As an e-commerce business owner, you know how important it is to deliver a great customer experience.
One of the essential yet often overlooked components of this experience is the fulfilment of your products. E-Commerce Fulfilment is receiving an order through your online shop and/or marketplace listing, picking, packing and shipping it, and have it delivered to your customer.
This guide covers everything you need to know about e-commerce fulfilment. We will examine the steps, options, and how to evaluate and select the best e-commerce fulfilment provider for your business.
The 5 Key Stages Of E-Commerce Fulfilment
No matter which 3PL you’re working with – there are five main stages your product goes through in any e-commerce fulfilment process.
Step 1: Receiving Inventory
Your fulfilment process begins here. It involves receiving your products from suppliers at the warehouse, matching the product identifier to check the quality and quantities received and entering them into your inventory management system. This process is also referred to as inbounding.
Step 2: Storage
Once your inventory is received, it is stored in the warehouse. Various storage models and options depend on your 3PL. These include pallet racking, shelving, and bulk storage. The storage cost will depend on the time it sits in the warehouse, how fast it moves, and how much space you require.
Step 3: Pick & Pack
As orders are received, they are processed and sent for picking from inventory. Once picking is completed, the order is packed safely in suitable packaging. Packaging options include eco-friendly alternatives or inserts and delivery notes. Once picked and packed, your orders are ready for shipping.
Step 4: Shipping
Shipping is the final step in the order process. Shipping is where the order is despatched to your customer. Usually, you will have different shipping carrier options are available, including standard, express, international, and same-day delivery. You can give your customers shipping options at checkout or provide a set service.
Step 5: Returns
Returns are an unavoidable part of e-commerce, and it’s essential to have a process in place for handling them. Your fulfilment provider should have a transparent returns policy and procedure that outlines how your returned orders are processed.
Different Fulfilment Options in E-Commerce
When it comes to e-commerce fulfilment, you have different options to choose from, including:
- In-House Fulfilment
- Third-Party Logistics (3PL)
- Fulfilment by Amazon (FBA)
In this guide, we will focus on outsourcing your fulfilment to a 3rd party e-commerce fulfilment provider, as this is the fulfilment model used by most e-Commerce brands.
How to Choose a E-Commerce Fulfilment Provider for Your Business Needs
When deciding on your e-commerce fulfilment provider, you must take the time to evaluate your business requirements. Do you need B2B services, FBA Prep, kitting or long-term storage? You must review every facet and be realistic about what is a deal breaker and what you don’t need.
1. Share your Business Goals:
Sharing your goals and building a solid foundation ensures both parties understand your business aims and requirements. In addition, if you have a great 3PL, they will keep your goals in mind and give you insights and tips on how to further scale your business or reduce logistics costs to reach those goals.
2. Seamless Integration is a Must:
Proper preparation helps identify potential integration challenges, ensuring smooth onboarding and minimising operational disruptions.
3. Build Trust with your 3PL:
A successful e-commerce fulfilment partnership requires trust. By researching and evaluating capabilities, you create a solid foundation of confidence. Trust goes hand in hand with being realistic with your requirements. Be sure to accurately estimate your needs and order volumes, as it will come back to bite you.
4. Cost Comparison and Review:
Investing time in finding the right partner allows you to select a competitive pricing provider, avoiding unnecessary expenses. All 3PL providers will charge using different pricing models. Evaluating all the costs and what is unseen is often tricky. Use set examples of orders, receiving and returns to get an accurate price from each 3PL for a like-for-like comparison.
5. Scalability and Flexibility:
Preparing for a long-term partnership involves considering future growth. Choose a 3PL that adapts to your evolving needs for seamless operations. Check their capacity. Do they have additional sites? Do they have international locations?
6. Size and MOQs
Size matters – The size of the fulfillment provider plays an important role in whether or not you will work with them. Some 3PLs are designed for huge e-commerce brand giants that have enormous order volumes like 100,000 D2C orders per month. These usually have what are called MOQs – minimum order quantities – and are only affordable for small and mid-sized brands above a certain threshold.
At the other extreme are very small 3PLs, which also serve customers with very low weekly MOQs. However, these often have the disadvantage of having only one or a few locations, very limited warehouse space, and therefore little opportunity for growth. They also often use outdated technology that requires a lot of manual effort.
Find a fulfilment provider that fits your order volume and offers you a good mix of reasonable prices and growth opportunities.
7. Accurately Forecast your Business:
Providing precise forecasts helps build trust and ensures service & cost expectations. Accurate predictions enable your 3PL partner to allocate resources efficiently, maintaining smooth operations and customer satisfaction.
8 Things to Check When Evaluating An
E-Commerce Fulfilment Company
There are some key topics to discuss and evaluate when sourcing your 3PL. These conversations will help you gauge the company’s capabilities and suitability for your business’s unique needs.
1. Pricing Models
Understanding a 3PL’s pricing models for storage, picking, packing, and shipping is vital to ensure transparent and affordable costs for your business. Some 3PLs offer tiered pricing, where rates decrease as order volumes increase.
