What Is Order Fulfillment? How to Optimize Customer Orders

How many times have you placed an order for a product and waited nearly forever to receive it? Perhaps the expected delivery date came and went without any updated communication.

It’s possible that the company you ordered from didn’t have a streamlined order fulfillment process.

Order fulfillment starts when a company acquires a sales request and ends when customers receive their order and are content with it. To meet customer expectations and satisfaction essential to a company’s success, creating an efficient order fulfillment process is necessary. 

Some companies use order management software (OMS) to automate the fulfillment process. Order management tools help companies enter and change orders, keep track of quotes, maintain an updated record of inventory storage levels, recognize trends in previous fulfillment processes, verify shipping order methods, and adjust pricing in real time. 

The order fulfillment process

The order fulfillment process follows the entire order cycle in seven steps, from receipt to delivery and beyond. This process isn’t just about getting a package to a customer’s door. It involves surveying different elements of your company’s fulfillment methods and going above and beyond for the customer.

1. Receiving

Prepping for upcoming orders begins before an order is placed. The inbound process follows items that arrive in the warehouse after purchasing. When the items arrive at the loading dock, they’re unloaded, checked for quality and accuracy, and then moved into inventory. These materials are used in the production process to fulfill future orders. 

2. Storage 

After the items are received, they’re ready to enter the warehouse’s inventory management system. Various inventory organization techniques are used to categorize how these inventory items will be placed upon receipt.

These techniques can be automated using inventory control software.

For example, you can use the first-in-first-out (FIFO) method for perishable products or the last-in-first-out (LIFO) method for nonperishables. The just-in-time (JIT) method is popular for those who hope to minimize costs by purchasing items as needed. Companies looking to organize by priority may use the ABC analysis method, where materials are placed in groups from A to C, using group A materials first. 

Some companies use warehouse management software to automate different warehouse processes like storage management between multiple locations. These tools also help companies track movements, manage warehouse personnel, and coordinate incoming and outgoing packages.

3. Picking

After the new items are organized in storage, the next step begins when a customer order is finally placed. Once a company receives that order, the order fulfillment team creates a list of items to be picked, and the team members walk through the storage area, collecting all of the items required to fulfill the order. The picking method is chosen based on what the company considers the most efficient for its flow.

• Zone picking is picking items from employee-assigned zones.
• Wave picking is the process of picking items in groups during specific intervals or waves throughout the day.
• Batch picking is the process of picking items from identical orders at the same time.
• Discrete picking involves a warehouse employee picking items from one order at a time.

4. Packing

Once all the items needed to fulfill the orders are picked, they’re moved on to the packing materials process. This is the last step where quality control checks take place. The way the products are packed is how the customer will receive them.

5. Shipping

Shipping is a major step in the order fulfillment process. Once the shipping labels and documentation have been received, the packed orders are loaded onto pallets and then delivered to the customer by trucks. The shipping process works closely with the entire supply chain to ensure the best delivery experience for the supplier and the customer.

The shipping and receiving process is a difficult one to perfect. It requires a lot of training and quality assurance inspections to run smoothly and exceed customer expectations.

Some companies utilize shipping software to automate the process of outgoing shipments, create custom tracking notifications, manage returns, and integrate with e-commerce platforms to digitize the entire supply chain.

6. Delivery

The delivery step in the order fulfillment process focuses on what methods a company uses to get the package to the customer. This also includes which carriers they choose based on budgets and techniques of delivery. 

Some of the most popular carriers in the United States include the United States Postal Service (USPS), United Parcel Service (UPS), and FedEx. Each has its way of making sure a package is delivered either through a middleman fulfillment center or in collaboration. One may even deliver to locations another cannot. This shipping method and delivery decision is essential for weighing shipping costs and communicating with the customer regarding their expected delivery date. 

