Today we’re talking about fulfillment strategy. This is a supply chain article. But there are several angles to the idea of fulfillment that are worth exploring. What do I mean by that? Well, for starters, order fulfillment is another way of saying e-commerce.
What exactly is order fulfillment? It’s the process of receiving goods, storing goods, processing your order, packaging those goods, and then shipping your order. In other words, it’s what happens between you pushing the buy button and a delivery driver pushing your doorbell with a box in hand.
The fulfillment-backed e-commerce economy was already trending up before the pandemic. But during the pandemic, when everyone was expecting depressed numbers, e-commerce spending allowed the retail industry to exceed its forecast.
And it isn’t slowing down, either. Some predict that consumers will cross the $1 trillion mark on annual e-commerce spending soon.
Fulfillment strategy keeps the whole party going! So here’s a hot take: Fulfillment is the zeitgeist. That’s right, the spirit of our times is fulfillment. But note I didn’t say the zeitgeist is e-commerce.
I think fulfillment is the richer word because it encapsulates both sides of the e-commerce coin. Fulfillment covers both the itch and scratch of e-commerce.
Let’s not forget: Before we thought of fulfillment as a supply chain process honed to a fine point by Amazon and others, it was a feeling. At the end of the day, we all yearn for this feeling of fulfillment. It’s possible to find it (or lack it) in many areas of our lives. But everyone knows it. There’s even an entire book on the multiple meanings of this word.
Fulfillment is also the warm sensory glow of contentment. In fact, humans find fulfillment such a wonderful feeling that it’s a strong motivational force for much, if not all, action. Indeed, fulfillment is basically a conversation starter for a discussion about Maslow’s hierarchy of needs.
At a basic level, when a need is met, that’s fulfillment. Thus you could say fulfillment is a big part of the game of life. Like any game worth playing, successful fulfillment in life often proves elusive. And that’s not just because humans are frustratingly complex.
Life itself presents us with a seemingly endless series of challenges. But soon after we achieve our goal and get what we want, our dopamine systems flare back up. And we’re off seeking the next challenge. It seems that once we’ve tasted fulfillment, we thirst for more.
Thus, we hairless apes travel to great lengths, endure many trials, and pay great costs—just to sip the soothing waters of fulfillment once more.
We’ll look anywhere for fulfillment. We’ll also buy just about anything in the hope that it brings us some level of fulfillment or satisfaction. Put another way, our inner fulfillment strategy sometimes crosses paths with e-commerce order fulfillment.
If we’re lucky, we’re talking about fulfillment fulfilling fulfillment!
So now we know the stakes at play. Let’s look at that other kind of fulfillment.
Entire swaths of the global economy are dedicated to this type of fulfillment. Massive fulfillment centers have been erected for this one purpose. They are staffed by people (and robots) whose professional purpose is the continuous improvement of the fulfillment process.
Whether you’re Amazon or slightly smaller, the basic order fulfillment process includes:
How we approach each step in the fulfillment process defines our fulfillment strategy. Let’s perform a quick review of these steps.
Before you can process any orders, you need products and goods. That means a fulfillment strategy must align customers with fulfillment centers. Obviously, many businesses have their own warehouses and ship their own goods.
On the other hand, fulfillment centers don’t typically ship their own product. Instead, a fulfillment center aligns as a third-party logistics provider (3PL) for a company that wishes to outsource the fulfillment strategy and process.
There are many reasons a business will opt to go the 3PL, fulfillment center route. Region and location in relation to your business and your customers are both significant considerations.
Another factor is cost to store finished goods. At a 3PL, overhead costs are shared with other businesses. That mitigates risk. And right now labor is scarce, so there’s a pooling-of-resources effect as well.
Beyond that, every step in the order fulfillment process requires personnel and a certain amount of infrastructure. For example, what if you don’t want to invest in robots? In that case, consider outsourcing your fulfillment to someone who already has robots!
