A completely functioning order fulfillment process is what most warehouse managers strive to achieve because customers stop buying from a company that doesn’t provide an excellent overall fulfillment experience. Quality order fulfillment and 3PL should be the pivot point around which everything revolves, and as a retailer, you can’t afford to ignore this process.
After surveying over 3,000 etailers and retailers in late 2021, Cin7 discovered that product sellers who outsourced their logistics to a third party (3PL) provider were 30% more likely to increase profitability. As an added value to you, we’ve included a link to another blog article that explains how to work successfully with a 3PL.
Returning to our main subject here, read on to learn about the order fulfillment process, its strategies, and how to optimize the entire process.
What is the order fulfillment process?
Order fulfillment encompasses receiving, storing, processing, managing, picking, packing, and shipping products to the customer or a retailer in response to an order that has been placed.
Order fulfillment can also be defined as a sequence of steps involved in processing an order to the satisfaction of the customer and making the necessary changes in the inventory records. It may also include the processing of returns and re-adjustment of the records.
Order fulfillment process
The steps of the order fulfillment process are receiving, picking, packing, and shipping. So, let’s go through them one by one.
Order fulfillment starts from the procurement of stock to sell. As soon as the products you have ordered reach your warehouse, receiving and storage begins. Receiving includes the unloading of the inventory, documenting it, and putting it away in the warehouse and allotting a serial number and SKU.
Picking begins when a picklist is created and continues through to picking the correct products in the correct quantity, in good condition and forwarding the order on to packing.
You can also click on the title to know about picking strategies in detail.
After the picked products reach the packing station, a specialized table, the products are packed, sorted, and barcoded before dispatching for shipment.
You can also click on the title to know about packing procedures and packing stations in detail.
Shipping is an essential part of order fulfillment, and one needs to choose an efficient shipping partner that is affordable, safe and fulfills the order in less time so that you can compete in today’s ecommerce market. Make sure that your shipping partner also provides a convenient return process because this is where you can reclaim a lost customer who might be angry about a problem delivery.
Strategies to optimize order fulfillment
The level of competition each ecommerce company faces is enough to understand that no matter how good your sales are, you still need to optimize your order fulfillment process using different strategies. The write-up ahead will give you an insight into some of the very effective ways to increase the productivity of your order fulfillment process.
Use automation to reduce errors and increase perfect order percentage
Warehouse and inventory management software that automatically calculates, manages, analyzes, and prepares reports about inventory & warehouse performance are very helpful in reducing the discrepancies and losses. Moreover, machines powered by automation like cobots, AGVs, articulated arm robots, Goods to Person, and AS/RS (automated storage and retrieval system) can be used to move, manage, and store fast-moving products in a quicker way to fulfill the orders.
However, managing fast-moving products is not the only thing you have to do to optimize your order fulfillment process. You also need to optimize your medium and slow-moving inventory so that you don’t overstock them, miss the opportunity to sell them, or let them expire or depreciate.
The benefits of using automation in order fulfillment are:
- Save Space – You can save between 30 and 85% of floor space using the vertical cube of a warehouse.
- Enhanced Throughput – Boosts order turnover and increases the cut-off time.
- Better Productivity and Accuracy – Automated machines like pick-to-light systems boost picking rates by 600 percent, reducing labor costs and errors.
- Improved Inventory Control – You have full control of your inventory because all the tasks are completed on time with fewer efforts. Moreover, you have all the information about inventory status in real time.
- Improved Ergonomics – Employees don’t have to bend and reach for products because the machines hand them the products at the correct height called the “Golden Zone,” which is waist-high.
The process of arranging inventory in a way that each SKU is stored in the most appropriate warehouse is called the slotting process. This process is a crucial part of warehouse management that makes a huge impact on the order fulfillment process. The slotting process aims to achieve:
- Increased proficiency and productivity
- Balanced workflow
- Smart space utilization
- Enhance inventory accuracy
- Minimize parts handling
- Better worker ergonomics
- Decreased search time to find a product
- Reduce travel time to product
You can purchase slotting software, or you can include this in your warehouse management software (WMS). Slotting needs a lot of inventory data, so it’s always recommended that your WMS includes slotting software. However, if you are using Excel, make sure you have the following information about your inventory.
- SKU hits – number of times a product is picked
- Pick quantities (number of SKUs picked per order)
- Number of pallets, broken case, and cartons of each SKU
- Total SKU quantity, reorder quantity, and reorder point.
- SKUs that are frequently picked together
- SKU numbers and descriptions
- SKU sizes and weights
- SKU picking methodology
Slotting of products should be done according to the pick velocities of each SKU. Fast and medium moving SKUs should be kept in a more accessible location. Furthermore, determine the storage location for each SKU by considering the weight, height, breadth, and volume of each type of SKU along with the type of equipment necessary to pick the products. For instance, by hand, fork truck, ladder, or scissor lift.
Classify your inventory
Inventory needs to be classified in a warehouse to make the order fulfillment process error-free and fast. Customers want their products as quickly as possible, with companies promising same-day shipping to same-day delivery the fulfillment game is getting very competitive.
