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ecommerce-fulfilment, small-business-coach

Make eCommerce Fulfilment Your Competitive Advantage

Trying to grow an online store is a challenge in many ways; scaling paid marketing channels, developing a best-in-class product range, and increasing conversion rates are all popular strategic imperatives, but what is often overlooked is the power of optimizing order processing operations. Whether it’s managed in-house, or outsourced with a third-party logistics provider (3PL), the speed with which merchants can satisfy fluctuating consumer demand can be the difference between profit and loss. In this article, we cover what’s involved in eCommerce order fulfilment, how technology-driven 3PLs can give you the leading edge, how to find the right provider, and finally, the current and future state of retail warehousing and fulfilment.

What is eCommerce fulfilment?

It’s a form of business process outsourcing (BPO) that involves an online retailer entrusting a specialist who handles product storage, picking, packing, and distribution on their behalf. A white label service, the proliferation of providers, and rampant growth of the online retail market, has forced 3PLs to innovate, and as a result, many are now offering value-added solutions such as returns management, customs clearance, product customization, and inventory analytics dashboards. There has even been an evolution towards ‘4PL’ and ‘5PL’ services, in which BPOs manage multiple 3PLs on behalf of clients, in different locations, and even help with deeper supply chain infrastructure such as manufacturing and procurement, along with strategy and budget control.

Finding the right 3PL

Before looking for a 3PL provider, consider whether you actually need one in the first place. For some online retailers, they may prefer a drop-shipping model, and not require any warehousing infrastructure. For start-ups and SMEs, there is an emerging trend called micro-warehousing, in which some online retailers rent out spare warehouse space to other merchants. Retailers with strong growth and significant investment may also consider developing their own product storage and order processing capabilities in-house. 

For those who have decided to leverage the expertise of a 3PL, the first obvious step is to check their third-party client reviews, along with on-site case studies, and even their employee feedback on Glassdoor. After all, happy employees, with strong job tenure, ought to correlate with happy long-term clients. Furthermore, assess the 3PLs’ strategic and integration partners, and ensure it aligns with your technology stack. For example, you may sell via Shopify, deliver marketing automation and campaigns via Klaviyo, and utilize a specialist agency. Are the 3PLs on your considered list experienced working with these providers?

Fulfilment providers differ in terms of their pricing, such as minimum monthly spend, picking fees, shipping charges, returns rates, and packaging costs. Pricing is usually also based on storage requirements, and 3PLs often demand minimum contract terms, and website integrations costs during setup. Some 3PLs have just UK fulfilment centers, whereas others will also have additional fulfilment warehouses in mainland Europe, and in other continents such as North America. Whether you need an international 3PL depends on your current customer base, and future growth ambitions into new territories.

Technology-driven fulfilment providers will also grant their clients access to an inventory analytics dashboard, giving them insights into the status of their orders, deliveries, customer queries, and returns. The most advanced 3PL technology platforms will also utilize predictive technology, to help merchants know when is best to replenish stock, and when not to. This can help avoid understocking, and missed sales opportunities. Inventory analytics can also help avoid overstocking, which is when supply exceeds demand, leading to capital tied up in inventory. Inventory management software also monitors historical demand fluctuations, along with manufacturing speed, and the time lag between the retailer placing an order with suppliers, and them arriving at the fulfilment warehouse.

The stages of eCommerce fulfilment

ecommerce-fulfilment

While you’re negotiating a contract with your 3PL, it will also be in your best interest to agree on key performance indicators (KPIs), objectives and key results (OKRs), to track and monitor metrics such as on-time delivery performance, ‘Where is my order?’ (WISMO) queries, picking accuracy, and order processing speed.

The next step is to establish lines of communication between client and 3PL, such as customer service, sales, operations, and instructing your suppliers, and/or manufacturing partners of their new address to ship finished goods to in bulk. Following this, integrating your sales channels with the 3PL’s warehouse management system (WMS) will ensure orders flow in seamlessly, ready for the 3PL to process your shipments.

As orders begin to flow in, the picking and packing teams will receive an order notification, and picking note. During this stage the team will use a barcode scanner to update and record the order processing status, feeding back to the WMS. Then, the picked products are gathered on the packing bench, ready for packaging and application of the shipping label.

Packets and parcels are then grouped by carrier (e.g. DHL, Royal Mail, Evri), into containers and/or pallets, ready for collection by the 3PL’s courier partners. The later in the day couriers are able to collect from the 3PL, the later the 3PL will be able to offer an order cut-off time.

The future of third-party logistics with eCommerce fulfilment

Predicted to nearly triple in size by the end of the decade, 3PLs are outgrowing online retail itself, indicating greater market penetration. A recent shift to remote working has highlighted the value of entrusting third parties, while retail entrepreneurs can prioritize their quality of life, and avoid getting muddy in the trenches of eCommerce logistics. Greater competition amongst 3PLs is forcing them to innovate, and utilize the latest IoT and AI to become more efficient. Meanwhile, consumers are increasingly demanding greater personalization from ‘retailers’, along with sustainable, yet fast and free shipping, along with sophisticated in-flight delivery options, placing pressure on 3PLs to help retailers deliver a best-in-class end-to-end customer experience. These seemingly insurmountable challenges can be overcome by finding the most suitable 3PL that aligns with your goals, and helps you focus on your own core competencies.

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