If you determine outsourcing is the right move, here are a few key performance indicators (KPIs) to help you compare facilities:
Once the contracts are signed, a business will begin shipping its products to the third-party fulfillment center. If care isn’t taken at this first step, there may be poor inventory control and cost-bearing inefficiencies.
Fulfillment centers tend to be enormous facilities. If there isn’t close control of stock, things can get out hand quickly. To keep things running smoothly, fulfillment centers use some of the most cutting-edge technology in the logistics industry.
We already noted the use of robots. Beyond that, most fulfillment strategies include a high level of digitization.
Goods that are barcoded when they arrive at the facility are scanned. This scan and a series of scans throughout the facility is how the location of goods can be tracked throughout the process.
In other words, there’s the first step to working with a fulfillment center: Ditch the office paperwork and adopt a digitized supply chain infrastructure.
As I mentioned previously, goods storage is key to any fulfillment strategy. Whether a product is big or small, there’s a strategy for storing that item.
Each strategy, again, will involve either a barcode or RFID of some kind. This tracking helps people locate goods during order processing.
Storage strategies typically involve identifying the high-runner products and locating them closest to the shipping bays.
When it comes to order processing, the logic is simply a factor of time and mileage. Ideally, each order processing trip should cover the shortest distance possible.
It’s likely that fulfillment centers could identify a Pareto distribution. That would be mean roughly 20% of orders would account for 80% of shipments. A close eye on shipping metrics like this will help decision makers adjust the physical layout and staffing needs of a facility as needed.
Bear in mind also that seasonality may play a role in ideal storage and order processing decisions. In other words, a certain rotation of product location and staffing decisions may help maintain peak efficiency. Machine learning tools backed by digitized data and AI could help the strategic process development at fulfillment centers. In short, you could save mileage and save costs.
Boxes arrive on my doorstep daily, and I think it’s dulling me to the excitement of Christmas morning. That said, the packaging process in fulfillment centers is all about right-sizing and using the correct packaging materials.
The concept is simple. The entire logistics industry hates shipping air. Also, some types of packaging are more cost effective.
I think most fulfillment centers train their folks in the art of packaging. It’s been a while since I’ve received a huge box with one Matchbox car in it.
But seasonality can affect packaging as well. To avoid inefficient packaging, facilities need to understand exactly how many boxes, in each size, they need at any given time. When does the holiday push start, and how much safety stock do you think you’ll need? If recent e-commerce trends are an indicator, add at least 10% to your usual projections.
The magic really begins once the trucks start moving. Successful shipments result in fulfilled customers. Happy customers leave good reviews. That leads to repeat business and increased revenue.
How does a single box get from the fulfillment center to your doorstep? The process can include a number of trucks or modalities. Many fulfillment centers send digital notifications of a package’s progress, including last-mile tracking.
Depending on the product and route, it’s possible that the package came through alternative shipping methods, such as intermodal, refrigerated containers, and last-mile 3PL services. Whatever it takes, right? A fulfilled order means a happy (and hopefully repeat) customer.
While writing this post, I couldn’t help but note the irony of the fulfillment zeitgeist. Indeed, I’ve bought plenty of worthless junk. But sometimes, a package arrives, and it contains the most meaningful thing I’ve ever owned. For example, it’s amazing that a book like Viktor Frankl’s Man’s Search For Meaning arrived in an Amazon package.
Fulfillment helps fulfill our quests for fulfillment.
With that, I’ll leave you with a favorite quotation of mine from Frankl:
“Between stimulus and response there is a space. In that space is our power to choose our response. In our response lies our growth and our freedom.”
This post was written by Brian Deines. Brian believes that every day is a referendum on a brand’s relevance, and he’s excited to bring that kind of thinking to the world of modern manufacturing and logistics. He deploys a full-stack of business development, sales, and marketing tools built through years of work in the logistics, packaging, and tier-1 part supply industries serving a customer base comprised of Fortune 1000 OEMs.
Digital workflows across the supply chain.
