To fulfill an order is to complete it, so the customer gets what they paid for. An order is fulfilled when every item in it has shipped or been handed over; an order that ships in parts is partially fulfilled until the last part leaves. The work happens in a warehouse, a fulfillment center or a store, and it is done by the seller itself, by a third-party logistics provider (3PL) or by a supplier that ships direct to the customer.
The Order Fulfillment Process, Step by Step
The figure above counts seven steps. The first two happen before any order arrives, and the last one continues after delivery. Steps 4 to 6 are the core every shipped order goes through. Our guide to the pick, pack and ship process covers them in more detail. Four notes on those steps:
- Storage. Each unit's location is recorded, usually in a warehouse management system (WMS), so the stock on hand is known before anything sells.
- Order intake. Orders come in from the online store, a marketplace or a sales rep, often through an order management system (OMS).
- Picking methods. Picking one order at a time is discrete picking, collecting the items for many orders in one trip is batch picking, and releasing groups of orders on a schedule is wave picking.
- Last mile and returns. The final leg is last-mile delivery, and returns come back through reverse logistics.
Order Fulfillment vs. Order Management vs. Ecommerce Fulfillment
- Order management is the system side: capturing orders from every sales channel, deciding which location fills each one, and tracking its status. Order management decides what should happen; order fulfillment is the physical work of picking, packing and shipping that makes it happen.
- Ecommerce fulfillment is order fulfillment for online orders, most often single orders shipped by parcel to consumers. Our guide to ecommerce fulfillment covers it in depth.
- B2B order fulfillment ships to retailers, distributors and other businesses, often in full cases or on pallets, and follows the buyer's rules for labels, paperwork and delivery appointments.
Who Fulfills the Orders: Common Models
- In-house. The seller runs its own warehouse or ships from its own premises, also called self-fulfillment. It keeps full control and carries the cost of the space, staff and systems.
- Third-party logistics (3PL). The seller sends inventory to a 3PL's warehouse, and the 3PL receives, stores, picks, packs and ships the orders and is paid for the storage and the orders it handles. Our guide What Is a 3PL? explains how the arrangement works.
- Dropshipping. The seller takes the order, and a supplier ships it from the supplier's own stock, so the seller never holds the goods.
- Marketplace fulfillment. The marketplace stores the seller's stock in its own fulfillment centers and fulfills the orders, as Amazon does with Fulfillment by Amazon (FBA).
- Store fulfillment. A retailer fills online orders from store stock, either shipping them from the store or holding them for the customer to pick up.
- Hybrid. A seller can mix models, for example fulfilling orders from its own warehouse in one region and through a 3PL in another.
How to Choose a Fulfillment Model
Many sellers start in-house, where they see every order and pay no 3PL fees. The usual reasons to move are running out of space, spending more time packing than selling, and customers far from the warehouse waiting too long for ground delivery. Compare cost per order on the same basis before you switch: in-house, count labor, packaging, space and shipping; from a 3PL, ask for a quote on your real order profile. Our guide to 3PL pricing covers how those fees work.
How Order Fulfillment Is Measured
- Order accuracy. The share of orders shipped with the right items, in the right quantities, to the right address. A mispick loses it, unless the error is caught before the order ships.
- Order cycle time. The time from when the order is placed to when it ships, or to when it is delivered. Say which one you mean before comparing numbers.
- On-time shipment. The share of orders that leave by the ship date promised to the customer or set in the warehouse contract.
- Cost per order. Labor, packaging, storage and shipping divided by the orders shipped.
- Inventory accuracy. How closely the counts in the system match what is on the shelves.
In the US, shipping times also have a legal side. The Federal Trade Commission's Mail, Internet, or Telephone Order Merchandise Rule requires a seller to have a reasonable basis to expect it can ship within the time it states, or within 30 days of receiving a properly completed order if it states no time (50 days when the buyer applies to the seller for credit at the time of ordering). A seller that cannot ship in time must offer the buyer the choice to accept the delay or cancel the order for a prompt refund.