"Failing to plan is planning to fail."
The saying has never been truer in the order fulfillment world. Fluctuating market demands, complex supply chain dynamics, and increasingly sophisticated customer standards have forced companies to give their fulfillment planning models a makeover. Otherwise, they risk failing to fill orders in a timely manner and falling behind their more resilient and agile competitors. An insightful fulfillment planning strategy accounts for variables within the supply network and sets up a framework for overcoming challenges, improving business growth and scalability even with difficult shipping conditions.
In this comprehensive guide to fulfillment planning, we'll survey the different fulfillment planning approaches, as well as the steps involved with creating an end-to-end fulfillment plan. Plus, we'll show you how working with a third-party fulfillment provider like Quickbox can help.
What Is Fulfillment Planning?
Fulfillment planning is the creation of a comprehensive framework that encompasses each phase of your order fulfillment process. It accounts for everything from ordering new stock and optimal inventory arrangement to handling returns to integrating technology into your stack — and every workflow in between.
Companies with a thoughtful fulfillment plan can better anticipate fluctuations in market demands and adapt to disruptions in their supply chain, while those without one may fall behind. Some of the key benefits of strategic fulfillment planning are:
- Cost efficiency. From reducing stockouts and overstocks to allocating inventory to fulfillment centers nearest the consumer, fulfillment planning optimizes your operations at every level. The result is greater efficiency and reduced costs.
- Improved customer satisfaction. In 2023, 96% of consumers considered delivery speed to be an essential part of their purchase decisions. Fulfillment planning helps you find ways to get your product to your customers as quickly as possible so that they'll be satisfied with their shopping experience.
- Operational scalability. Some fulfillment planning models are well-suited for SMBs, but they can weigh down your processes as your business expands. Fulfillment planning seeks to find a model that grows alongside you.
Reduced costs, faster shipping, happier customers, greater scalability — fulfillment planning is the foundation for it all.
Components of Fulfillment Planning
A fulfillment planning strategy should span each phase of your order fulfillment process. That includes:
- Inventory Management: Including real-time tracking and stock optimization, inventory management addresses the proper ordering, storage, usage, and selling of all your inventory, raw materials, and goods.
- Order Processing: By leveraging technology, order processing elevates fulfillment accuracy and reduces delays, both of which improve customer satisfaction.
- Shipping Logistics: Fulfillment planning considers which logistic strategies will help merchants best balance delivery speed and cost. It evaluates prospective fulfillment center locations to see which ones are closest to consumers, finds couriers that can transport packages quickly and affordably, and identifies potential bottlenecks within your supply chain, boosting your resiliency and agility in the process.
- Returns Management: Even when products are delivered on time and correctly, some customers may still need to return them. Returns management creates efficient processes for sending out products, which builds your customers' trust in your brand.
- Technology Integration: Whether it's optimizing your warehouse layout, streamlining return processes, or selecting alternative suppliers, technology empowers every fulfillment planning component. Warehouse management systems (WMS) and fulfillment management systems (FMS) let companies automate their processes and leverage analytics to yield powerful data insights, improving their demand forecasting and business intelligence capabilities.
Some fulfillment planning models concern themselves only with warehousing workflows such as ordering, picking, packing, and kitting, but your model should go beyond that. Also consider large-scale logistics operations such as procurement, shipping, and last-mile delivery methods, so that you can adapt when the shipping conditions change unexpectedly.
5 Steps To Creating a Fulfillment Plan
With so many different components, it's essential to take a systematic approach to creating your order fulfillment plan. The exact details of your process may vary according to your application, size, and resources, but a general order fulfillment approach is:
- Identify your current business needs and challenges. Merchants whose products require a great deal of customization may prefer more control over their order fulfillment processes. Others may feel so bogged down by packing and shipping their products that they can't focus on product development and may prefer third-party logistics solutions.
- Forecast demand and prepare for seasonal fluctuations. Does demand for your products vary significantly during peak season, or does it remain consistent throughout the year? If you have difficulty forecasting demand or anticipating fluctuations due to seasonality, working with an outsourced fulfillment provider could help.
- Choose the right fulfillment model. The three fulfillment planning models are in-house, outsourced (3PL), or drop shipping. More on each later, but understand what all three entail, so that you can pick the one that fits your operations.
- Set benchmarks for key performance indicators (KPIs). KPIs provide quantifiable evidence of how well your order fulfillment processes are working. Two key KPIs are order accuracy and shipping times, but also monitor inventory turnover, customer backorder rate, and inventory dwell time.
- Leverage technology. WMS and FMS solutions help you automate your fulfillment workflows and analyze important product data so that you can make data-driven shipping decisions. Other technology such as autonomous vehicles and robotics can perform shipping tasks with greater speed and accuracy than human workers, so implement warehousing innovations to elevate your fulfillment efficiency.
Another key step in forming your order fulfillment strategy is to monitor and refine it continuously. Fulfillment planning is an iterative process, and your shipping needs will change as you scale. Use inventory and order management solutions that give you visibility into your fulfillment processes, and refine them as you identify opportunities for growth.
Types of Fulfillment Models
A core part of building your order fulfillment strategy is understanding what fulfillment models are available. Each type of fulfillment model requires different levels of involvement from you — and there are advantages and drawbacks to each.
Direct
Also known as in-house fulfillment planning, direct models require the merchant to handle all of their fulfillment workflows themselves. That includes ordering stock, storage, picking, packing, kitting, shipping, and returns management, in addition to analytics.
