do they charge for shipping?
  5. Can you connect to their fulfillment platform?
  6. How do they expect you to send them the list of orders to fulfill?
  7. Will they offer ways to connect your systems to theirs? etc...

This can be a great solution if you can easily integrate your systems to the manufacturer’s ones but if integration is not possible, it might become difficult to stay productive and effective

4. Hybrid Fulfilment operations

You may be in a situation where it makes sense to use a combination of the three fulfillment options defined above.

As an example, you might choose in-house fulfillment for custom orders that are assembled in-house by your staff.

You may also use a third-party fulfillment partner to handle standard non-custom orders that sell in larger volumes and, finally you may decide to have items that you do not stock drop-shipped by the your manufacturers.

Regardless of your situation, making sure that your various retail systems can easily connect to your vendors and partners is key to time and cost efficient operations and enhanced customer satisfaction.

Maintaining efficient and smooth integrations between your retail platforms and your vendors and partners ones will cut down significantly errors resulting from repetitive manual data entries and eliminate mundane tasks.

5. Leverage integration solutions

To fulfill orders quickly, you need great visibility in several areas of your business—sales, logistics, and inventory to name a few. Having an easy access to all your data at anytime, and in real time is key to your business success.

However, as we have seen above, to meet current customer’s expectations and to fulfill their orders, you need to implement various platforms:

Website, Shopping cart, Inventory control system, Warehouse management system, Accounting system, CRM, etc..

In this context, most of these systems do store similar information revolving around your products, their costs and prices, their availability, and your customers.

As an example, your eCom platform will need to store the list of your sellable products online as well as the online price of each item and the quantity available for sale.

In the meantime, your accounting software will also store the list of your products, their selling prices, the costs at which you have purchased them from your vendors and your company on hand quantities.

If you switch to your CRM application, you will most likely see for each customer, the list of products that they have purchased from you, at what price and how many.

While it is obvious that a lot of the data in these different platforms is redundant, it does not mean that by default, you will only need to enter this data once in one of the systems to have it automatically replicated to the other systems data containers.

Maintaining a fragmented set of data containers and making sure that at all times they are in sync is a real challenge and a costly one. Furthermore, maintaining fragmentation in your systems leads to increased order fulfillment time, and partially informed business decisions.

Increased order fulfillment time may lead to customer frustration which in turn may lead to poor sales and eventually business failure.

6. Understanding your cost per order

Increased order fulfillment time usually rhymes with increased order Fulfillment cost.

Indeed, the increased fulfillment time is rarely linked to the fact that you are, at fulfillment time, enhancing the quality of the products you have sold, or that you are creating on the fly an incredible packaging that will leave your customer speechless when he will receive his ordered products.

Increased fulfillment time is rather linked to the fact that your various systems are not connected and therefore, you spend an incredible amount of time, inputting the same data, reviewing it and comparing it, on different screens of different applications over and over again.

Furthermore, since most of these applications do not use the same user interface, you will need to familiarize yourself with different screen designs to locate, review or edit the same information which can make the entire process pretty confusing.

A single step missed in one of the applications that contribute to the fulfillment process might be generating chaos and seriously delay the moment when your customer will receive his/her order.

To better understand your cost per order, make an exhaustive inventory of all the tasks that need to take place, from the moment a new online order is placed on your website and, the moment the order is received by your customer.

You will be surprised by the myriad of small steps that need to be completed before the online order reaches your customer.

For each of these steps, attempt to:

In doing so, you can keep customers within your ecosystem, where each channel will work harmoniously with the rest to raise sales and engagement.

  1. Define if that step is manual or automated
  2. If the step is manual:
    • Quantify the time it takes to complete it
    • Define the type of staff performing the task
    • Define the hourly rate or the cost of that manual resource
    • find out if that task can/must be performed 24/7 (in which case, you will need to have different shifts and increased costs)
    • Define how many times can that task be realistically be repeated in a day
    • Define the tasks that are dependent of the completion of this one
    • Define the tasks that this one depends on
    • Find out if the next task in the sequence of fulfillment events, is automated or manual:
      • If the next task in the sequence is automated, find out if, the current task is not completed if it blocks the entire fulfillment chain for all the orders or if it only will block the fulfillment of that specific order

The list of questions above, are only basic questions that you might need to answer to better understand how much you need to spend for every order fulfillment.

Your major goal when reviewing the list of manual steps is to understand and define if you can easily automate and therefore eliminate them and at what cost.

The comparison of the cost of automation to the operational cost you need to incur every time you process an order manually will allow you to gauge, based on the average number of orders you process a day/week/month, if the automation cost will pay for itself.

It will also show you based on the fact that, when you factor all the time needed to complete all manual tasks involved in the fulfilment process of one order, how many orders, you can fulfill realistically per day with the staff that you have at your disposal currently.

You will most likely quickly realize that to save money on order fulfillment and, to increase your daily fulfillment capability, you will need to automate as much as manual tasks as possible you have inventoried in your fulfillment process.  

7. Reduce the impact of order returns

Giving customers an opportunity to easily return their purchases is an absolute necessity in today’s highly-competitive marketplace.

It helps you improve customer engagement and be perceived as a customer-centric brand or retailer.

However, it also has a downside...

Getting a lot of return packages can be a nightmare for any business as they inflate operational costs without generating any incomes.

Here again, You need to think about automating as many return steps as possible, from the re-entry of the product in the inventory to the refund of the order.  

Takeaway

An optimized order fulfillment process is vital to every forward-thinking retailers and you must fully understand what the entire process entails to be able to improve it as a whole.

For your company to thrive in this cutthroat landscape with increasing customers expectations and high volumes of data, you have to cut fulfillment time cycle and operational costs.

To help you do so, you need to determine which fulfillment model is ideal for your business, and invest in a retail integration platform allowing you to cut this fulfillment time and employee costs by up to 80% thanks to the automation of mundane time-consuming tasks.

You will then be able to focus on your growth!

How To Cut Your Order Fulfillment Time Cycle and Employee Cost By 60% To 80%

If you are interested to learn how you can streamline your order fulfillment operations and calculate the Return On Investment you will gain by automating your fulfillment process, visit our online Order Fulfillment Savings Calculator Here.

Our advanced calculator will which will help you understand how quickly you can save money and increase your order fulfillment capacity by implementing our PortalMX smart retail integration platform.


M.X. Data is 30+ year veteran leader in the development and deployment of retail management applications.

M.X. Data has acquired the expertise and insight knowledge of the best retail practices available today by working and consulting with the most prestigious retail companies on the planet. M.X. Data’s staff will work seamlessly with your teams and will act as your best trusted advisors

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