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Planning Your Order Fulfilment Strategy

by Aziz Memon| May 15, 2021| 2 min read
Tidal Commerce
Reading Time: 2 minutes

Price, shipping charges, speed of delivery and ease of returns are the key factors that influence a sale online.  To succeed, you need a fulfilment strategy that helps you optimize for these factors and plan for the infrastructure, systems, processes, and team before you build or scale your fulfillment operations.  

Overall there are three truths that apply 

#1 Location of your fulfilment center impacts cost and speed of delivery. 

Shipping orders to US or Canadian customers from overseas or even shipping domestic orders across the country can add significantly to the delivery time and costs.  

Reducing the distance, the packages travels to the customer and the number of transport modes it uses to get there reduces the cost of shipping and time in transit.  

Optimizing your fulfillment operation based on where your customers reside will help you reach the most people in the most cost-efficient manner. 

Consider distributing inventory across multiple fulfillment locations that are within proximity of large populations of your customers. 

#2 Technology integrations for upstream and downstream activities  

Consider software that integrates seamlessly with your ecommerce platform to automatically manage orders and inventory across multiple sales channels can reduce delivery times and improve customer satisfaction. 

As soon as an order is placed online it can be processed and shipped by the fulfillment team and tracking information can then be sent back to the ecommerce platform or marketplace and shared with the customer. 

The software adds visibility into inventory quantities on hand across fulfillment locations and helps online retailers to proactively order more inventory to prevent stockouts. 

#3 Free 2-day shipping. 

2-day and even same-day shipping are becoming more prevalent as they drive sales. Offering free shipping reduces card abandonment rates and significantly increases sales. However, not only are shipping costs expensive for the merchant to absorb, but they can also differ from product to product and geography to geography therefore difficult to offer without caveats. Free shipping can also increase return rates and hurt your margin.  

When offering free shipping, consider the following. 

  • Bake the cost of shipping into the product price using the average shipping cost, but this works best for expensive products. 
  • Require a minimum spend threshold for free shipping to increase the average order value for inexpensive products. 

Deciding on your order fulfillment model 

Order fulfillment is the process of receiving and storing product inventory, picking, packing, labeling, shipping, and processing returns and inventory management. 

Speed and cost of shipping matter to consumers.  

When a consumer wants something, they want it now, which is why 2-day delivery has become an expectation. Sophisticated operations are pushing to same-day delivery.    

  • 38% will never shop with a retailer again if they had a poor delivery experience.  
  • 25% will cancel orders because of slow delivery. 
  • 61% will abandon their cart if shipping, taxes, and other fees are too high.  

There are three common order fulfillment methods Dropshipping and Outsourcing  to a Third-party logistic (3PL) company.  Merchants with physical store can also offer more convenient fulfillment and return options like Buy Online and Pick-Up in Store (BOPIS) and Buy Online Return In-Store (BORIS) 

Choosing the right order fulfilment method depends on several factors, including your order volume, type of product and what you are willing to manage yourself and importantly what meets the expectations of your customers.