Sales are the lifeblood of any type of business. If a business does not make sales, it won’t generate profit or revenue, for that matter, and would likely not be capable of staying operational. Everyone knows the importance of sales, but how many people understand the importance of fulfilment? What is fulfillment in business? Well, that you are here means you most likely do not know and you want to learn.
Luckily for you, this article has everything you need to know about this business topic.
What has sales got to do with fulfilment?
Rest assured, before the end of this article, you will get the answer to that.
You will also learn other very important things about this topic.
With that said, let’s get right into it.
Meaning of Fulfillment in Business – What is Fulfillment in Business
Fulfilment refers to the process through which businesses receive, package, and then ship out goods orders to their customers.
Most people call this process “order fulfilment”.
Because it’s all about completing the transaction between a business and customers and making sure that a customer receives the goods they ordered (bought).
This term is commonly used for e-commerce.
However, any business that sells products to their customers through shipping or delivery also practices this process.
Therefore, if you do not always sell your products to your customers face-to-face, but you have to send the products to them, then you have to deal with this process.
You should note that for the process to be complete, the order you send out to your customer must match their specifications.
This process is very important when it comes to a company’s credibility and reliance.
When your order fulfilment process is efficient and effective, customers will come to trust you.
And this could do wonders for your company’s reputation.
You cannot make sales without fulfilment if you run an online business.
This is how sales and order fulfilment are intertwined in the online business world.
You can get a thousand orders, but if you can’t fulfil them, then you won’t make sales.
And when you do not make sales, you can’t run your business.
How Fulfillment Works – What is Fulfillment in Business
When you get an order, you can be happy that you are making sales.
However, the process is not complete until you fulfil that order and your customer has their product with them.
This process is the vital act of assembling a customer’s order and then shipping it to them.
The starting point of this process is strategic sourcing of the product and the end is when the customer gets the products.
But it isn’t just that straightforward.
There are several other phases between the starting point and the end.
For a lot of companies, these other phases may include quality control, inventory management, processing, and even customer support.
But the steps in this process are quite simple.
The company gets the order that the customers make either online, through the phone/email, or even in person.
The company then takes note of this order in its inventory system.
And then sends an order confirmation message to the customer.
They also let the department in charge of order processing (usually the warehouse) know about the order.
The workers in the warehouse prepare the product for shipping.
Then the order is shipped and the customer gets a notification of the shipping.
Finally, the order gets to the customer.
However, if the order does not match the customer’s specification or it is damaged, they can then return it.
The company can then ship a replacement or refund the customer.
Fulfillment Process – What is Fulfillment in Business
Order fulfillment can be a very complex process or can be quite simple too.
It all depends on the business size.
A small business can make its process as simple as possible.
The entire process can be in-house.
And everything can be processed and organized in one place.
However, this same process can be a whole lot more complex for a bigger organization.
Regardless of the operation scale, one thing that businesses should aim for in this process is efficacy.
Companies should strive to make sure their customers get their orders quickly and in perfect condition.
Companies should also try to make the process efficient; they should make sure it is as inexpensive as possible.
One way to do this is to get the order right the first time.
Having to ship one order more than once can make the process more expensive than it has to be.
However, regardless of how complex or simple a company’s fulfilment process is, it includes 5 main steps.
These are sourcing for the goods, receiving inventory, storage, processing, and shipping.
A last step may be included in some cases, that’s return processing.
Let’s look at these steps below.
Goods Sourcing
Depending on the nature of the business, a business may have to source for the goods it holds in its inventory.
The goods may be from the manufacturer or supplier.
However, the company must take its time to make sure that it gets its products from a reliable source.
They must source high-quality products that would meet the needs of their customers.
Receiving Inventory
Whether the company is getting the products from a 3rd party or producing the products themselves, they would have to move them from one place to another.
If the company is producing the goods, they would have to move them from the production location to the warehouse.
And if they are from a manufacturer or supplier, the company has to receive them.
