The Order Fulfillment Process In 7 Steps + Best Practices for Efficiency
According to a recent survey, lack of speed and lack of accuracy are two of the top causes of customer frustration in the U.S.
The secret to winning over customers and meeting their expectations begins in the warehouse — with a streamlined order fulfillment process.
In this article, we’ll cover all you need to know about order fulfillment, including types, the step-by-process, best practices and more.
Plus, we’ll introduce how Modula’s automated solutions can help you streamline order fulfillment to increase picking accuracy and in turn, boost customer satisfaction.
What is Order Fulfillment?
Order fulfillment is the process of receiving goods and shipping them to your customers within an expected timeline.
The process starts with receiving and sorting inventory and ends with shipping orders or managing return transactions.
4 Types of Order Fulfillment
The best type of order fulfillment for your business depends on factors such as your industry, your volume, and budget. The four most common types include:
1. Dropshipping
With the dropshipping method, you rely on a third-party supplier to provide items and manage your inventory.
Here’s how dropshipping works:
- Your customer places an order
- Your warehouse operator hands over the order details to your supplier
- Your supplier fulfills the order by shipping the product directly to your customer
While dropshipping is common among start-up companies, large brands also use this method. Online retail giant Amazon, for example, allows third party suppliers to utilize dropshipping when filling customer orders.
2. In-house Order Fulfillment
In-house order fulfillment requires you to use your own employees to manage the order fulfillment process from start to finish, allowing you to have full control over your operation.
This method works well for small startups, where orders are typically placed in small volumes. While cost-effective, this method can be time-consuming.
However, if your startup scales into a bigger company, you can transition to outsourced order fulfillment or even hybrid order fulfillment to accommodate a larger operation. (Believe it or not, Amazon started out with this method!)
3. Outsourced Order Fulfillment
Outsourced order fulfillment is handled by a third-party or contract logistics (3PL) provider.
This method is especially beneficial if you lack storage space or access to qualified employees.
While it sounds similar to dropshipping, the difference between the two is that with an outsourced method, you are managing your inventory through your logistics partner, and not through vendors.
4. Hybrid Order Fulfillment
As the name implies, hybrid order fulfillment is a mix between keeping things in-house and outsourcing to a logistics partner.
If you need more flexibility with your order fulfillment process or if your company is undergoing sudden and rapid growth, hybrid order fulfillment might be the right method for you.
This method works best for companies that:
- Offer customized items that need to be pre-assembled in-house
- Sell expensive or large items that can’t be stored in-house
- Sell slow-moving (“C” product) items
The Order Fulfillment Process
From receiving inventory to managing returned items, here is a step-by-step guide to the order fulfillment process.
1. Receiving
Receiving your inventory is the first step in the order fulfillment process. In this step, your warehouse operator identifies your inventory, typically with a barcode reader.
Next, your warehouse operator will document the inventory with the help of a warehouse management system, before storing each item in its proper location.
At Modula, our warehouse inventory management systems interface with almost all Enterprise Resource Planning (ERP) and Dealer Management Systems (DMS) systems to ensure the receiving process is quick and accurate.
2. Storing
Next, it’s time to store your inventory, by transporting it to its allotted storage area with the use of a forklift or conveyor.
Frequently picked items must be stored in adequate volumes and positioned for quick access, using automated storage or flow racks. Items that are picked less frequently can be stored in pallet racks or on standard shelving systems.
However, one of the biggest drawbacks to conventional shelving and racks is the inefficient use of horizontal space. These systems take up a larger footprint of your warehouse and require your pickers to travel to store and pick products, resulting in wasted time and reduced productivity.
One solution to optimize warehouse storage? Vertical Lift Modules (VLMs).
With Modula VLMs, you can store and receive goods automatically with the scan of a barcode or a simple touch on the user-friendly Copilot controller.
3. Order Processing
After an order is placed, your warehouse operator reviews the order for accuracy, then confirms whether the product is in stock.
This stage also involves updating inventory levels, processing payments and generating shipping labels or packing slips.
