In a world where consumers are accustomed to instant gratification, the buying process must be streamlined and straightforward. Order fulfillment allows businesses to consolidate inventory management and delivery with an eye towards speed and efficiency. Order fulfillment involves everything related to inventory storage, processing, packaging, and shipping, and can be handled in house or handed over to third-party logistics providers.
For e-commerce business owners, deciding how to handle the critical component of order fulfillment can seem overwhelming. The right bookkeeping firm can help business owners make better decisions about their order fulfillment strategies and shine a light on the misallocation of resources. The result is less waste, faster uptime, and financial data to inform and justify future business decisions.
Order fulfillment involves four steps:
- Inventory Storage
- Order Processing
Receiving consists of acquiring the products you will sell so that you can fulfill customer orders. Those products are then stored, either locally in a warehouse or at a third-party fulfillment center. When a product order is received, that order is processed, including retrieval of the item from storage and preparation for shipping. Finally, after processing is complete, the order is packaged and shipped. Order fulfillment also includes returns processing, which consists of the customer’s initial return, as well as evaluation of the product and possible storage and resell.
From receiving to shipping, each step of the process represents a business decision that involves a financial outlay and impacts the bottom line. For example, where you create your product can affect its cost, including raw materials, wages, and more. Storing your product can include expenses for facilities rental or fees to a third-party fulfillment center. Order processing is linked with storage, and so costs can rise or fall depending on where the processing is occurring if any special handling or packaging is needed. Finally, shipping (both for initial purchases and returns) can vary greatly depending on the shipping company you use and the locations where your products are delivered.
Should you use a third-party fulfillment service?
When deciding whether to use a third-party fulfillment service, you must first decide upon your ultimate business goals. For example, do you have the resources to invest a large sum upfront on inventory? Do you want to manage workflows, or are you comfortable delegating duties to a third-party service provider? Finally, how much oversight do you want over the quality and handling of your product?
With a third-party fulfillment service, you can purchase products in bulk, which can reduce creation costs and increase profit margins. You can offset costs associated with storage and avoid paying rent on a warehouse but having your items stored offsite. Finally, because of the volume of business third-party fulfillment providers handle, shipping costs can be significantly reduced because of more beneficial shipping contracts with FedEx and UPS. In addition to the charges, both upfront with inventory purchases and with ongoing fees, the most significant disadvantage to using third-party fulfillment services is quality control. When you outsource your product handling, you lose control over the quality of the product itself and the level of customer service. If your third-party fulfillment provider doesn’t deliver satisfactory products or services, you risk alienating customers and negatively impacting your business growth potential and bottom line.
The advantages of using third-party fulfillment revolve around ease and speed. Keep in mind that third-party fulfillment can be expensive, but that the cost may be justified if it frees you up to focus on growing your business. Because of the complexities involved, a decision about using a third-party fulfillment service should only be made after you have a clear understanding of your business’s finances.
Should you personalize your packaging?
Without a storefront, you cannot interact face-to-face with your customers, and so your products are your ambassador. As such, it makes sense to see packaging as an extension of your brand and as a way to elevate your customer service experience. The trick is to find the balance between what you can afford and what will strengthen your bond with your customer and ultimately lead to more purchases and profit growth.
Personalized packaging makes your customers feel special and appreciated. It can be as simple as including a “Thank You” note with your product or using packaging materials that reflect your brand identity like biodegradable tissue paper or luxury wrapping. The goal is to add a human touch to the buying process so that your customers feel a stronger connection to your company and brand.
Of course, packaging enhancements will also increase costs. When deciding whether or not to personalize your packaging, it’s helpful to ask the following questions:
- How much packaging can I afford?”
- What is the marketing value of personalized packaging?
- At what point will the cost begin to affect profitability?
If you don’t know the answers off the top of your head, an experienced bookkeeping team can help by providing you with clear financial information that you can use to make these simple decisions that can make a big difference in your bottom line. We understand the cloud and e-commerce because here at AIS Solutions we are a 100% remote cloud-bookkeeping firm specializing in e-commerce that can deliver real-time financial information wherever you need it and whenever you need it. Decisions that require you to pay for services or even supplies, especially order fulfillment decisions that are so central to your success, are often impossible to make without accurate information. Our bookkeeping team can help you make these decisions by helping you understand what you can afford.
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