Of the various success factors that e-commerce giant Amazon has forged over three decades, fulfillment has been the most strategic. The Amazon business model of high customer satisfaction and constant innovation would not be possible without its highly efficient fulfillment system, which has set a new e-commerce standard of two-day shipping.
Fulfillment is the logistics process of receiving, processing, and delivering orders; it includes warehousing, inventory, picking, packing, shipping, and handling. When your e-commerce business excels at fulfillment, the benefits you derive include customer satisfaction, operational efficiency, and profitability. If you want to build a smooth and successful online retail business, fulfillment is where you should start.
Let’s say you run an e-commerce shop that gets a handful of daily orders, the type you can easily pick, pack, and ship in a few hours. This scenario can be reasonably handled with in-house fulfillment, even if you get a bit busier with returns. When the business expands and the order volume increases, you will likely encounter stocking, packing, and shipping issues. This is when you should look into third-party logistics (3PL) to outsource your fulfillment process and maintain your two-day shipping competitive edge.
Current E-Commerce Fulfillment Models
Beyond self-fulfillment, your e-commerce venture can be managed with:
- 3PL providers that handle all or part of your processes and order volumes.
- Multi-channel fulfillment involves using various methods, including 3PL, to handle orders from different sales channels.
- Fulfillment by Amazon (FBA) is a specific 3PL model that allows you to send stock to various Amazon warehouses for picking, packing, and shipping of orders.
- Dropshipping takes over all your e-commerce fulfillment, from inventory management to packing and shipping returns.
The fulfillment method you choose should be based on a careful assessment of your business needs and goals. If your e-commerce operations are growing beyond what you can handle through in-house fulfillment, consider the following factors when choosing a 3PL partner.
Competitive Fulfillment Speeds
As previously mentioned, Amazon has set a two-day standard of e-commerce fulfillment that raises the bar for everyone. More than 60% of online shoppers expect two-day delivery these days; otherwise, they will look for another e-commerce store that can meet their expectations.
Needless to say, fast fulfillment is a crucial factor to consider when evaluating 3PL providers. To this effect, the best providers manage a network of strategically located warehouses connected through a streamlined ordering system.
Shipping Point Proximity
E-commerce fulfillment is like real estate in the sense that it is all about location. The closer a 3PL warehouse is to your customers, the faster and cheaper shipping will be. This proximity translates directly into reduced shipping times and lower shipping costs, which are essential for customer satisfaction.
A 3PL provider with a widespread network of warehouses would allow you to position your inventory closer to your target markets, thus minimizing the distance packages need to travel. This increases the potential of same-day or next-day delivery for some orders.
Branding and Packaging
Beyond shipping speed, the unboxing experience adds to customer perception and can foster brand loyalty. If you want to foster brand visibility and loyalty, your ideal 3PL partner should offer customizable packaging options that align with your brand.
Your 3PL providers should be fully transparent when it comes to their standard and generic packaging presentation. In other words, you should know how the parcels look from the outside and what your customers will see when they open the boxes. Branded packages, slips and personalized messages can set you apart from competitors.
Fulfillment Software
The ideal 3PL software should enable e-commerce platform integration and provide real-time inventory data. Look for features like order tracking, shipping label generation, and return management. You want a cross-platform user interface that is intuitive and easy to operate on desktop or mobile devices.
Evaluating Pros and Cons of Fulfillment Solutions
After considering the factors above, you should think about possible disadvantages. For example, dropshipping offers very limited control of the fulfillment process, and it invariably reduces your profit margins. The same can be said about FBA, which excels in terms of shipping speed, proximity, and software, but the fees can be substantial.
By evaluating more detailed factors such as shipping volume, product type, and branding, you can uncover other potential disadvantages. There’s also the level of control that 3PL partners allow. You should carefully consider immediate business needs, budget projections, and long-term goals. Many e-commerce operators focus solely on cost-savings when evaluating 3PL providers. Instead of only thinking along these lines, you should consider more nuanced factors such as how much time they can save you. Perhaps you can use this time to expand your reach, improve your marketing strategies, and fine-tune your branding.
Ultimately, the right e-commerce fulfillment strategy is the one that balances cost-effectiveness, efficiency, and the ability to meet your customers’ expectations for timely and accurate delivery.