To help streamline the order processing stage, you can utilize a warehouse management system to maintain real-time visibility over your inventory.
4. Picking
After receiving orders, it’s time to pick goods.
While picking may seem like a simple task of retrieving an item from its designated area, this is where inaccuracy can lead to returns, disgruntled customers and lost revenue.
Automated warehouse picking solutions help you boost picking accuracy, which in turn increases warehouse efficiency.
From the straightforward validation via barcode to a wide range of picking aids such as the laser pointer and LED bar, these picking systems increase picking accuracy by up to 99%.
5. Sorting
The next step is to group and sort goods into their designated orders.
For individual orders, your warehouse operator can pick and pack the product, where picked items go directly into their individual shipping packages.
For multi-item orders, products can be picked and placed into a designated tote as the order is being completed. The items are kept together until the next phase of packing and dispatch.
6. Packing
Once your warehouse operator has sorted the goods, it’s time to pack your customer’s orders.
This is where fragile orders are protected with banding or bubble wrap, and delivery instructions, package specifications (such as product dimensions) and return labels are included with the order.6.
7. Shipping
Packages are first consolidated in the shipping area by being transported with a conveyor, trolley, forklift or robot.
Then, packages are sorted by carrier type and destination, allocating each shipment to either a courier service, USPS, or a freight forwarder.
Once an order ships, it is important to send out tracking updates regarding the shipping status and delivery dates.
8. Returns Processing
According to the National Retail Federation, returned items accounted for estimated $428 billion in merchandise in 2020.
When you experience a return, items will need to be inspected, then you’ll determine whether they should be stored in the inventory or sent to a store’s clearance section instead.
6 Best Practices for Order Fulfillment
Now that you know how the order fulfillment process works, here are some of the best practices you should use to streamline the process.
1. Automate Processes
Whether it’s picking the wrong item or misreading a packing slip, manual tasks are prone to human error, which can disrupt your order fulfillment process.
The solution? Automating processes within your warehouse.
To automate your order fulfillment process:
- Utilize automated order picking solutions to prevent mispicks
- Utilize automated storage solutions to organize inventory and streamline picking
2. Decrease Travel Time
Your warehouse operator’s travel time is paramount to the order fulfillment process. The more time they spend traveling throughout the warehouse, the less efficient the process becomes.
To reduce travel time:
- Store fast-moving items near shipping areas
- Utilize batch picking for slow-moving items
- Utilize picking aids such as pick-to-light or voice-assisted picking systems
- Automate material handling with conveyor belts and automated storage and retrieval systems (AS/RS)
3. Optimize Inventory Management
Accurately managing your inventory can help you reduce stockouts, manage costs and meet customer demands.
To better manage your inventory:
- Keep track of fast-moving items and replenish them when inventory is low
- Conduct regular inventory counts to ensure accuracy
- Utilize a warehouse management system to track stock levels, and manage and monitor the location and movement of inventory within your warehouse
- Track employee activity and restrict access to high value inventory
4. Keep Your Warehouse Organized
Organization is key to an efficient order fulfillment process.
To organize your warehouse:
- Store warehouse inventory according to demand, with hot-ticket items at the front and least popular items at the back
- Utilize labels and signs
- Group inventory using totes, bins and dividers
- Install an automated storage system to maximize floor space while keeping your inventory safe and secure
5. Optimize Your Returns Management Process
Identify methods to recycle inventory and improve customer satisfaction with a streamlined returns management process.
To optimize your returns management process:
- Designate a specific area for return items
- Establish a quality control team to receive, inspect and test return items
- Keep track of all returns, exchanges and refunds on your point of sale (POS) system
- Craft a return policy and state that all returns must be made within a specific timeframe
- Analyze return data to track and assess customer behavior
6. Offer Transparent Shipping Times
A recent survey found that 45% of online shoppers purchase from businesses that display anticipated delivery times from the get go.
