What is order fulfilment?
Order fulfilment means fulfilling a sales order by receiving goods, and processing and shipping orders to customers. It encompasses the entire distribution strategy, from sourcing inventory to picking, packing and shipping orders.
What are the main order fulfilment models?
In-house
Fulfilling orders in-house entails your internal team managing all steps of the process, from receiving inventory to shipping completed orders to customers.
Third-party
Third-party fulfilment relies on outsourcing critical parts of the order fulfilment process to external vendors, who handle the storage, packing and shipping of products on your behalf.
Dropshipping
Dropshipping is a fulfilment method where an online store doesn’t keep the products it sells in stock. Instead, when a store sells a product, it passes the sales order to a third-party supplier to ship directly to the customer.
This approach can be cost-effective and convenient for smaller businesses as they can start an online store without having to invest in inventory. However, it has the drawback of providing little control over the distribution process, as the third party manages this.
Hybrid
The hybrid fulfilment model combines two or more of the above methods. For example, you can fulfil your bestsellers in-house while outsourcing the fulfilment of other products. Hybrid fulfilment can help you optimise your operations, meet customer demands more effectively and scale to meet peak-season demand.
What’s the order fulfilment process?
Managing incoming inventory
The first step involves receiving and documenting incoming stock, including product quantities, condition and quality checks. It’s essential for accurate tracking and making sure products are ready for order fulfilment.
Storing inventory
Inventory is stored in-house or in a warehouse or distribution centre. It’s often organised with a system like FIFO (first-in-first-out) to make sure older items are shipped first. Proper storage, security and tracking are crucial to safeguard against damage, loss and obsolescence.
Processing orders
This step involves receiving incoming orders and verifying them. It also involves payment processing and inventory allocation. If you outsource this part of the process, you can simply pass the sales order to your third-party distributor, who’ll manage it from there.
Picking
After an order passes checks and is approved, your picking team or automated warehouse robots select it using the instructions on the packing slip. This slip should include essential information like the SKU, colour, size and warehouse location.
Packing
Use your chosen packing and protective materials to package the product. This step also includes weighing and measuring the order to ensure it meets the specific shipping requirements.
Shipping
This stage involves choosing the appropriate shipping method and carrier for the order, generating shipping labels and handing the package over to the carrier for delivery. It may also involve tracking and updating the customer on the shipment’s progress.
Delivery
Delivery encompasses the actual transit of the package from the fulfilment centre to the customer. It involves coordination with the chosen carrier to ensure timely and secure delivery.
Processing returns
If a customer is unsatisfied with their product, the returns process begins when they send the product back. If the item passes quality control checks, you can restock it. You'll also need to issue refunds or replacements, depending on the customer’s request and your returns policy,
What are the challenges of order fulfilment?
Managing inventory and forecasting
Balancing between excessive and insufficient stock levels is challenging. Low stock can lead to stockouts, which negatively affect the customer experience, while overstocking can incur extra storage fees and carrying costs.
Logistics
Customer satisfaction relies on timely and safe deliveries. Managing the logistics of the entire order fulfilment process can be complex, especially when depending on third-party shipping companies.
Reverse logistics
Reverse logistics is the technical term for the returns process, encompassing the sequence of events to return a product from a customer back to the retailer or manufacturer. This process commonly involves five steps:
Returns
Reselling
Repairs
Repackaging
Recycling
Each step of the returns process requires meticulous tracking and automation, which can be a challenge.
Labour shortages
Adequate staffing is essential for warehouses to pick and pack orders. Labour shortages make it challenging to retain high-quality, consistent staffing. A lack of staffing can cause delays and higher turnover costs, leading to dissatisfied customers.
Optimising the customer experience
Managing the picking, packing and shipping of many products simultaneously can be complex, especially when your process involves multiple shipping companies and varying delivery times. This complexity can lead to errors, such as missed items and delayed shipments.
Complex fulfilment software
While order fulfilment software should streamline operations, some solutions are complex, hard to implement and challenging to integrate with your existing tech stack.
Order fulfilment best practices
Analyse key data
Begin with a thorough examination of your existing performance — calculate the time it typically takes to process orders, pick items, pack them and deliver them. Utilise this data to refine each stage of the process. Maintaining clear visibility across your operations will aid in identifying areas for improvement, discerning patterns and enabling you to foresee bottlenecks before they occur. Remember that data is knowledge, which is essential for preventing stockouts and an accumulation of backorders.
Connect essential platforms
Access to real-time data is pivotal to a successful order fulfilment process. Use inventory management software that's compatible with your existing tech stack. For example, choose inventory management software that integrates with your customer relationship management and accounting solutions to streamline your workflows and enable seamless data transfer.
Automate routine processes
Standardise and automate repetitive tasks, such as customer order tracking, order processing and the printing of shipping labels. Automation alleviates manual labour from these tasks and significantly mitigates the risk of human errors.
Choose intuitive inventory management software
Inventory management software can help you maintain optimal stock levels and allows for effective demand monitoring without exposing the business to stockouts or excessive storage fees. The ideal software should be easy to use and offer powerful automation capabilities, real-time inventory tracking, comprehensive analytics and seamless integration with your existing technology stack.
Streamline order fulfilment with MYOB
With MYOB CRM (also known as Tall Emu CRM) you can process and fulfil your sales orders quickly and easily. MYOB CRM has in-built inventory management capabilities and integrates seamlessly with both MYOB and Xero accounting software, making it an ideal operating system for many different types of small and medium-sized businesses.
With MYOB CRM, you can track sales, manage inventory, fulfil orders and make sure your financials are always up to date. What’s more, you can integrate MYOB CRM with a host of other applications, including WooCommerce, Stripe, Campaign Monitor, Mailchimp and more.
See what MYOB CRM can do for you — view a customisable demo. You can also start a 14-day free trial. At MYOB, we have you covered.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.