7. Returns processing

While the base of the order fulfillment process ends when the customer receives their order, it doesn’t truly finish until both sides are satisfied. The returns process includes explaining to the customer exactly how to return the product, conducting a quality control check on receipt, and either putting the item back into storage or disposing of it. It can also include either an exchange or a refund. 

Order fulfillment models

There are four different models for fulfilling orders. All of these order fulfillment strategies can help your company succeed. However, one may be a better fit than the other. Consider your time, budget, space, needs, and objectives when choosing a model.

In-house

In-house fulfillment gives companies the ability to control every aspect of the order fulfillment process. They’re in charge of every movement and can customize the process to their liking. This model is also typically the most cost-effective, with lower upfront costs, as it allows companies to utilize the space they’re already paying for.

On the other hand, managing the entire order fulfillment process can be time-consuming and potentially more costly in the future if operations outgrow the allocated space.

Third-party

Third-party fulfillment transfers responsibility to a company that specializes in every step of the fulfillment. This fulfillment provider will receive, pick, pack, and ship orders on your behalf.

The third-party model is favorable for companies looking  to save time, gain knowledge from industry experts, and save money on owning a warehousing space. However, third-party logistics comes with some challenges. Putting your fulfillment in the hands of another company requires a lot of trust and the understanding that their customer service values may not always align with yours.

Some companies utilize third-party logistics (3PL) software to manage outsourcing agreements, oversee multi-warehouse management, track outsourcing costs, and monitor overall performance metrics.

Dropshipping

Dropshipping fulfillment also includes the use of third-party services. In this model, however, only the shipping process of order fulfillment is outsourced. With dropshipping, companies are not required to keep their products in stock. When an order is received, the information is sent over to the third-party who fulfills that order on behalf of the retailer. 

A dropshipping fulfillment partner is beneficial for companies looking to cut shipping costs, turn the shipping pressure on to industry experts, collaborate with teams with wider capabilities, and free up some warehouse space for production. Similar to third parties, customer service values are at risk, and increasing shipping costs can mean increasing order costs for your consumers in the future. 

Hybrid

Hybrid fulfillment is a combination of one of the above models. Combining these models can help build the most unique and customized order fulfillment method for your company. You can combine in-house and dropshipping by doing most of the fulfillment yourself until it’s time to ship. Or, you can give a third-party company all of the control but source the dropshipping from another.

Depending on your needs, these combinations can work in many different ways and may need to be modified to adapt to changes in the supply chain.

Benefits of effective order fulfillment

An efficient order fulfillment process helps companies process orders faster and better. There are many more benefits to experience after putting in the effort to streamline the way you fulfill orders. 

• Improve demand forecasting. Taking and fulfilling orders will give you insight into what your demand looks like at different times. Use historical demand data during demand planning to predict future order volumes and fulfillment needs.
• Increase quality control. Managing the order fulfillment process lets you keep a close eye on everything that moves in and out of the warehouse. Take this opportunity to ensure all of those items meet company standards.
• Create customer loyalty. Your customer base wants a brand they can trust. By fulfilling orders effectively, you meet their expectations while making your customers feel valued. 

• Generate a free positive reputation. The best marketing is word of mouth. Providing excellent customer service will entice existing consumers to share their experiences with others. 
• Gain insight into KPIs. Going through multiple order fulfillment cycles will provide you with extensive information on your company’s current capabilities and compare them to overall key performance indicators (KPIs). Calculate your order fulfillment rate to track progress along the way. 

Order fulfillment challenges

There are a few challenges you’ll face as you work on streamlining your order fulfillment process. These challenges include clear measures to avoid problems or plan for future difficulties. 