Regardless of how the company is getting the goods, they have to count and inspect them to ensure everything is the way it should be.
They need to be sure that the products are the exact quantity that they should be and that they are not damaged or faulty.
Storage – What is Fulfillment in Business
Next, the company needs to store the inventory.
They must take proper account of the inventory.
Companies usually organize items into categories.
Some would be kept for short-term storage while others would be long-term.
Some might be disbursed immediately to fulfil orders.
And others would be stored for future orders.
Processing
When a customer initiates an order, the company sends the details of the order to the warehouse team.
They would in turn start processing the package for shipping.
This step involves picking out the needed item.
They must use the packing slip that contains the details of the order to pick out the item.
The details would typically contain things like the number of items, size, product colours, and so on.
After picking out the item, the team would then package the product using packing materials.
The team must consider dimensional weight when packing the product.
They should typically work towards making the DIM as low as possible.
This can help the company save money on shipment costs.
The package should also have return shipping labels and materials.
In case the package does not match the customer’s specification or is damaged, they can use the label and materials to return the package.
Shipping – What Is Fulfillment In Business
Once the package is ready, the company will send it out for shipping.
Shippers (airlines and freight lines) determine the package billable cost according to its dimensional weight.
This is why your company needs to take care to properly process any product it’s sending out for shipping.
Aside from the cost, you must make sure your packages meet the specifications of the carrier or shipper.
If it does not meet the requirement, the carrier or shipper may refuse to ship the product.
Sometimes, a shipping route may involve two carriers.
This is a common occurrence when shipping.
This is because sometimes, the first carrier may not be able to deliver the product directly to the customer.
Perhaps, because their location is remote.
The first carrier may not operate in that area so the second carrier would have to get the order to the customer.
Returns Processing
If the order does not meet the customer’s specifications or the product is damaged/faulty, the customer can use the return shipping labels and materials to return the product.
The company can then send another product to the customer to finally fulfill their order.
Or refund their money if they can’t replace the product.
The company would restock the product if the reason for the return is that it didn’t match the customer’s specification.
But if the item is damaged, the company can’t restock it.
In this case, they can return the product to the manufacturer or supplier to get a refund or recycle it.
Fulfillment Models – What is Fulfillment in Business
There are different methods that companies can choose to carry out their order fulfillment process.
Usually, the method that a company decides to use would depend on its specific needs and situation.
Some models are best suited for bigger businesses while others are better for smaller businesses.
Also, the nature of the business may determine the model they opt for.
Knowing the different models can help you decide on the best one for your company.
So, let’s look at these models below.
In-house
With this model, every step of the fulfilment process is done internally.
The company does not involve any other entity and just carries out the processes all by itself.
Third-party
As you can tell from the name, this model involves outsourcing every activity in the fulfilment process.
Companies often choose this option when they do not have the capacity to handle the process by themselves.
Or they believe they can use the time they’d otherwise use for this process to focus on their main business processes.
It does not matter the reason a company chooses this option, what matters is that they find a third-party fulfilment vendor that can effectively carry out their fulfilment needs.
Luckily, there are so many vendors out there, so finding a reliable and competent one should not be difficult.
Drop Shipping
When a manufacturer produces and then ships the product to customers, this is known as drop shipping.
Drop shipping comes with several advantages including reduced overhead costs.
This makes it a very advantageous option for startups.
Customers can also benefit from this model.
Since there’s no middleman in this process, it can reduce the amount of money the customer has to spend.
However, this model also has its drawbacks.
A major drawback of the dropshipping model is that merchants (companies that use this model) do not have control over the process.
Because the merchant does not have control, they can not make sure the process goes smoothly.
And this can significantly affect fulfilment.
Also, the delivery time can be quite long.
The reason for this is most manufacturers do not operate in the countries the merchant operates.
So, it may take a long time for the order to get from the manufacturer to the customer.
This may also make shipment more expensive.
