eCommerce order fulfillment describes processing online orders, packing them into boxes and bags, and sending them to the people who ordered them online. There are six primary fulfillment operations: inventory management, warehouse storage, receiving, picking and packing, shipping, and returns, and eCommerce fulfillment businesses take care of them all.
However, eCommerce businesses can also take advantage of three different fulfillment models, and not all of them will be right for your unique business. Take a moment to learn about the advantages and disadvantages of each so that you can make an informed decision with more confidence.
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The best eCommerce fulfillment warehouse is one that takes care of all parts of the order fulfillment process, and this is called third-party logistics. This fulfillment model involves transportation, inventory storage, freight forward, shipping and receiving, picking and packing, and much more.
Essentially, the business hands over all parts of product sales and distribution to a third party and is only the face of the business. This model is preferable for many business owners who lack the significant number of resources required to store products, pack them, and ship them to destinations around the world.
There are many advantages associated with 3PL, such as reduced operating costs when you don’t have to worry about hiring staff or leasing storage space. You can also enjoy improved data insights, meaning you can see where your goods are throughout all parts of the storage and distribution process. You might even enjoy complete scalability since there’s no need for you to store goods yourself.
However, as with most things in life, there are also some disadvantages. For example, not all third-party logistics companies are reputable, and you’re entirely reliant on them to provide good customer service.
As the name suggests, in-house fulfillment means you fulfill orders within your own business. You have complete control over the quality of goods that leave your business, and you don’t have to worry about communicating with other companies to ensure goods make it to their destination.
However, there can be many disadvantages associated with in-house fulfillment. It’s time-consuming, you need to have plenty of storage space, and you might even need to hire employees just to keep on top of packaging and shipping. You might also miss out on shipping discounts and find you have less of an opportunity to grow your business due to a lack of labor and space.
Dropshipping describes taking orders for products on your website, but having all goods delivered directly from the supplier who picks them, packs them, and ships them to your customers.
Dropshipping is desirable for new business owners who don’t have the time, space, or labor required for significant order numbers. You also only pay for what you sell, meaning you can keep your regular business costs to a minimum.
As desirable as dropshipping can be as a fulfillment model, it’s not perfect. If items arrive broken, damaged, or incorrect, your reputation can take a hit, not that of your suppliers. You also don’t benefit from bulk pricing to bring down your costs, which means your profit margins might be lower, and you have no control over stock levels, shipping, or handling.
It’s not always easy deciding which fulfillment model will suit your needs the most when you launch your new eCommerce business and start taking orders. However, by reviewing the pros and cons of these three models, you’ll be well on your way to satisfying your customers with a fast, easy, and smooth sales process.
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