Facebook iOS14 changed everything, making it increasingly more difficult for DTC merchants to profitably run a business, so that's why it's more important than ever to structure a streamlined Ecommerce Fulfillment Supply Chain.
In this guide, we'll cover the basics of Ecommerce Fulfillment, all the way up to how to scale your fulfillment from $0 to $100M.
What is Dropshipping?
Dropshipping is a retail method for order fulfillment where a seller does not stock the products it sells. Instead, the seller buys the products from a third-party supplier only when customers purchase them, and then goods are shipped directly to the customer. This way, the brand does not have to deal with manufacturing the products itself.
In simpler terms, dropshipping allows marketers to sell almost any product imaginable with virtually no overhead.
Dropshipping has become quite famous in recent years among savvy young entrepreneurs who have access to a wide variety products globally via dropshipping exchanges.
The recent boom in the e-commerce industry has also led many retailers to shift their business models to dropshipping for fulfilling online orders. One of these retailers is Wayfair, one of the biggest online furniture stores.
Wayfair does not make any of its products. Instead, it has a collaboration with a network consisting of over 11,000 suppliers.
This retail method has also given rise to various independent dropshippers.
Independent drop shipping platforms include Shopify, eBay, Amazon, and AliExpress. These storefronts and virtual brands run independently with no inventory, little capital, and a small number of employees.
What is Ecommerce Fulfillment?
Ecommerce fulfillment is a supply chain process in which a brand gets the products ordered online to its customers’ doorstep.
Ecommerce fulfillment services store and ship orders based on seller needs.
Being a systematic process, retailers must carry out the correct steps carefully to ensure that customers receive their orders on time.
Apart from communicating the order status to the customers, this supply chain process primarily consists of the following steps:
● Processing the orders
● Picking the orders
● Preparing the orders for the delivery
● Transporting the orders
● Documenting the orders’ receipts
In addition to that, eCommerce fulfillment includes keeping track of the order once it is shipped. This supply chain process requires that retailers deal with returns.
What are the Pros/Cons of Dropshipping vs Fulfillment?
Dropshipping and eCommerce fulfillment are often compared. So, let’s look at some of the key points to compare these two processes:
Which one is the Best?
A Side-by-Side Comparison of Dropshipping and Ecommerce Fulfillment
How do I Get Started with Ecommerce Fulfillment?
Business owners need to put a good amount of effort into this aspect. For effectively getting started with Ecommerce fulfillment, one can take into account the following elements:
Decide on the Type of Fulfillment Needed
There are several roles that a fulfillment company can take on. Therefore, the business owner has to decide on the type of fulfilment needed by the company. The fulfillment can include storing, packing, shipping, or tracking the products.
Once the brand's owner has made this decision, they will be able to further make effective decisions regarding the fulfillment services. Indeed, no business owner would want to get fulfillment services that provide no significant benefit to the business.
Communication and Phone Systems
Technology has been an integral need in today's age, regardless of what type of business one runs. The same goes for a company that offers fulfillment services. Therefore, a business owner must always go for the fulfillment service provider with good communication and phone systems.
Moreover, the company's owner must make sure the chosen provider does not cut corners. Furthermore they should ensure that the provider makes every possible effort to respond to the needs in a high-tech fashion. The basic requirements that an ecommerce fulfillment service provider should cater to include operational equipment, access to the company's website, and sound communication systems.
The Staff of the Fulfillment Company
Significantly, your potential service provider should be equipped with skilled employees. For example, some of the critical staff members for a fulfillment company should include a warehouse manager, a fulfillment manager, and a fulfillment specialist.
Furthermore, the owner must ensure that the tasks are assigned to the right person. For example, the fulfillment center manager should be responsible for making sales calls. Similarly, the fulfillment center manager will also be responsible for leading the clients through the setup.
As far as the warehouse manager is concerned, they will be required to install all the warehouse management systems. Moreover, the warehouse manager will also be responsible for keeping track of training personnel and back end procedures.
Marketing and Sales
The chosen fulfillment service provider must also put considerable effort into their marketing and sales. That way, you can know about their services in a better way. Notably, a basic marketing campaign is required to put forward the business' message. This way, your business will also be likely to target its potential customers more effectively.
Pricing System for a Fulfillment Company
Establishing a price matrix is also crucial before taking the services of a fulfillment company. Notably, the pricing matrix should consist of all the services offered by the fulfillment company. For example, the fees can include customer service, storage, and more.
Other pricing option can also consist of the following:
● Storage charged at a price per month
● Warehouse fee
● Fee for the set up of new product
● Order receipts fee
● Fees for reporting
● Cost for shipping materials
● Customer service fee
● Initial setup cost
What do I Need to Know Before Hiring an Ecommerce Fulfillment Service?
Since not all fulfillment companies provide the same services, there are a few things that the business owner must consider before hiring an ecommerce fulfillment service. Some of those elements include:
Item Size and Weight
A majority of ecommerce packages sent through the mail weigh no more than 10 pounds. However, some packages can weigh as little as one pound.
Therefore, you must consider what kinds of products the business will be dealing with. Depending on product type, the average weight of an order can be a few ounces or even a hundred pounds.
For example, fulfillment centers like Fulfill rite concentrate on shipping small, light-weight products. This requires a specific set of equipment and fulfillment plans that would be completely different if the company instead chose to deal in larger packages.
To start working with a fulfillment company, you need to estimate the volume of your orders. For example, if you anticipate 25 orders in a month, you must search for a fulfillment service that is flexible with monthly minimums. This way, the business owner will have to pay only for the orders the business will be shipping out to the customers.
On the other hand, if your company has to deal with thousands of orders each month, you may have more options, as some fulfillment companies only work with companies that deal in high volume.
Number of SKUs
An SKU is a scannable barcode that helps you keep track of product location and includes product information. If your company has just one product, all your sales will be based on one SKU.
However, if your business sells T-shirts in various colors and sizes, then the SKU count will depend on the number of shirts sold times the available colors times the available sizes.
Moreover, if you have a few SKUs at hand, then you won’t have a hard time finding a suitable fulfillment company according to the needs of your company. But, on the other hand, having a higher number of SKUs will require you to take into account more factors.
Basically, the more variation there is in your product types, the more complicated fulfillment becomes.
Location of the Customers
Another thing to take into account here is the location of the company’s warehouse. You can either go for a fulfillment company with a single warehouse or a fulfillment company with multiple warehouses.
Moreover, companies with a single warehouse tend to operate more smoothly. Whereas companies with multiple warehouses are more efficient in serving large areas quickly.
What are the Best Ecommerce Fulfillment Services?
Here are some of the top eCommerce fulfillment services:
● Ship Bob
● Ship Monk Red Stag Fulfillment
● Rakuten Super Logistics
● eFulfillment Service
● Ruby Has
● Amazon FBA
● FedEx Fulfillment
How Much Does it Cost Per Item for Fulfillment?
The cost for a typical fulfillment order costs:
● Inventory Receiving: $25–$45 per hour (or $5–$15 per pallet)
● Storage: $8–$40 per pallet per month
● Pick & Pack: $3–$5 per order
● Outbound Shipping: Varies based on the products' weight, size, and destination.