Storage: There are many models for storage pricing, including location pricing, e.g., pallets, shelves, or bins. 3PLs using volumetric pricing may measure in cubic feet (Amazon), cubic or square metres. All storage model calculations and charging will be daily, weekly, or monthly.
Picking & Packing: All-inclusive picking & shipping rates, flat rate picking, multiple units, and additional charges for each line item. There are many variations in models and costs based on the number of items picked, packed, and shipped.
Shipping & Postage: Simplicity is critical when it comes to shipping & postage. Flat rate fees are always preferable to volume-based shipping. In the UK & EU, you can ship most items anywhere domestically for a flat fee depending on the weight break. Some carriers use zones and have fuel surcharges that change from month to month. In the USA, UPS & FedEx charge residential fees, which can add $3-$5 per order to the delivery fee… These charges will often not be clear on your rate card!
Good Pricing: Transparent pricing models help you anticipate and control costs, making it easier to manage your budget. Flexible pricing models can adapt to your business’s changing needs, supporting growth and scalability.
Bad Pricing: Opaque pricing models may result in higher costs or inefficiencies, negatively impacting your bottom line. Some shipping rates may require more complex calculations, fuel additional and surcharges.
Example: A small online store selling handmade jewellery may have lower storage needs but more complex picking and packing requirements due to the delicate nature of its products.
2. Fulfilment Onboarding Process
Onboarding properly with your 3PL is vital to a successful e-commerce fulfilment operation. You must discuss the steps involved, your responsibilities, how long it takes, the paperwork, and the training provided.
- Example Onboarding plan
- Onboarding Plan & Roadmap
- Channel Integrations
- Warehouse Processes & SLAs
- WMS training
- Communication Channels
- Product Master Data
- Labelling Requirements
- Packing & Packaging Profile
- Shipping Profile
Some 3PLs provide quick and easy onboarding and let businesses begin working with them in just a few days while some have quite rigid and extended onboarding processes in place that are usually more complex.
Good Onboarding: A well-structured onboarding means moving to the 3PL goes smoothly, with fewer problems for your business. Adequate training and paperwork during the start help both sides understand their roles and requirements, leading to a better working relationship.
Bad Onboarding: A lengthy onboarding will hold up the beginning of operations, affecting your business’s ability to process orders. Not focusing on the details and complexities of your business during the onboarding will likely lead to problems later.
Example: A rapidly growing apparel store transitioning from in-house fulfilment to a 3PL might require a quick yet comprehensive onboarding process to avoid disruptions. Packshack’s efficient onboarding process, which includes integration setup, warehouse process training, and product master data management, ensures a smooth transition, allowing businesses to continue their operations with minimal downtime.
3. Standard Operating Procedures (SOPs)
Standard Operating Procedures are the mapped-out steps in the e-commerce fulfilment process. Any competent 3PL will have SOPs for every facet of their operation. Robust SOPs generally mean operations flow the same way every time, ensuring a smooth, reliable service. A well-run fulfilment center will also have structured SOPs for communication. Communication SOPs will guide all parties in the relationship, ensuring effective collaboration and efficiency.
Communication SOPs: These may include preferred communication channels (e.g., ticketing system, email, phone, or messaging apps), a designated contact person for specific issues, and exception escalation protocols.
Operational SOPs: These could cover processes for inbounding inventory, order fulfilment, shipping, returns, inventory management, and guidelines for handling exceptions or unique situations.
Good SOPs: Clearly defined SOPs help maintain consistency and efficiency in communication and operations. SOPs guide all parties, ensuring everyone is clear on expectations and processes.
Bad SOPs: Overly detailed or inflexible SOPs may limit the ability to adapt to unique situations or changing requirements.
Example: A subscription service that requires frequent updates of inventory levels and shipping statuses.
4. Service Level Agreements (SLAs)
Always ask for a list of the 3PLs operational and communication SLAs. Understanding the fulfilment provider’s service level commitment to your business is essential. Service levels should be in line with industry standards or better. Understanding the SLAs for communication and operational aspects of your partnership with a 3PL is necessary to ensure clear expectations.
Communication SLAs will cover response times, issue resolution times, regular meetings, access to account managers and much more. A 3PL may commit to responding to 90% of requests within four business hours and resolving 95% of issues within two working days.
Operational SLAs include order fulfilment accuracy, shipping speed, and returns processing. A well working 3PL like Packshack for example guarantees that 99% of all orders are processed and shipped the same day if received before noon.
Good SLAs: Clearly defined SLAs minimise the risk of operational disruptions by structuring communication and operations. Regular performance review based on business intelligence (BI) data aligned with SLAs provides oversight and helps with operational improvement.
Bad SLAs: Unrealistic or overly stringent SLAs may strain the 3PL partnership.
Example: A high-value electronics company requires a signed Proof of Delivery, and serial number tracking during order fulfilment would require a very detailed operational SLA.
5. Shipping & Postage
You should ask the following questions about shipping services: How is the shipping fee calculated? What additional surcharges will there be? Is the shipping fee based on the actual weight or the volume of the parcel, or both? Is the fuel surcharge included or additional?
Unforeseen shipping carrier surcharges will reduce your profit margin. Always request advice from your 3PL about the available shipping services. You should always ask for an example of shipping charges to all destinations based on your products.
