What is Order Fulfillment in Supply Chain Management

What is Order Fulfillment in Supply Chain Management

If there are issues with your order fulfillment, customers potentially evaluate your company poorly and leave negative reviews. Because of this, businesses should view order fulfillment as a crucial component of their operations and provide resources to it.

However, few business owners are actually interested in and knowledgeable about order fulfillment in supply chain management. They simply monitor it and address issues when they arise.

So, what is order fulfillment in supply chain management? How can supply chain management and order fulfillment be made better overall?

We will provide you with useful information about it as well as suggestions for improving your order fulfillment and supply chain management. Check out our blog to discover out!

What does Supply Chain Management mean and Why does it matter?

Supply chain management (SCM), which comprises all procedures that convert raw materials into finished commodities, is the central administration of the movement of goods and services.

Companies can reduce unnecessary costs and deliver goods to customers more quickly and effectively by optimizing the supply chain.

What is Order Fulfillment in Supply Chain Management?

Order fulfillment is a key step in supply chain management. The first stage in providing customer service is to efficiently and successfully fill the orders placed by the customers, which initiates the supply chain.

Order Fulfillment Supply Chain

The two-day shipping choices are standard for consumers nowadays. Therefore, there is a strong demand for timely and efficient delivery. Your business may suffer if shipments aren’t delivered on time when your order fulfillment process is inconsistent or tardy.

What Differs Supply Chain from Order Fulfillment?

The phrase “supply chain” relates to the interconnected network of businesses, organizations, and other resources that procures produce, and delivers items from point of production to the final consumer. The larger supply chain, which consists of six phases of fulfillment, includes order fulfillment as just one link:

• Warehouse and Storage
• Inventory Management
• Receiving
• Pick and Pack
• Delivery
• Returns

In other terms, the supply chain refers to the route an item takes from its place of manufacture to the customer’s hands. Order fulfillment refers to the step in the supply chain in which the product is selected from warehouse shelves, packaged, and delivered to the consumer.

Order Fulfillment Process and Supply Chain

As your firm expands, you can optimize the process and make it better once you understand how an item reaches your clients. The example that follows demonstrates the many processes a product might go through on its way from the factory to a buyer.

Supply chain order fulfillment process

Step 1: The manufacturer produces the goods

Based on the defined requirements of the wholesaler, the producer produces the appropriate quantity of goods.

Step 2: The wholesaler places the order for the goods

The wholesaler charges the manufacturer for the products after having the necessary amount of inventory on hand to fulfill all of the orders received from their retailers.

Step 3: The manufacturer sends the goods to the wholesaler’s warehouse

The products are given by the manufacturer to a cargo carrier for delivery to the wholesaler. The cargo carrier is then paid for by the manufacturer.

Step 4: The cargo carrier delivers the goods to the wholesaler’s warehouse

The merchandise can be shipped by truck or rail, depending on the transportation mode selected and the addresses of the companies. It might take a  few days to some weeks before the delivery is completed.

Step 5: The wholesaler stores the goods in a warehouse or fulfillment facility

The wholesaler receives the product shipment and updates its stock information to notify retailers of the products’ availability.

Step 6: The customer places an order from the online retailer

An online shopper puts an order and charges for the product. The consumer confirms the order, which is subsequently processed.

Step 7: The online retailer makes the purchase with the wholesaler

The retailer notifies the wholesaler of the order manually or automatically and then charges for the goods.

Step 8: The wholesaler completes the order

The wholesaler takes the order out of shelves, puts the goods in packages, uses a courier company to deliver the order to the customer, then reimburses the courier service. A shipping confirmation is typically sent to the customer at this point.

Step 9: The product is shipped to the end-user

The amount of time it takes for the cargo to actually arrive at the point of delivery will depend on the shipping option that is selected.

Step 10: The customer gets their orders

The item is shipped to the consumer after leaving the producer. The buyer now has the option of keeping the item or returning it to start the returns procedure.

What does Order Fulfillment Service mean?

Order fulfillment service is ultimately just a business function. It can be contracted out to a reputable order fulfillment company, often known as a third-party logistics provider (3PL), just like any other business activity.

What does 3PL mean?

A 3PL refers to a third-party fulfillment logistics company that offers companies demanding supply chain management outsourced logistics services. In other terms, a 3PL is a service you use to handle different supply chain tasks like:

• Freight Forwarding
• Inventory Storage and Management
• Order Fulfillment
• Shipping or Receiving and Distribution
• Picking and packing
• Cross-docking

It is used to manage a variety of tasks in the supply chain, including order fulfillment, shipping, collecting, and distributing, inventory storage and management, picking and packing, as well as cross-docking.

A 3PL can help you manage your quickly changing eCommerce supply chain with its network of fulfillment center locations, automated processes, and substantial supply chain management expertise.

