What Is Order Fulfillment?

By QuickBooks

2 min read

Receiving and processing orders, and then successfully delivering them to customers is order fulfillment in its most basic form. As a small business grows larger, a glitch in this process can result in customer loss and reputation damage.

A startup, for example, may begin its business taking orders on an ecommerce marketplace like Shopify or Amazon, finding that initially it can package up products and get them in the mail with a few in-house staff. While perhaps a dozen orders a day can be handled this way, once volume increases to hundreds or thousands per day, you need to consider where you’ll store products and how you’ll track all the moving pieces.

If you have these questions, it’s time to start thinking about investing in fulfillment resources. Outsourced fulfillment services and integrated solutions for tracking inventory and logistics have opened up opportunities to businesses of all sizes.

In-House Fulfillment vs. Third-Party Services

In-house order fulfillment involves a complex, full-service process that includes storing and managing a large amount of product. If a business doesn’t already have extra storage space on site, it means leasing a warehouse and hiring at least a few employees who can track and ship items as orders come in. Without careful tracking, companies can easily lose control of their inventory or become unaware of products that go missing — both are costly risks.

On the other hand, third-party fulfillment services take the logistics of processing and delivery out of the hands of a business. Perhaps the most well-known third-party fulfillment service is Amazon. Businesses list their products on the site. Then, when a customer purchases a product fulfilled by Amazon, the item is stored, picked, packaged and shipped all from an Amazon warehouse.

Increasing pressure to get products in the hands of customers quickly is pushing big-box retailers to build warehouses in multiple states to enable product delivery within a one- or two-day window. The demand to keep prices stable while increasing resources will likely lead many businesses, particularly small ones, to consider third-party fulfillment as an option to remain competitive.

Third-party fulfillment services, though, are not the best option for every business. Based on the cost of rental space, full-time salaries and packing supplies, FitSmallBusiness states businesses with fewer than 1,350 orders each month benefit from using a third-party service, but once orders exceed that amount, it might be time to bring it in house.

body-order-fulfillmentCustomer demand can fluctuate from one month to the next, especially for businesses that are seasonal. One advantage to using a fulfillment service is a shift in sales won’t require downsizing or conserving resources.

Integrated Solutions

Consider an online shopping experience in which customers place orders based on the assumption that if products are listed on the site, they must be available. If that information is out-of-date, the customer may be frustrated by placing the order, only to get a message later that the item is out of stock. This scenario illustrates the importance of integrated automation tools, like Intuit QuickBooks.

Automation tools can help stabilize and maintain fulfillment efficiency. If you’re not keeping your order fulfillment, inventory management and storefront teams and tools all in sync, you could be jeopardizing customer service.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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