• Organizing inventory effectively. To fulfill orders quickly, you need to be organized. This includes keeping an accurate count of the resources available at all times to ensure you’re only selling what you have. This certainly doesn’t exclude online retailers. E-commerce inventory management is just as important as maintaining a physical location. E-commerce order fulfillment can also include real inventory space, although all orders are placed online through an e-commerce platform.
• Customer communication. Potentially the most important part of order fulfillment is creating constant and clear communication with the customer. This includes an accurate delivery date, tracking information, and frequent updates as their order moves in and out of the fulfillment system.
• Keeping up with demand. Getting customers to place an order isn’t easy. So, once you get those orders, you want to keep them. Use the order fulfillment process to balance supply and demand by keeping close attention on every step and making sure you can always supply what is demanded.
• Righting wrongs. No matter how hard we try, we simply cannot be perfect. That is why a huge challenge is creating an order fulfillment system for fixing mistakes. Whether you send a replacement promptly or offer a full refund, your reputation depends on the process being smooth and fair for both parties.

Order fulfillment best practices

At the end of the day, order fulfillment is what you make of it. Every company will have a different process that works for them. And every company can benefit from some best practices. 

Check out some tips for making sure your order fulfillment process is set up for success.

Create a warehouse flow that works 

Designing the most effective warehouse layout for your operations is the best building block for order fulfillment.

The right warehouse layout helps optimize storage space, increase overall productivity, utilize labor and budgets effectively, and keep things organized. The warehouse flow should include space for changing storage items, fixed inventory, picking and packing, and shipping and receiving. There are different types of flows you can choose based on the shape and capabilities of your warehouse.

Using every inch of your warehouse to its fullest potential is essential for order fulfillment. The more space you have, the more you can do with it. No matter the size of the warehouse, the order fulfillment process can be successful when space is utilized adequately with safety and organization in mind.

Invest in training  

When you don’t put the needs of your employees at the forefront of your order fulfillment center, you’re doing yourself a disservice.

Order fulfillment isn’t easy, and a process with that many moving pieces needs to be a space of open communication and collaboration. That is why you should invest in training and ensure that all team members understand their roles and responsibilities. Create a clear and comprehensive training program and leave room for questions and concerns. Use this training to identify issues and collect feedback from those working to make the process a success.

Consider outsourcing your fulfillment center

Whether you’re a brick-and-mortar or an e-commerce business with an online store and online orders, you may want to look into your options for outsourcing order fulfillment. For example, order fulfillment can be especially daunting for small businesses, and many businesses opt to use an order fulfillment company. A third-party fulfillment center will take the responsibility of storing your merchandise, picking, packing, and shipping out orders.

Third-party order fulfillment services may be favorable for you if:

• You have found that fulfillment is taking too much of your time.
• Your delivery times are increasing, and customer satisfaction is dropping as a result.
• Your inventory is quickly taking over the space you have allocated.
• Shipping costs are becoming overwhelming.
• You’re looking to expand internationally.

Leverage technology 

When in doubt, consider leaning on automation to take some of the stress off your back. Order fulfillment software and warehouse management system (WMS) tools offer updated order fulfillment data from all devices at all times. Software also helps reduce the chances of human error and maintain constant communication with customers.

Order management software

Order management software (OMS) allows companies to automate their order fulfillment process. Its main goals are to shorten the order time in the fulfillment cycle and increase the processing in the entire supply chain.

Order management solutions can be integrated with other tools to control billing, maintain customer relationship management (CRM), and track subscription-based products or services. 

To be included in this category, a software product must help:

• Gain insights into the effectiveness of order management strategies.
• Effectively send and receive orders using various exchange methods available across multiple devices.
• Decrease the need for manual data records and avoid order processing errors.

"Below are the five leading order management software from G2's best order management software category. This list is based on G2 data collected on October 11th, 2021. Some reviews are edited for clarity."

1. QuickBooks Online

QuickBooks Online gives you the tools to organize order finances with access to a ready and available support team. Use QuickBooks Online to keep track of cash flow, manage bills, balance income and expenses, and control inventory. 

What users like:

“I really like that there are many options for working with journal entries. The process of inputting the information and numbers into the system is very convenient. It also automatically identifies the right name of the credit or debit line, which makes it much easier if you are a beginner.

