Christy Bella
There isn’t a single online retailer in existence that doesn’t want to grow, unless their director is hell-bent on destruction. The problem with growth aspirations is that there are many barriers. After all, if it was super-easy to start and grow a business, then everyone would be minted. In the modern Western world, we live in an attention economy, where consumers are barraged with hundreds, if not thousands of different marketing messages on a daily basis.
These same consumers are a fussy bunch, demanding fast and free shipping, with items always in stock, without fail. Online shoppers also expect a sustainable approach to things like packaging, delivery and customer service. What’s the often-overlooked secret to scaling an online store profitably, whilst delighting your customers with lightning-fast and sustainable order processing? Ecommerce order fulfilment.
What is eCommerce Order Fulfilment?
It’s the process of entrusting a third-party logistics (3PL) provider to manage and optimise the goods intake, warehousing, storage, picking, packing and distribution of finished goods on your behalf, as your brand. 3PL warehouses typically demand a minimum of 10 to 30 orders per day, and other specialists will demand hundreds. This is so that both parties can benefit, and achieve the required economies of scale to make 3PL thrive.
When a retailer signs up with an eCommerce fulfilment provider, the first step is to ensure both parties’ technology is integrated, such as the retailer’s Shopify store, marketplaces (such as eBay and Amazon), and/or order management system (OMS), with the 3PL’s warehouse management system (WMS). The next step is to establish lines of communication between client and fulfilment centre, such as leadership, customer service, procurement, operations, technical support, and suppliers (so that they are appropriately instructed of where to ship inventory to).
Once client and 3PL are integrated, and stock arrives at the warehouse(s), the warehouse operations team can allocate products by SKU in specific picking locations. As orders flow in, the picking team collects products ready for packaging at the packing bench, and application of the shipping label. When the shipping label is generated, customers will receive a tracking notification.
Parcels are then grouped by the packing team by carrier, either on pallets, in bags or in containers, ready for collection by the domestic and international courier providers, or, if the 3PL partners with a shipping consolidator, a single daily collection occurs, across multiple carriers.
The later orders can be collected, the later 3PL clients can offer order cut-offs, and delivery on their promises of next-day shipping. James Khoury, founder and CEO of Zendbox added: “Offering a late order cut-off is a major competitive advantage, proven to increase eCommerce conversion rates, customer loyalty, and revenue.
After learning that 35% of online orders are placed between 4pm and 9pm, we recently introduced a 10pm order cut-off time, helping merchants offer next-day delivery to more consumers. As a result, our clients, which are typically multi-channel retailers, have experienced an average conversion rate increase of 15%.”
Once couriers have collected packets and parcels, they are now in the hands of the delivery networks, ready for final-mile delivery to customers. Depending on carrier partners and service selection, consumers will be able to choose from a range of in-flight delivery options, enhancing the customer experience and in theory, reducing WISMOs (‘Where is my order?’ queries), and increasing on-time delivery performance.
At each point in the fulfilment journey, the warehouse team uses barcode scanning technology to record each stage, so that both WMS and OMS keep track of inventory statuses.
Innovative, technology-driven 3PLs offer inventory analytics that takes all of this data into account, alongside procurement, supply chain and customer service metrics (i.e. cost to serve and profit margins), to help retail decision-makers make calculated, educated decisions, so that they can avoid understocking (which means missed sales opportunities), and overstocking (which means capital unnecessarily tied up in stock). Good inventory management also helps retailers manage batches and best before dates, essential for sectors such as sports nutrition.
Gilson Pereira, head of customer experience at Zendbox added: “Inventory tracking is a system or process by which inventory is monitored and maintained so that a business can get a complete picture of what they have coming in and going out, and how they can use this information to make more profit. That’s inventory management in a nutshell but, of course, there’s a lot more to it.”
Finding the Right eCommerce Order Fulfilment Specialist
3PLs are diverse in terms of their capabilities, contract requirements and pricing. Pricing can be hideously complex, with seemingly limitless dimensions. To keep things simple, eCommerce fulfilment pricing constitutes shipping and storage costs, along with picking and packing fees. There may also be onboarding charges such as eCommerce platform integration, handling customer service queries and processing returns. Demand for 3PLs worldwide is skyrocketing, predicted to nearly triple in market size over the next six years.
As a result, 3PLs have enjoyed enormous growth, but competition has also increased, influencing innovation. This means to stand out of competitors, fulfilment specialists are increasingly offering additional complementary services that are normally the preserve of 4PLs, such as strategic consultancy, procurement and manufacturing.
In the future, 3PLs will need to invest in AI to further accelerate order processing, IoT to get smarter with pick and pack methods, and diversify their service pillars, but not at the detriment of the human touch.
Soft skills are more in demand than ever, and the more a 3PL can help retailers offer an organic, authentic customer experience, whilst ensuring an environmentally-friendly approach to sustainability with infrastructure, packaging and shipping, the more likely they will be to succeed. Retailers will demand 3PLs who focus on partnerships with relevant technology providers, and 3PLs that can help merchants access pooled volume discounted rates with things like packaging, software and procurement of raw materials will stand out from the crowd.
