How to Set Up an Order Fulfillment Process

Once a customer has made their purchase, a new process starts: order fulfillment. This is the process between an order appearing in a business’ system and an actual product landing in a mailbox. 

Order fulfillment is important for any business, particularly in a moment when speed and convenience means good service. Customers need to know when their package is arriving, and most expect to track it all the way to their door.  A bad fulfillment process can cost a business and lead to a loss of customers. 

Ahead, we’ll go through what’s involved in the process, why order fulfillment matters, a few options you can select to fulfill orders, and tips to make the process effective and smooth. 

What is an order fulfillment process?

The order fulfillment process is triggered after a customer makes a purchase. Once they’ve gone through an online checkout and had their order confirmed, the steps to get the order to their door involve: 

• Checking inventory

• Picking up and packing the items

• Labeling for shipping or organizing local pickup/delivery

• Shipment dropoff or pickup

• Delivery management, including tracking and any returns 

To hit all of the steps of the order fulfillment process smoothly, inventory must be in stock, someone (or something) needs to be there to pick and pack the contents, and you and an effective logistics partner need to get the order out. You’ll also need to coordinate with a delivery partner to some degree,  whether for local delivery or pick-up or a shipping carrier. 

And remember, order fulfillment doesn’t always end with a package at the door. Ecommerce sales in the U.S. were over $1 trillion dollars in 2022, and 16.5% of those sales ended in returns. Fulfillment also includes processing and tracking any returns smoothly.

Why does an order fulfillment process matter?

The order fulfillment process matters for a few reasons, with the primary centered on customer service. Placing an online order means your customer is content to wait to get their purchase instead of walking into a store to get it immediately. In many cases, the sort of product they’re ordering isn’t available in a traditional brick-and-mortar spot, but that doesn’t mean their expectations of good, fast service go away. 

Nearly two-thirds of customers around the world and across a variety of categories expect their order to arrive within one day. 

The bottom line is that a solid order fulfillment process means your customers are getting exactly what they want in the time they expect. Ensuring delivery times are clear and as up-to-date as possible will help keep customers satisfied. 

An effective and well-oiled fulfillment process also saves you time. That means you have more time to focus on other business tasks, and as the business grows, the fulfillment process doesn’t slow you down. 

3 order fulfillment options 

Businesses and entrepreneurs looking to build out their online business and order fulfillment process have a few options available to them. Each has their own benefits and challenges. It all comes down to your needs, like the size of your customer base and location or inventory.

1. Self-fulfillment (or in-house fulfillment) 

The first fulfillment option is done by the business or entrepreneur. Pretty much everything involved in the order fulfillment process is included here—besides the actual delivery, which is usually handled by a carrier of your choice. Depending on your business, you might also offer in-store pickup or local delivery, especially for fragile items like floral arrangements or food.

Self-fulfillment is great for small teams that can handle the volume of orders themselves. Many direct-to-consumer brands start with this type of fulfillment, boxing up orders late into the night. 

The plus side of this option is low fees (not paying a warehouse operator to hold inventory or pack items). This is a very hands-on approach to the order fulfillment process, meaning you can know exactly where and what the inventory is and get it packed up in a timely manner. It’s also personal—you can customize boxes and add surprises to orders that customers truly love. 

However, self-fulfillment can be time-consuming. If your business is growing beyond this stage, it might be worth looking at other options. 

2. Third-party fulfillment 

Many ecommerce businesses opt for third-party fulfillment, sometimes called third-party logistics (3PL). A 3PL takes the entire order fulfillment process off the hands of a business, storing, tracking, and packing your inventory and shipping out any orders. 

This is the best option for businesses that do a consistent number of online sales and don’t have the time to dedicate to self-fulfillment anymore. There are a number of different fulfillment services to choose from, based on pricing and warehouse locations.

The benefits of using a 3PL are that you don’t need to consider things like seasonal staffing, like you might if you’re doing self-fulfillment. And you get more time and space back by outsourcing packing, shipping, and inventory storage.

The downside of this option is that there is little physical control over what goes on with processing, packing, and shipping the order. 3PLs have their own order fulfillment infrastructure that make it easy for businesses to set and forget, but it’s important to do due diligence on any potential logistics partner to ensure your orders make it to your customers quickly and in good condition. 

3. Dropshipping 

For entrepreneurs new to the ecommerce world, and especially those with limited room for stock or starting funds, dropshipping is another choice. 

Dropshipping essentially takes nearly all of the physical part of ecommerce off a business owner’s plate. With 3PL, your inventory or products are sent to a warehouse for a company to ship. With dropshipping, inventory is sourced and held by a third-party manufacturer or wholesaler and they handle the order fulfillment. 

Dropshipping is a low-budget, low-effort way for anyone interested in ecommerce to get started. The downside of this, however, is you’re reliant on the third-party’s time, schedule, and availability. If something happens to cause a delay in shipping, it’s difficult for you to control it if you’re dropshipping. Plus, unless you’re ordering custom products, like print on demand merch, you’ll be choosing from a catalog and will need to differentiate yourself and your products from similar sellers.

How to choose your order fulfillment process

Trying to pick which order fulfillment process is right for you and your business comes down to a number of important factors. Consider things like your current needs, cost, location, and your values when researching fulfillment options.

• Business needs: If you can currently handle your volume of orders, chances are you’re not going to require the services of a 3PL. But if you’re quickly growing, it might be smart to set up an order fulfillment tool that can scale with you.

• Cost: How much of the fulfillment costs will you cover with your product pricing? How about shipping rates? Is a third-party partner in your budget? Make sure to balance convenience with customer price expectations and your bottom line.

• Location: Where your warehouses are located is important not just for speed of delivery, but for shipping costs. Some 3PLs ship from different warehouses depending on the location of the customer, so they can get their shipment as soon as possible.

• Mission and values: You may want to seek out fulfillment partners with a similar mission and values to yours. That might look like working with an eco-friendly 3PL or avoiding dropshipping because you value selling handmade items.

See the full list of shipping factors to consider

Best practices for order fulfillment 

It’s normal to make adjustments as you figure out the right fulfillment process for your business. Here are a few common considerations to take into account as you update and manage yours.

• Prioritize shipping quality. Working with a trusted carrier is crucial. Once the package is out of your hands, it’s up to the carrier to get it to the customer. If your packages are regularly getting damaged or lost, consider switching partners. 

• Stay on top of inventory tracking. Have a system you can trust to track your stock levels. Low inventory or zero inventory can greatly impact your customers, especially if they’ve already paid for something you’ve accidentally oversold.

• Prepare for seasonal sales peaks. Seasonal sales and seasons can affect order volume and shipping times. During holiday seasons, for example, many businesses set customer expectations by noting order deadlines to guarantee holiday deliveries.

• Consider 3PLs that use automation. Artificial intelligence (AI) can help shorten delivery times for customers and curb any mistakes that could be caused by human error. This can show up in partners that use a robot to pick and pack items to be shipped or fulfillment software that knows which warehouse is closest to your customer. 

• Nurture your relationship with shippers. If you’re working with another party, it’s important to build and tend that relationship. This can potentially keep costs low, ensure that you’re getting accurate timing on shipment arrivals for your customers, and help you stay up-to-date on any potential conflicts or issues with deliveries. 

• Be candid with your customers. A clear shipping and delivery policy you can refer customers to is important. In the event of any issues or delays, send out emails or texts to notify customers. While they may have a tracking link handy, it’s better business to get updates from you. 

• Think with a global mindset. Remember that international shipping may incur costs to the buyer upon delivery. And if you ship internationally, political, ecological, and other external factors can impact how shipping and supply chains function .