Hybrid
Finally, some companies combine two or even use all three models together.
When a company uses more than one model, then its fulfilment model is hybrid.
For instance, a company may decide to use the in-house model for some products, while it uses the third-party model for some products.
Or they can easily handle the process in-house when demand is not that high.
But during peak seasons when demand spikes, it may decide to outsource the process and focus on its main processes.
The same company can also decide to dropship bulky items.
Tips on How to Improve Fulfillment – What is Fulfillment in Business
Your order fulfilment rate can significantly influence your company’s reputation and customer satisfaction.
Typically, if you fulfil a customer’s order on time, with the right product, and in good condition, that person will be very happy with the service.
They will come to trust your brand and equate it with reliability, competence, and efficiency.
Once customers feel this way about your business, it’s only a matter of time before they become loyal to your brand.
They’d also not mind telling those around them about your business.
So, you see, order fulfilment can also help increase your company’s sales.
But when you do not take this process as a priority and customers do not get their orders on time and in good condition, your reputation will be affected.
Customers won’t want to patronize your business let alone tell others about you.
This is why you need to make sure your order fulfilment process works as optimally as possible.
If you are outsourcing the process, then you have to ensure you use a reliable and competent vendor.
Take your time to vet the vendor you want to use for this process.
And if the vendor is not doing the job the way they should, do not hesitate to replace them.
If your company is using the in-house method, then you even have more control over the process.
You should use this to your advantage and make sure everything works the way it should.
There are so many things companies do to optimize their in-house fulfilment process.
The following tips should help you do so too.
Set Clear Expectations
Savvy business owners know that it is better to make a few promises but then deliver more than that.
However, some business owners tend to do the opposite.
They’d make big promises and then under-deliver.
Sadly, this can affect credibility to a very large extent.
So, it is better to make promises that you know you can meet up with and then do beyond what you promised.
Instead of promising immediate delivery, give a realistic timeline.
Make sure you set clear expectations that customers can bank on.
Consider potential delay factors when setting expectations.
This way, if those factors do not come into play, then your customers can get their orders faster than they expected.
It is better than having to wait beyond the expected date.
Also, if it looks like the order will be delayed, then you should notify your customer about the issue.
Invest in Order Fulfillment Software
There are so many order fulfilment systems that you can use to track and optimize every activity in your fulfilment process.
All you have to do is choose the one that suits your business needs the most.
Build Collaboration with your Shippers – What is Order Fulfillment in Business
Your shipper has a very big role in your order fulfilment process.
So, you need to establish collaboration between your business and them.
This will help you work peacefully and effectively with them.
See them as a business partner and treat them accordingly.
Take your time to properly negotiate with them to get good deals.
And also work a great delivery schedule with them that will help you fulfil your customers’ orders on time.
Work in sync with them to reduce the chances of delays and other shipping issues.
Improve your Customer Service
The truth is, regardless of how hard you try, you won’t always get it right with your customers and their orders.
You may make some mistakes, mix up orders, some products may be bad, and delays may happen, among so many other things.
This is why you need to work on your customer service.
So, even when things do not go the way they should, your customers can still have a smooth experience with your company.
You should dedicate your time to making any issue that comes up right.
It doesn’t matter if the fault is from you, a vendor, or even your customer, your duty is to fix it.
And you can only do this if you have good customer service.
Also, make sure your return process is as straightforward as possible.
This way, if a customer has issues with the order, they can easily get a replacement or refund.
You can read this article on how to improve your customer service.
Conclusion on What is Fulfillment in Business
When your customer orders a product, it is your responsibility to make sure that the right product gets to them on time and in good shape.
If your fulfilment process is poor, it can end up affecting your company’s credibility and reputation.
And this can cause a decline in sales.
This is why you need to do your best to make sure your fulfilment process is optimal at all times.
Some of the best ways you can improve this process in your company include setting clear expectations, investing in order fulfilment software, working in sync with your shippers, and improving your customer service.