Domestic shipping: A wide range of domestic shipping options, such as next-day, 2-day, or ground shipping, allow you to cater to your customers’ delivery expectations.
International shipping: International shipping requires preparing customs documentation and navigating complex regulations and local laws. Make sure you are clear about the process.
Carrier partnerships: Most 3PLs have accounts with multiple carriers. Can you benefit from their buying power and get better shipping rates?
Good Shipping Options: A wide range of shipping options enables you to meet diverse customer expectations. A 3PL experienced in international shipping can help you to reach more customers.
Bad Shipping Options: Hidden surcharges and shipping fees will cause unforeseen issues for your business. Make sure you are clear about all of the costs from the start.
Example: Your store sells high-value products, requiring next-day delivery and detailed tracking for your customers. You need to make sure that your 3PL can handle your shipping requirements and works with carriers providing those services.
Any 3PL offering e-commerce fulfilment must have effective returns processes in place. A simple returns process is crucial for maintaining customer loyalty and satisfaction. Discuss the 3PL’s ability and the steps in the returns process, including return authorisation, inspection, and restocking.
Return authorisation: Some 3PLs may offer automated return authorisation systems, streamlining the process for customers and reducing the workload for your business.
Inspection: This should be simple and easy to process. Most facilities will use grading for returns, e.g. Good (green), OK (Amber), and Bad (Red). What happens to the stock for each grade must be agreed upon in advance enabling you to address product quality issues and reduce future returns.
Restocking: Fast restocking ensure your stock is available to be resold. Always ask for the SLA for the time taken to receive, evaluate and restock your returned orders.
Good returns processes: A great returns experience can boost customer satisfaction and loyalty. Simple returns inspection and restocking processes help you identify and resolve product quality issues, potentially reducing return rates and associated costs. Effective inspection processes may identify the core issue of returns.
Bad returns processes: A bad or insufficient evaluation of the return quality can lead to restocking errors and eventually to customers receiving a faulty product.
Good to know: In some countries, like Germany, returns percentages are higher than in other regions. Streamlined returns process makes it easy for customers to return items and quickly receive replacements or refunds. Handling returns efficiently and transparently is critical for maintaining customer trust and satisfaction.
7. Integrations and Technology
All 3PLs specialising in e-commerce fulfilment should provide out-of-the-box integrations with all leading e-commerce shop systems and marketplaces. Check their ability at the start of the discussion so you save time.
E-commerce integrations: Your 3PL must integrate with popular e-commerce platforms like Shopify, Amazon, eBay or WooCommerce, enabling seamless data exchange and streamlined order processing.
WMS: A modern Warehouse Management Software (WMS) is essential for e-commerce fulfilment. Cloud-based systems are preferable.
Advanced Reporting: A modern 3PL should be able to provide accurate live inventory reporting.
Good Technological Set-Up: API Connected systems simplify operations, reduce the risk of errors and improve overall efficiency. A good WMS will provide real-time inventory visibility, accurate order processing, efficient stock management and reporting.
Bad Technological Set-Up: Reliance on disconnected systems will result in manual processes, data discrepancies, and likely human error. A 3PL with an outdated or incompatible WMS will struggle to meet your fulfilment needs.
8. Customisation & Branding
Do you need branded packaging or inserts? Ask if the 3PL offers customisation and branding options for packaging materials, packing slips, and other customer-facing materials. Branded packaging helps build your brand identity and improves your customer’s experience for very little expense.
Advantages of customised packaging: Customisation options help promote a brand’s identity and create a memorable unboxing experience for customers. Personalisation can contribute to increased customer loyalty and repeat business.
Disadvantages of customised packaging: Additional upfront costs for branded packaging materials and additional storage costs for the packaging.
Conclusion – Working With A Reliable 3PL Is Key To Your E-Commerce Fulfilment Success
Working with a transparent and reliable 3PL is essential to the success of your e-commerce business. You get more visibility and control over your e-commerce fulfilment processes. With a good 3PL, you will have access to real-time information about your inventory, order statuses, and shipment tracking. With this information, you can make informed decisions and respond quickly to any issues that may arise, such as shipping delays or delivery bottlenecks.
Working with a transparent and reliable 3PL provider can help you build trust with your customers. When you have streamlined and reliable e-commerce fulfillment processes in place, you can provide your customers with a positive shopping and shipping experience that includes accurate order fulfilment, on-time shipping, and effective communication. This leads to more customer loyalty and repeated purchases.
At Packshack, we specialise in providing top-notch e-commerce fulfilment services with warehouses in the UK, Germany, the USA, and Canada. Our services include speedy yet detailed onboarding, industry-aligned processes, SOPs, SLAs, a wide range of high-standard shipping options in all regions, transparent and simple-to-understand pricing, and a structured communication process.
Partnering with us means you can focus on growing your business while we expertly manage your e-commerce fulfilment needs. Reach out to us today to learn how we can support your e-commerce business, regardless of size or unique requirements. With Packshack as your e-commerce fulfilment partner, you can confidently focus on growing and scaling your business.