The online version is very convenient since you can access it from any device without any problems. I believe that this is the easiest way to get access to QuickBooks. ”

- QuickBooks Online Review, Albert O.

What users dislike:

“It can be hard to treat records en-masse. Bulk editing, reporting, and any sort of power-user features are really lacking. Simple transaction-by-transaction treatment is best. In fact, I find the mobile version better to use than the desktop version! I feel like the options you are given are fairly basic fundamentals.”

- QuickBooks Online Review, Simon W.

2. PartnerLinQ

PartnerLinQ is a cloud-based supply chain management platform. PartnerLinQ allows companies to integrate with third parties, manage stock inventory, reduce delays with up-to-date information, and save time on managing manual order processing.

What users like:

“It has extensive customization options and is easy to configure. The communication process is more efficient and faster because it includes an AS2 solution. The API integrations layer increases flexibility and improves the customer experience.

The client onboarding process is quick and hassle-free. It allows having real-time visibility of the fulfillment of orders and customer information. Instantly update orders, improving management in real-time.”

- PartnerLinQ Review, James W.

What users dislike:

“The deployment of the application does take time and needs to be simplified. There is a learning curve for new business owners. Customer support is not always available for solving technical issues.”

- PartnerLinQ Review, Maria G.

3. Webgility

Automate order accounting with Webgility. Webgility allows companies to record every transaction in real time, organize sales tax filing, capture data without manual effort, continuously update inventory information, and gain insights into profitability and performance.

What users like:

“Webgility makes doing business with Amazon incredibly easy and saves hours by not having to input every order manually. It's easy, even for a non-technical person such as myself. The support is outstanding as well. They've been available to assist whenever I've needed it, and I've needed it a few times due to my own errors. I highly recommend it.”

- Webgility Review, Kelly M.

What users dislike:

“We have encountered a problem where errors are being reported, but we cannot see them when we log in to look at them. They have worked on the problem, and it was fixed for a bit but then began again. This particular problem has dragged on, and while overall our connection is working, this one issue is particularly frustrating because it was not fully resolved after several months. However, it was taken care of eventually.”

- Webgility Review, Stephen E.

4. SAP Commerce Cloud

SAP Commerce Cloud is a digital commerce platform. It allows companies to create unique customer profiles, manage product catalogs, identify demand trends, integrate with third-party fulfillment solutions, and track what target customers are spending their money on. 

What users like:

“It is best for the integration of commerce websites with the backend system. It improves the performance and searches for the best buying experience from the commerce portal. Backend invoices can be processed and stored easily, and no technical to less technical knowledge is enough for understanding it.”

- SAP Commerce Cloud Review, Vikas K.

What users dislike:

“Not sure whether it is a stand-alone solution. I think that it must be integrated with other solutions, so if a user needs an end-to-end platform, this might not be the answer.”

- SAP Commerce Cloud Review, Hasanali S.

5. Salesforce Order Management

Fulfill orders on any sales channel with Salesforce Order Management. Use Salesforce Order Management to create a visual workflow system, build omnichannel fulfillment capabilities, and take care of returns, refunds, and exchanges — all in one platform.

What users like:

“Salesforce is extremely powerful on a number of levels. It is an excellent contact manager and also contains customer information on many levels such as contacts, leads, customer history, opportunities, and much more.”

- Salesforce Order Management Review, David S.

What users dislike:

“It is sometimes difficult to use all the features of the software. The programming language software used is complex.”

- Salesforce Order Management Review, Mansi G.

Order up!

Order fulfillment simply relies on finding the right service (or combination of services) to meet your needs and customer expectations. Create your own fulfillment model, or reach out to a third party to get some of the stress off your back. Whatever you decide, as long as you have your company’s KPIs in mind and keep customer satisfaction at the forefront, you deliver success.

Improve the flow of your order fulfillment processes by creating a unique production and distribution strategy with operations management.