Order fulfillment frequently includes hidden costs that may be having a big impact on your business. The process itself encompasses all of the steps you take from the moment an order is received until the item(s) land in your customer’s hands. Meaning that fulfillment includes both backend steps and those that are more obvious and customer-facing.
In reality, the fulfillment process touches virtually every aspect of your business—not only operations teams, but also your marketing, finance, customer service, and IT departments as well.
Let’s take a closer look at the order fulfillment process to suss out some of those costs and then we’ll provide 8 essential tips to optimize it within your organization.
What Steps Does Fulfillment Entail?
For many manufacturers, an order fulfillment process can be broken down into these steps:
- The order is received—on the phone, via email, fax, or EDI.
- The order must be entered into back-office systems (like an ERP or accounting platform).
- Your customer is notified that the order has been received.
- The order is sent to your warehouse/inventory storage. A paper order might be taken to the warehouse as part of a batch, or it is sent directly from an invoicing or sales order management application.
- The order is picked: A worker then finds the items in the order and pulls them off the shelf.
- The order is packed to prepare for shipping, including labeling.
- The order is shipped.
- The customer is notified that the order is on its way.
- Finally, the order arrives.
One of the ways manufacturers judge the efficiency of their order fulfillment processes is by looking at the Perfect Order Metric. A perfect order is one that is on time, complete, undamaged, and includes the correct paperwork.
Although most companies strive for “perfect orders” every time, it’s a difficult thing to achieve. Let’s take a look at common challenges for the standard order fulfillment process.
The Order Fulfillment Process: Core Challenges
Businesses face several challenges throughout the order fulfillment process. These include challenges related to demand planning, inventory management, manufacturing capacity, supply chain optimization, logistics planning, and several other complex concerns.
The problems most companies face with order fulfillment can be broken down into 5 different areas:
1. Demand Planning
Demand planning involves knowing in advance what the demand for each product will be and scheduling manufacturing accordingly. This also includes a company’s efforts to try to generate demand via marketing and promotions.
2. Manufacturing Capacity
Another important aspect to consider in the fulfillment process is the capacity to manufacture the orders that you receive in the time that your customers need and expect them.
3. Inventory Management
Order fulfillment is all about meeting customer expectations. This is particularly tough to accomplish if you are out of stock for the items customers want.
You need to know what’s in stock and provide visibility on stock levels as the order is placed. This prevents customers from being faced with delays and backorders.
4. Supply Chain Execution
Supply Chain Execution” questions that can also impact order fulfillment center around what you do when popular client items are low or out of stock. Mainly, how quickly can you manufacture and expedite more product to get them back in play?
From there, how long will it take to get to your warehouses?
5. Logistics Planning
Once the items are ready to ship, how are you going to get them to the customer?
How long will it take?
Will the items be handled carefully so they arrive in one piece?
All of these are questions you must know the answer to in order to have a well-oiled order fulfillment process.
8 Tips to Optimize Your Order Fulfillment Process
When it comes to optimizing your order fulfillment process, there are multiple steps that manufacturers can take that can create considerable improvements. Here, we’ll focus on 8 key tips for optimizing the order fulfillment process at your organization.
Let’s start by looking at some “quick wins” that don’t require a massive investment, but will make a difference shortly after being implemented.
#1 Improve Inventory Handling Ability
Having the right inventory at the right time is one of the critical aspects of the order fulfillment process.
Forecasting customer demand for each sales channel will help keep your inventory at expected levels. Know everything you can about your customer behavior and be prepared for demands at any given time.
By conducting accurate demand forecasting you’ll be able to determine if your current manufacturing capacity is sufficient to support your foreseen demand. If your forecasting returns estimates that are beyond your capacity, it’s time to identify ways to increase your output ability.
Stock Level Accuracy
Your stock levels have to be up to date, no matter how they’ve been used. Apart from orders, scenarios like returns and damages can have an adverse effect on the accuracy of your stock levels. So make sure even the slightest change is updated into your inventory as soon as it is known.
Once you know which sales channels generate the most demand, you can start adjusting stock numbers and locations.
Re-organizing your warehouse for efficiency also helps with space allocation and fulfillment. Try separating and organizing stock according to sales channel priority, this can generate better fulfillment times and assure that the most vital accounts are always serviced.
