What is order fulfillment?

Order fulfillment is the comprehensive process involved in receiving, processing, packing, and delivering orders to customers. Order fulfillment starts the moment a customer places an order and concludes when the customer receives the product or service.

In many ways, order fulfillment represents the latter part of the buying journey because it takes place after a purchase has been made. That said, it’s arguably the most important stage of the buying process, and it makes or breaks customer perception and loyalty.

According to parcelLab’s findings, over half (53%) of consumers believe the post-purchase experience brings up the strongest emotions in their shopping journey.

What is the order fulfillment process?

Order fulfillment stage	Description
Receiving	Products from suppliers are received and stored in the warehouse for future orders
Inventory storage	Products are organized and stored, ensuring optimal stock levels to prevent overstocking or stockouts
Order processing	Order details and inventory levels are verified
Picking	Based on the order, products are identified and retrieved from storage, which can be manual or automated based on the warehouse size
Packing	Selected items are securely packed to ensure they reach customers undamaged
Shipping	After packing, orders are handed to carriers for delivery, and customers receive tracking details to monitor their shipment

The specific steps in the order fulfillment can vary depending on the type of business, but generally, it can be broken down into the following stages.

Receiving

As an ecommerce business, your products need to be stored in a warehouse. The receiving phase involves getting these products from your suppliers and storing them properly.

Inventory storage

Once the products are received, they need to be stored in an organized manner to facilitate easy picking when an order is placed. Effective inventory management ensures that your stock levels are maintained so you’re not over- or understocking goods.

Order processing

When a customer places an order, it needs to be processed. This involves confirming the order, checking payment, and preparing it for shipment.

Picking

The order fulfillment team (or platform) goes through each order to identify and pick from their storage areas. This process can range from manual picking in smaller operations to automated picking in larger, technologically advanced warehouses.

Packing

Once items are picked, they are packed securely for shipment. This step involves choosing the right packaging materials and ensuring that the product reaches the customer in good condition.

Shipping

At this stage, orders are out of your control and placed into the carrier’s hands. After packing, the order is shipped to the customer using a chosen shipping method. This step also involves providing the customer with tracking information so they can monitor the delivery progress. To be safe, make sure your shipping practices comply with the prompt delivery rules set forth by the Federal Trade Commission.

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How do you improve the order fulfillment process?

Every company is different, so optimizing the order fulfillment process can vary depending on your workflows. That’s why the first step to improving order fulfillment is understanding your existing processes. Map out each step, and identify bottlenecks and areas where errors frequently occur.

From there, you’ll be able to zero in on the areas you need to improve on and take action accordingly.

That being said, here are some general order fulfillment practices to implement periodically.

Leverage and integrate the right technologies

Use an integrated order management system (OMS) and warehouse management system (WMS) to automate and streamline operations. Modern systems can sync inventory levels in real-time, automate picking lists, and optimize warehouse routes.

You should also consider integrating your fulfillment software with your post-purchase experience platform, so you can optimize post-purchase customer communication and send the right notifications at the right time.

Consider batch processing

Instead of handling orders one by one, process them in batches. This can especially be useful during high-demand periods.

Let’s say it’s peak season, and you’re running a Black Friday sale. As such, your store receives thousands of orders within a few hours—far more than your usual daily average.

If you were to process each order individually, the time spent on admin tasks like printing order slips or communicating with the shipping department would multiply with each order, slowing down the overall operation.

But by implementing batch processing, you can group orders, say every 50 or 100, and process them collectively. This means they can print 50 order slips at once, streamline the picking process, and beyond.

Implement a zone-picking strategy

Speaking of picking, you should organize your warehouse items based on their demand. High-demand items can be placed closer to packing areas to minimize pick times.

Let’s say you’re an ecommerce luxury brand that sells fashion-forward products. You notice that accessories such as bags, belts, and watches consistently have higher sales volumes. In this instance, you rearrange your warehouse so that those high-demand products are placed in a zone closer to the packing stations.

Optimize packaging

On the packing side, use appropriate packaging to reduce shipping costs and ensure products reach customers undamaged. Consider custom packaging solutions or automated packaging systems for efficiency.

Pro tip: if you have eco-friendly initiatives, the Environmental Protection Agency (EPA) recommends using sustainable packaging.

Use data analytics

Leverage data to gain insights into peak order times, popular products, average order processing times, and more. Using this data, you can make informed decisions about staffing, inventory purchasing, and promotional periods.

Regularly review vendor performance

If you’re working with carriers or third-party logistics providers (3PLs), regularly review their performance. Ensure they meet your standards and adjust contracts or providers if needed.

For example, let’s say you’re reviewing your carrier scorecard and find out that a particular carrier’s fees have increased. In this instance, it may be worth renegotiating your rates to get more favorable terms.

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What is the order fulfillment rate?

The order fulfillment rate ​​is the percentage of orders that are successfully fulfilled compared to the total number of orders received within a specific time frame. It’s a metric that can help you gauge the effectiveness of your order fulfillment processes.

The formula to calculate the order fulfillment rate is: Order fulfillment rate = (Number of orders successfully fulfilled / Total number of order received) x 100

For instance, if a retailer received 1,000 orders in a month and successfully fulfilled 975 of those orders, the order fulfillment rate would be 97.5%

A high order fulfillment rate indicates that a business is effectively managing its inventory, operations, and logistics to meet customer demand. On the other hand, a low rate can signal potential issues like stockouts, inefficiencies in the supply chain, or problems with third-party logistics providers.