Classify inventory by its picking velocity (fast-moving, slow-moving, very slow-moving, and medium moving). Group similar size and types of products, picking cost, and inventory value. You can group the fast movers, slow movers, and medium movers and plot their movement against time to get the picking to cost you are incurring for moving each SKU.
You can also classify inventory based on the value of products. According to the Pareto Principle or 80-20 rule, 80% of the effects come from 20% of the causes. This means that 20% of your inventory is responsible for 80% of the company’s sales.
Therefore, with the help of the Pareto Principle, you can perform an ABC analysis:
A – it’s the 20% of the total products and constitutes for 80% of sales
B – it’s the 30% percent of items and is responsible for 15% of sales
C – it’s the remaining 50% of the inventory that brings in 5% of the revenue
Understandably, many companies tend to focus their picking optimization efforts entirely on the products lying in Fast Movers or the A group, which brings in 80% of the revenue. Never ignore the remaining inventory because it’s the remaining 80% of the stock that if appropriately managed, can improve efficiency, the bottom-line, throughput, and lower inventory costs.
Design and follow processes and workflows
There is always a need for flawless picking methodologies that improve the order fulfillment process, increase throughput, and reduce efforts. You can rely on many picking methods in line with your needs.
Zone picking – The warehouse is divided into different zones, and pickers are assigned those zones. Pickers need to pick products from the zones allotted to them and pass them on to the next zone. This process is also called “pick and pass.”
Zone picking is a clever technique for a company with high order volume and SKUs with low to moderate picks per orders. Separate zones give you the freedom to manage each one differently, like using automation in one zone and manual product handling in another zone.
Batch Picking – Multiple, similar kinds of orders are grouped to make small batches or 4-12 orders. Pickers pick the orders in batches at the same time with the help of a picklist that has the location and other details. Batch picking requires a smart inventory and order management software solution that creates a picklist that can consolidate similar orders.
Wave Picking AKA Parallel Picking – In wave picking, all the zones are picked simultaneously, and then the items are later consolidated to form a complete order. This method is best for warehouses with many SKUs and medium to high picks per order.
Match inventory to storage equipment
Finding the correct storage equipment for various types of inventories is crucial to ensure that storage doesn’t slow down the picking process or make it difficult for the pickers.
Different types of storage technologies:
- Shelving – Shelving utilizes upright posts supporting formed steel sheet panels as horizontal shelves.
- Pallet rack – Single or multi-level storage meant to support the stacking of single products or palletized loads.
- Pick modules – This applies to FIFO inventory management. Refers to gravity-based flow storage of pallets or cartons that employ elevated rails and wheels or rollers within a rack-supported structure.
- Drawer systems – Cabinets within enclosed shelving best for smaller items.
- Vertical carousels – A series of shelves stacked vertically that can rotate around a track like a Ferris wheel. These automated storage and retrieval systems (AS/RS) deliver products quickly and safely to a work counter that is ergonomically situated to benefit the employee.
- Horizontal carousels – These are bins fixed on an oval track that can spin horizontally to bring the container near the operator so that he/she can pick or drop products in it. The carousels are equipped with AS/RS.
- Vertical lift modules (VLMs) – An enclosed AS/RS with two column trays with an inserter and extractor center. It automatically retrieves products when asked for. It is very efficient and reduces the time consumed picking products.
Order fulfillment options
Order fulfillment options like third party fulfillment (3PL), merchant fulfillment, and drop shipping can be beneficial.
Let’s review the various fulfillment options:
This type of fulfillment is also called in-house fulfillment. The best thing about this type of fulfillment is that it gives you total control of your supply chain, and in the long run, it can be more profitable as well. However, to fulfill orders on your own, you need to invest money in setting up a warehouse, buying equipment, hiring laborers, etc.
Drop shipping is an approach that is used by many ecommerce companies. Retailers are responsible for marketing and sales and pass order details on to product manufacturers. Then, manufacturers and suppliers ship the orders directly to the customers.
Third-party fulfillment (3PL)
Outsourcing of order fulfillment logistics, including inventory, orders, shipment, and returns management to a third party company that charges a fee or takes a cut of revenues is called third party fulfillment
Many companies often choose third-party fulfillment firms to manage tasks that require significant investments and are tough to handle. Third party logistics providers offer the expertise that only qualified businesses can acquire and can be useful for small companies looking for smart and efficient order fulfillment assistance.
To learn more about streamlining your order fulfillment and warehousing, we’ve included a link to another Cin7 blog article that explains how you can successfully work with a third party (3PL) logistics provider like the other 71% of sellers who plan to do so in the next few months.
Order fulfillment is a critical aspect of retail business and there should be strategies in place to ensure that the process is flawless. If executed properly, smooth order fulfillment and perfect order percentage are what every company strives for. Also, you need to choose the best way to fulfill orders using third party fulfillment, drop shipping, and merchant fulfillment because every option has its benefits and requirements.