#2 Increase Your Inventory Transparency
Transparency of stock levels becomes important when you’re selling across multiple channels. This inventory visibility keeps you updated on the happenings of all sales channels so that you can be proactive and replenish stocks to meet upcoming demands.
Adopting a cloud-based inventory is the easiest way to increase the visibility of inventory across all channels. Cloud systems provide a versatile, secure environment where all stock levels, across all sales channels, can be integrated and managed under a single interface.
#3 Improve Order Management
Order Notification and Status
Knowing and providing the status of orders in real-time through order fulfillment software will help your delivery network keep track of progress, identify bottlenecks, and delight customers.
A keen eye on what’s happening with your orders is the first step toward perfecting online order fulfillment. Your whole delivery team should know about the status of each order so that no delays exist in getting the products moved on to the next level.
#4 Better Warehouse Management
More orders mean more stock, which requires bigger warehousing space. If you’re maintaining multiple warehouses, a demand for warehouse-specific details can sprout up making multi-location inventory management a daunting task. If warehouse management is not up to snuff, the order fulfillment process and your e-commerce will also take a serious hit.
Make sure that stocks are transferred in a timely manner between locations to assure that all warehouses are stocked appropriately based on order fulfillment history. Sharing stock between warehouses based on demand helps your business face any unexpected surprise orders, and ultimately paves the way to creating a perfect order fulfillment process.
Make sure you are able to monitor multiple stock access points so that mistakes can be avoided, or if they are made that they can be easily located and addressed. Any good user activity log can get this done for you and create a valuable paper trail to diagnose issues..
#5 Make Returns and Edits Simple
Occasionally, by the time your shipment prepped for departure, your customer may require changes to their order. Providing flexibility up to the point that the pallet hits the truck can be very valuable to your clients and can vastly improve your order fulfillment process.
To accommodate any new customer requirements, be it an increase or decrease in product quantity or full or partial order cancellation, you’ll need an order fulfillment process that provides the freedom to edit orders at any point within the process quickly and easily.
It’s important to note that many customers would happily incur a Change Order Fee to avoid throwing off their own inventory and paying for return shipping and restocking fees.
#6 Increase Accuracy in Determining Seasonal Sales
Analyzing consumer-based orders will let you know which products they prefer at what point in the year.
Company insights into seasonal sales are crucial to be prepared to face demands. Compare sales performance based on date to detect which season yields maximum revenue and which products make it to the top of the list. A seasonal sales analysis can help you better your order fulfillment process.
#7 Improve Your Flexibility
Delivering orders on time is something every customer appreciates. Make use of order fulfillment software, with delivery tracking and scheduling features, to provide that value and transparency to all customers.
Partial Order Processing
To improve flexibility and customer service, you may need to process orders in portions. In other words, if a customer has priority items that need to get shipped first, fulfillment will necessitate multiple orders. Use an order processing system where any select number of products can be invoiced, billed, shipped and delivered based on your customer’s preference.
Multiple Shipping Locations
It’s not unusual for a customer to want an order to be split shipped, meaning one order with delivery to multiple locations. This is often considered a challenge in the order fulfillment process, but managing different delivery points is a great service to master that creates significant value for your customers.
#8 Automate Processes
After your systems are able to provide more visibility into all aspects of the order fulfillment process, you should also look at how you can speed up the processes themselves.
Automation doesn’t necessarily mean investing in robotics or conveyors; it can be as simple as investing in scanners to more easily enter inventory into the system as it moves to your warehouse/storage area, or scanning it out as it leaves.
In addition, many organizations opt to go with customer service and order processing software to optimize their fulfillment process.
Order processing operations are a key element of order fulfillment and are an ideal area to automate within your organization.
To truly optimize your order processing, be aware that advanced order processing automation can ensure accurate pricing, verify customer credit, and delivery, all without human intervention or processing errors.
Be sure to explore our order processing automation solution for more on how this technology can help you optimize your order processing process.
DocLib can automate your entire order process from the receipt of a purchase order right through to fulfillment, while saving on manpower, reducing overall costs, and improving your customer’s experience.