How To Optimize Order Fulfillment
Order management is a complex process made extra challenging by the fact that retailers are dealing with more sales channels and more fulfillment locations. Recently, a study conducted by Peerless Research Group listed the pain points firms operating within the retail industry today face – the complexity of order management systems, the ongoing challenges of keeping modern customers satisfied and the rising costs of operations.
According to the report, the average retailer maintains four different types of sales channels, but lacks the ability to actually utilize inventory effectively to fulfill orders across all of these different sales channels. Leveraging inventory more effectively can not only help merchants turn orders around faster, it also allows them to make better use of their most critical asset: their inventory.
Using an eCommerce management solution to help automate order routing can play a pivotal role in enabling retailers to optimize order fulfillment and the movement of their stock. A configurable rules-based order flow that puts orders in motion automatically enables merchants to ship inventory from the most ideal location and into the hands of customers.
Here are a few tips for crafting order routing rules:
1. Create a chain of command for orders
The ideal order flow needs to form an effective chain of command that will use rules-based logic to automatically route the order to the most optimal fulfillment location. The goal is to streamline efficiency by eliminating manual steps and verifications to determine where an order should be fulfilled. Before setting up a chain of command, determine what goals you have set for your business. Is it to fulfill orders as fast as possible? Or, as cheap as possible? Or, to cater to each customer’s needs and wants? Once you have determined what it is you want to achieve, it is easier to craft your order routing rules. Here at SalesWarp, we have a thorough Design Analysis phase at the outset of each client engagement to help our clients identify all the different scenarios relating to order fulfillment so that implementation meets all of their intended goals.
When it comes to order fulfillment, the Peerless Research Group noted that nearly half of respondents think delivery delays of out-of-stock items are a huge cost. When an order is received for out-of-stock inventory and a retailer has to first send a purchase order to a supplier and the supplier has to send the inventory to the retailer’s warehouse, the lead time from customer order to customer delivery significantly increases. This can increase shipping expenses if a retailer chooses to expedite shipping to the customer to make up the time differential. With well-optimized order routing rules, retailers can significantly cut back on these delays, as their eCommerce software can quickly streamline communication with the supplier and the customer. This is true for both out-of-stock items and for retailers managing a just-in-time inventory system.
2. Consider all the variables
There are numerous variables that affect order routing, so it’s crucial that merchants identify all the different scenarios of order fulfillment to set the proper order routing rules. Depending on the scenario, a rule will be applied and the order will move through the chain of command. Here are a few conditions retailers must take note of:
Inventory location – internal warehouse item, drop ship item, in-store item, third party fulfillment warehouse item
- A retailer will want to determine which location to check first, second, third, etc.
Type of order – domestic and international orders
- You will also want to determine which location will fulfill orders with specific attributes, such as a domestic shipping location. The attribute of the order should launch a different order flow.
Shipping costs – customer pays shipping or retailer pays shipping
- If retailers are charging customers for shipping, this may affect order fulfillment. An order with next-day delivery needs to be handled differently than a ground shipping order or else merchants may not deliver on customer expectations.
Shipping location – ship from fulfillment location, ship-from-store, pick-up in-store and other such offerings.
- Retailers may be looking to ship items to customers at the lowest cost to themselves or offer multiple delivery options to customers. This will require a different order routing rule for each shipping location.
3. Keep the customer in mind
The ultimate goal of automating an order flow is improving customer satisfaction while minimizing retailer costs. However, sometimes there are tradeoffs. Merchants should keep this in mind as they develop their order routing rules set. For example, a retailer may want to fulfill orders as soon as they are received to get them into the hands of customers as fast as possible. In this case, a customer who orders 5 items may receive one shipment of 4 items and a second shipment of 1 item because that item was out-of-stock. The customer will receive what is in stock immediately and receive a second shipment a few days later, but the retailer will take on multiple shipping costs to execute this chain of command.
Order fulfillment can encompass a lot of steps, checks, and resources to manage properly. But with an eCommerce solution that molds an order flow to your business, retailers can streamline this process to reduce costs and resources while increasing delivery rates for their customers.