The strategy of Order Fulfillment and Supply Chain

Order fulfillment is a rather straightforward operation: deliver the right goods to the right consumer as quickly and affordably as you can. With that objective in mind, expediency and effectiveness take priority.

The strategy of Order Fulfillment and Supply Chain

So that you are aware of the differences between supply chain and order fulfillment, we can discuss supply chain management, enhancement, and fulfillment planning strategy in more detail.

Select the appropriate order-picking method

Depending on the type of your organization, there is a variety of order selecting techniques that you can use. You must decide which is best for your company by assessing the scope and size of your operations.

Boost inventory visibility

Better stock level visibility will help your order fulfillment process if you distribute through a variety of channels. The more your inventory visibility, the more likely you are to avoid a stockout as well as overstocking.

Streamline order management

Your network system can monitor progress, spot shipment bottlenecks, and notify customers when their purchase has arrived by understanding and sharing the status of shipments in real-time using your warehouse management system.

Place the warehouse location first

Make careful to pick fulfillment companies and warehouses that not only satisfy your shipping and picking specifications but are also situated in your target consumer market.

Use a 3PL for order fulfillment outsourcing

With more resources available, 3PLs like Flowspace can distribute various inventory volumes to various warehouses across the nation and select the quickest, most affordable method of delivery for your business and your client, regardless of where they live.

How to enhance order fulfillment in supply chain management

Order fulfillment control has become difficult due to a surge in customer orders with more varied SKUs, demanding innovative solutions.

ECommerce businesses need to manage distribution and incur significant delivery expenses because 69% of customers are less inclined to shop with sellers that don’t ship within 2 days of the deadline promised. Many businesses only have one distribution facility, which is unable to keep up with rising consumer demands.

ECommerce businesses must optimize order fulfillment throughout every step of the selling process in order to face these challenges. When the entire supply chain is interconnected, retailers will be able to plan their operations based on knowing the condition of their inventory, where it is, as well as when it will arrive.

How to enhance order fulfillment in supply chain management

Order fulfillment is a crucial component of supply chain management since it dictates how businesses can accurately finish transactions and meet consumer needs. The four components of supply chain management are as follows:

Use Order Management System (or OMS)

Every element of supply chain management, including order placement, fulfillment, and delivery, is connected by OMS order management. Order management system (or OMS) software enables retailers to streamline order fulfillment throughout their supply chain.

Every step of order fulfillment, involving inventory management, shipment tracking, and delivering customer purchases, is supported by an OMS program. Choosing a cutting-edge OMS enables eCommerce businesses to optimize expenses and coordinate inventory movement with 3PL providers.

Use Order Fulfillment Logic (or OFL)

The concepts and tactics that eCommerce businesses use to make sure that the orders of customers are completed quickly are referred to as order fulfillment logic. This implies that it controls the speed of fulfillment across the supply chain.

The balance between customer requirements and the company’s bottom line is what order processing is all about. eCommerce businesses will incur less expense, utilize their inventory more effectively, and offer a better customer experience with a well-designed order fulfillment logic.

Creating an order fulfillment strategy that enables flawless coordination of these deliveries is necessary as more retailers prioritize shipping orders from various distribution hubs. For example, retailers must take into account the costs of shipping purchases from clients’ actual locations while building up distribution hubs.

Use Warehouse Management System (or WMS)

Software called a warehouse management system streamlines warehouse tasks like inventory tracking. Ensuring that goods flow smoothly through a company’s warehouse, speeds up order fulfillment.

ECommerce businesses used to rely on paperwork to precisely track storage activity. To monitor warehouse management, though, retailers need an automatic and scalable system due to the expanding demands of the eCommerce sector.

A warehouse management system specifically aids e-commerce businesses in:

• Properly keep track of raw materials and products in numerous warehouses.
• Keep track of how orders are handled along the supply chain, from arrival to consumer delivery.
• Processing returns swiftly and effectively will allow customers to follow their refunds.

Use Last Mile Logistics 

Nearly 28% of the overall cost of a shipment goes toward last-mile logistics. It is the last stage of order fulfillment in the supply chain and focuses on how e-commerce businesses may deliver goods to customers more quickly and affordably. The majority of the time, retailers deliver customers’ products using parcel services or small package carriers.

The importance of last-mile logistics in offering the best possible customer experience has historically received little attention from e-commerce enterprises. For same-day delivery, 23% of customers are willing to pay more nowadays. In order to meet demand, retailers must concentrate on last-mile logistics.

Final Words

After reading this post, you may realize that order fulfillment in supply chain management is something that every firm should take seriously.

To better meet your consumers’ expectations, use warehouse automation to increase order fulfillment efficiency and accuracy.

The greatest optimal solution for order fulfillment for small businesses and larger corporations is to invest in software. If money is tight, you can utilize inexpensive inventory management software and later add more features as your company expands.

Either way, it’s all well worth the investment!