Order fulfilment is the process of storing inventory, picking and packing products, and shipping online orders to customers.
This process can be completed in-house by an ecommerce company or outsourced to a third-party logistics (3PL) provider.
Ecommerce order fulfillment applies to both business-to-business (B2B) orders — where large quantities of product are shipped to big-box retailers — as well as business-to-consumer (B2C) orders that are shipped directly to a single shopper’s home.
There are three order fulfilment models merchants can choose from: in-house, outsourcing and drop shipping.
The use of each model depends on specific business requirements.
In-house fulfilment means that all steps in order fulfilment, i.e. warehousing the products, picking and packing orders, shipping to the end user, and handling returns are managed internally by the seller.
It’s common for smaller companies dealing with packing and shipping themselves, but also larger organisations who want to keep control of inventory and shipments at any stage.
Larger companies who do not want to outsource order fulfilment usually need to build their own infrastructure which includes obtaining warehouse space, staff and software to manage it.
Third-party fulfilment means that all order fulfilment activities are outsourced to an outside provider.
The third-party provider is in charge of warehousing products, picking, packing, labelling and shipping orders on behalf of the seller. In addition to that they also deal with returns processing and quality control.
Third-party logistics (3PL) providers typically operate a number of fulfilment centres and have the logistical expertise and capacity to meet order fulfilment requirements on a large scale. As 3PLs work with many companies and ship out large volumes each day, they can negotiate with carriers to get huge discounts for bulk shipping rates.
Drop shipping means that the seller does not stock the sold product, but the order is shipped by a manufacturer or wholesaler directly to the end user.
Drop shipping eliminates the need for warehousing and logistics, either inhouse or outsourced. The sellers simply process the sales orders and forward them to the supplier. The shipping process is completely in the hands of the manufacturer. This method is popular with sellers on large eCommerce platforms such as eBay and Amazon, and sales of consumer goods such as electronics and clothing.
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