Whether you’re facing seasonal demands or supply issues, giving your customers a head’s up about their package is paramount to meeting their expectations.
To maintain transparency regarding shipping and delivery:
- Provide an estimated time window for shipping at checkout
- Send an order tracking link to your customer as soon as its available
- If there’s a delay, send the customer an email as soon as possible, apologize for the delay, and provide an updated delivery window
Key Challenges of Order Fulfillment + Solutions
From demand planning to labor shortages, here are the top challenges of order fulfillment to prepare for, along with actionable solutions.
1. Demand Planning
From increased demand of turkeys and frozen pumpkin pies during Thanksgiving to beach balls and pool inflatables in the summer, predicting fluctuations in demand ahead of time can be a challenge.
To manage demand:
- Determine peak seasons by leveraging historical data
- Identify which items will be affected by seasonal demand
- Plan and order inventory before peak seasons occur
- Identify fast-moving goods and store them near the shipping area for easy access
2. Supply Chain Disruptions
As supply chain disruptions can be unpredictable, planning for them can be a challenge. But adjusting your strategy now can help lessen the impact of a disruption in the future.
To navigate supply chain disruptions:
- Localize your inventory
- Identify backup suppliers
- Create buffer storage
- Perform a supply chain vulnerability audit
3. Labor Shortages
The COVID-19 pandemic introduced a wide range of obstacles for order fulfillment, with labor shortage being the largest challenge.
To face labor shortages:
- Utilize automation to streamline time-consuming warehouse processes, such as storing and picking
- Optimize your workflows. For example, instead of traveling throughout your warehouse to pick goods, implement pick to light systems to speed up the process
How to Streamline Order Fulfillment with Modula Automated Solutions
At Modula, our automated solutions ensure a fast and accurate order fulfillment process. Regardless of the size of your operation, our solutions improve efficiency, picking accuracy and warehouse safety.
Our automated solutions include:
1. Modula Vertical Lift Modules
Modula’s vertical lift modules (VLMs) are fully automated vertical storage systems that take up a minimum footprint in your warehouse by taking advantage of high ceilings.
See the Modula VLM in action:
Modula Lift: the vertical storage system
Items can be stored up to 53 feet high in a safe and secure unit that automatically delivers them to an operator, with a touch of the user-friendly Copilot controller or the scan of a barcode.
This guarantees that the right part is delivered to the right person at the optimum ergonomic retrieval height.
Need to boost picking accuracy? Our VLMs integrate seamlessly with our picking solutions.
2. Modula Horizontal Carousel
If your warehouse has a low ceiling, we’ve also got you covered.
With our Modula Horizontal Carousel, we provide you with a new level of performance, reliability and safety for high-speed picking operations where ceiling height is limited.
Just like our VLMs, the horizontal carousel can be used in combination with our picking solutions to achieve even higher picking performance.
3. Modula Order Picking Solutions
Easy to set up and intuitive to operate, our picking solutions are ideal for enhancing batch and multi-order processing.
See Modula’s picking solutions in action:
Modula presents the new picking solutions to automate and speed up warehouse operations
Our Modula Put to Light System is the perfect complement for our Put Cart and Put Station products.
Our smart system speeds up your throughput thanks to picking multiple orders simultaneously and helps you operate in batch or multi-order modes.
From minimizing picking errors and boosting labor efficiency to improving your inventory accuracy, you’ll never go back to using shipping lists or picking tickets.
4. Modula Warehouse Management Systems
Take your order fulfillment to the next level with our warehouse management solutions to boost productivity, accuracy and efficiency.
Our Warehouse Management Solutions allow you to gain control and visibility over your inventory, manage and monitor individual items, and keep track of orders, including order processing, shipping and delivery.
Key Takeaways on Order Fulfillment Processing
From minimizing picking errors and boosting labor efficiency to improving inventory accuracy, automated solutions play a key role in a streamlined order fulfillment process.
At Modula, our solutions allow you to meet and exceed your customer’s expectations, increase their satisfaction and run an efficient operation, from start to finish.