Direct fulfillment planning is generally well-suited for two groups of merchants: large enterprises that possess the warehousing space and logistics network to handle their own fulfillment processes themselves, or small-scale merchants with small enough product demand that they can handle their workflows in-house.
The advantage of direct fulfillment is that it provides complete control over your processes and greater brand customization, as well as greater interaction with your consumers. The downside is that it's resource-intensive. Direct order fulfillment requires you to handle all your own inventory and order management workflows, taking your time away from more value-adding tasks like sales and product development.
Third-Party Logistics (3PL)
As your business scales, you may want to offload your workflows to a 3PL fulfillment provider. Under a 3PL model, you outsource all your order fulfillment processes to these logistics and warehousing specialists, freeing you up to focus on building your brand.
The 3PL model is ideal for companies whose fulfillment processes are becoming too complex to handle alone. 3PL partners offer end-to-end fulfillment services, including:
- Ordering stock
- Processing orders
- Picking
- Packing
- Kitting
- Shipping
- Return management
The main advantages of 3PL order fulfillment are its scalability and operational efficiency. 3PL providers have the expertise needed to optimize your order fulfillment workflows and also possess leading-edge warehousing technology such as autonomous vehicles and robotics. They use their resources and know-how to strengthen your supply network, letting you focus on sales and innovation. The disadvantage is that you'll have less control over your order fulfillment operations, but the trade-off is worthwhile for merchants whose growth is hindered by ever-evolving supply chain demands.
Dropshipping
Rather than store inventory or process orders onsite, some merchants use a dropshipping method. The process of passing orders directly onto a supplier instead of filling the order themselves provides a convenient way for start-up merchants to test the waters.
The main advantage of dropshipping is that it doesn't require you to keep any inventory on hand. It's often a viable option for merchants who are testing the market with a new product, but it relies completely on your fulfillment provider and yields minimal customer interaction.
Overcoming Fulfillment Challenges
Creating a thorough fulfillment planning strategy is essential for overcoming supply chain hurdles and maintaining customer satisfaction. Some obstacles that your fulfillment plan should address are:
- Demand fluctuations. Product demands surge during peak seasons. Your fulfillment plan should anticipate fluctuations by analyzing historical data so that you'll have enough inventory on hand at all times.
- Rising shipping costs. Over 44% of consumers have abandoned their shopping carts due to excess additional costs. One of those costs is shipping, so keeping delivery prices low is essential for fulfilling an order.
- Carrier and location selection. Choosing the right carrier is critical for keeping your delivery time to a minimum. The location of your fulfillment centers also impacts your delivery speed, so it's important to station your fulfillment centers strategically across the country — or to leverage a 3PL provider that already has.
Clear communication is also key for proper order fulfillment. Over 90% of customers want the ability to track their orders, especially during returns or delays. Keeping your customers updated with alerts and tracking numbers — which 3PL partners provide — can improve their satisfaction and mitigate any annoyance over an error.
Best Practices for Fulfillment Planning
Many of these challenges can be overcome by implementing fulfillment best practices, such as:
- Establishing strong partnerships with carriers and 3PL providers, to keep shipping costs low
- Using predictive analytics for demand forecasting and inventory management, to minimize stockouts and overstocks
- Prioritizing transparency with customers through proactive updates
Adopting sustainable packaging practices is another best practice that enables merchants to reduce costs by cutting out wasteful packing material. Sustainability is also a proven way to attract eco-conscious customers. In fact, 66% of consumers now say that they consider it when purchasing from a brand.
Tools and Technology for Fulfillment
Of all the order fulfillment best practices, implementing the right technology may be the most important. The order fulfillment industry is constantly developing new tools to improve its processes. Some of the most important innovations are:
- WMS and ERP systems that automate workflows, increase efficiency, and optimize warehousing processes
- Real-time inventory tracking solutions to stabilize inventory levels — even during peak season
- Carrier comparison platforms to optimize shipping costs and compare delivery speeds
3PL fulfillment providers already possess the technology that can elevate your shipping processes, so working with one is often cheaper than purchasing your own shipping technology. If you want to take advantage of the latest fulfillment tech, a 3PL is the right way to go.
When and Why You Should Outsource Fulfillment
Fulfillment needs change over time, so it's important to understand when you should pivot to a new plan. Some signs that you may want to consider outsourcing your fulfillment to a 3PL partner are:
- You're having difficulty keeping up with current fulfillment demands
- You notice that your lead times or delivery speeds are too long
- You need to use fulfillment centers that are more strategically located to your consumers
In general, growing businesses that are bogged down by handling their shipping processes themselves may be able to improve their processes by shedding the weight of their order fulfillment workflows. If that sounds familiar, consider 3PL fulfillment services.
Fulfillment Planning With QuickBox: A Stronger Supply Network Today
The right fulfillment planning model can be the difference between a business's failure and its success. Align your fulfillment planning strategy with your company's location, resources, and scope, and you can weather the storm of ever-changing consumer demands and supply chain dynamics.
QuickBox is a 3PL that partners with companies of all sizes to help them optimize their order fulfillment methods. We assist you with all of your ordering, storing, picking, packing, and shipping processes, making us an integral part of each link in your fulfillment planning chain. Our industry-leading team of supply chain and logistics experts has over 100 years of combined experience in helping businesses analyze their fulfillment processes, and with a dedicated account manager assuring personalized support for your team, you'll receive a custom experience that's as unique as the products you ship.
Whether you'd like to evaluate your current order fulfillment strategy or take advantage of a 3PL partner's professional services, contact us to explore scalable solutions tailored to your needs.