Modern Retail

How to Plan Your Order Fulfilment Strategy

Fulfilment strategy planning

This post first featured in the Modern Retail Guide to Fulfilment November 2019. To read the full ebook click here, or scroll to the end of the page to view on page-turning software.

To fulfil orders efficiently and successfully, a well-planned fulfilment strategy is vital. Whether you are starting out, fully established or looking to scale your business, designing an infrastructure and having processes which work is essential to reliable and cost-effective deliveries.

While some of these considerations may cost more to set up initially, each of them will optimise your fulfilment processes, and in turn, benefit business.

Here are some of the main areas to consider when planning your fulfilment strategy:

Location

Whether you operate solely online, or have a brick-and-mortar store, location is important in ecommerce.

Carefully choosing the location you fulfil orders from, will enable you to meet expected delivery times, reduce the costs of shipping and help to reduce retailers’ carbon footprint.

First, you should consider where the majority of your orders are delivered to. Having your fulfilment centre located near these areas will not only reduce the time spent transporting customers’ orders, but also reduce the associated costs. By keeping costs low, customers are more likely to feel they have received value for money.

Some retailers may find that a fulfilment centre in the countryside is more cost-effective, particularly if they need to store large quantities of products and their customers live in this area. On the other hand, if a retailer’s main customer-base is in London, it could be beneficial to consider an urban fulfilment centre, getting deliveries to customers quickly and investing the money which would be spent on long-distance transport, on higher value property instead.

It may also be worth looking into having numerous fulfilment centres, distributing inventory to be near popular shipping locations.

Use of technology

Implementing technology in fulfilment operations can simplify processes and remove the risk of human error. 

Systems can be integrated into ecommerce platforms or marketplaces, meaning that the fulfilment team are notified to pick and pack items as soon as an order is placed. By doing this, there is no need for manual data entry, removing the risk of duplicates or typing errors.

Uses of technology can be adapted to suit retailers’ requirements, for example, sending customers an email when a product has been shipped, or providing parcel tracking information. Having customers sign for deliveries with electronic signatures can also be fed back to businesses quickly, helping to know when a delivery has been successfully made.

It can also be used to communicate information across various teams, regardless of employees’ locations. A perfect example of this is automatic updates showing the available inventory in fulfilment centres. By doing this, processes can run more smoothly with orders being placed to avoid selling out of specific products, or running out in specific warehouses.

Shipping

A pivotal part of any fulfilment strategy falls on the shipping time retailers set and the cost of achieving this. While there is an increasing demand for one-day and two-day delivery, customers also look for competitive pricing, meaning retailers have to balance speed and price.

Well-planned ecommerce order fulfilment can convert higher numbers of customers, without the need to impact margins.

‘Free shipping’ can quickly increase the likelihood of customers progressing to a checkout page, reducing the cart abandonment rate. To achieve this without reducing your margins, consider adding the average cost of shipping into the product price, or state a minimum purchase value to qualify for free shipping. Bear in mind that you must remain competitive, so overpricing your products to compensate for delivery costs may deter customers.

Base your shipping options on customers’ preferences and average spend, creating cost-effective methods of incentivising higher purchases in return for fast or free shipping if suitable.

Choice of order fulfilment model

Self-fulfilment model

Taking care of order fulfilment in-house means retailers complete their processes without the need of any third-party logistics partner or dropshipper. Typically used on smaller quantities of inventory, or when businesses begin, this DIY approach helps retailers to keep full control of the fulfilment process.

Pros

  • Keeps manufacturing, inventory and warehousing in one place
  • All you need is storage space, address labels and packaging resources
  • It can be cost-effective for smaller businesses
  • You can individually negotiate shipping rates with providers for large volumes of products

Cons

  • It can require warehouse space, equipment, staff and fulfilment software, making it a big commitment for a smaller business to set up
  • Packing all deliveries yourself can become time-consuming, particularly when the number of orders increases

Third-party fulfilment model

Third-party fulfilment is a solution often used by retailers who do not have the resources to handle it themselves. From time-commitments to a lack of space or disinterest in their distribution, retailers can benefit from handing their fulfilment over to third-party experts for a number of reasons.

Pros

  • Third-party fulfilment companies can take care of the whole process, from taking inventory from manufacturers, to picking, packing, labelling and managing returns
  • Because of their capacity, they can often facilitate rapid growth and you can purchase inventory in bulk
  • Third-party fulfilment companies can negotiate fantastic business and shipping rates as they do this in bulk for numerous companies

Cons

  • Quality can be compromised, meaning you must choose your third-party fulfilment partner carefully to avoid disappointing your customers

Dropshipping model

When dropshipping, products are produced, sourced and shipped directly from the manufacturer, with systems being put in place for orders to be automatically picked up by the manufacturer. From here, they take care of the entire process, taking the pressure off the retailer.

Pros

  • The dropshipper will take care of all manufacturing and shipping processes, giving you time to focus on selling more
  • You are given access to the dropshipper’s network, saving time without the need for sourcing, networking and negotiating costs
  • Low overheads and the ability to test markets before committing

Cons

  • Less control over processes, placing your brand’s reputation in the trust of the dropshipper
  • Little potential to customise products or orders, making it hard to establish brand identity
  • Can become more challenging when working with multiple dropshippers

Read the full Modern Retail Guide to Fulfilment November 2019 below.

Holly Worthington

Holly Worthington

Holly brings a wealth of experience in both print and digital publishing. As Modern Retail's Content Editor, Holly is passionate about helping independent retailers to thrive in today's ever-changing market.

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