Fulfillment Models

When it comes to e-commerce order fulfillment, every merchant has to make a decision: to outsource the process to an external provider, or to manage the whole process internally?

As order volumes grow, it will become increasingly important to revisit your current fulfillment strategy to determine whether it still meets your operational needs as they grow. That’s a question you shouldn’t be asking only once. In the current state of e-commerce fulfillment, one model might be cost-effective and efficient, but in the next year, this might not be the case.

Fulfillment models can make or break a business. Whether it’s dropshipping, in-house order fulfillment, or third-party fulfillment, there are many different options to choose from. But what are the differences between them, and which one is the right fit for your business? We’ll go over the pros and cons of each fulfillment model, so you can make an informed decision.

As part of your regular e-commerce fulfillment model evaluations, you will be able to detect any red flags that may indicate that the time has come to make a change to another fulfillment model and whether you should switch at that point.

The different types of fulfillment models vary in complexity, cost, and speed of delivery, so it’s important to understand the best option for your business.

So… Let’s take a look at all the pros and cons of the most common fulfillment models for e-commerce, and the signs that it’s the right fit for your business.

Fulfillment models

Dropshipping is one of the most common models, as it doesn’t require any upfront inventory costs or storage space. The concept of dropshipping refers to outsourcing order fulfillment in which a merchant does not own or store the merchandise they are selling, but rather does outsource it. Rather, the supplier or manufacturer of the product is responsible for fulfilling and shipping orders from their own facilities, while the brand is the middleman who markets and sells goods to the end customer from their own facilities. Dropshipping also ensures that delivery times are faster and more cost-effective, making it the perfect choice for businesses looking to maximize their profits. You can even integrate dropshipping into your existing business model, creating a seamless customer experience.

It really suits your business if:

• In your product category, you don’t feel that much competition, because you’re in a niche market.
• In terms of the post-purchase experience, you don’t need to have more control over it.
• As far as time delivery is concerned, you are okay with that.

A company that manages the entire fulfillment process on its own, rather than outsourcing it to a third party, is known as in-house or self-fulfillment. In addition to receiving and storing SKUs, they also process orders, pick/pack items, ship, and manage returns. Brands that are just starting out and/or manage small order volumes (50-100 orders per month) may find that in-house fulfillment is the most cost-effective option. It is because outsourcing e-commerce fulfillment is not as cost-effective as fulfilling those orders independently as opposed to outsourcing e-commerce fulfillment.

It really suits your business if:

• Despite rising shipping costs, you don’t have a problem absorbing them.
• Your operation keeps pace with rising order volumes.
• You don’t let valuable growth opportunities pass you by. And you keep an eye on them.

If a merchant chooses to partner with an external fulfillment provider for the fulfillment of their e-commerce products, the process is called third-party logistics (3PL). Basically, the 3PL partner is tasked with managing all fulfillment-related tasks for the business as well as providing any value-added services that they may need. Receiving and storing inventory, processing online orders, picking/packing, shipping orders, and handling returns and exchanges are all part of this process.

• Your 3PL is relying on automatic processes.
• Your inventory levels are always accurate.
• You have visibility into order management.

Which fulfillment model to choose?

In order to determine which fulfillment model is most suitable for your business, you should identify your business goals and take the time to understand the requirements that will be necessary to implement that fulfillment model. These three fulfillment models each have their own advantages and limitations.

There is no doubt that the Dropshipping or In-House Fulfillment model is the most suitable option for those who are planning to start an online business and want to manage all of the operations by themselves.

More advice:

1. In order to find the best storage solution for your products, you need to identify what type of warehouse best meets your needs.
2. Do you have any storage and packaging requirements? Do you sell subscription-based products? Or do you sell products that require special packaging? Or do you sell products that require special wrappers and assortments?
3. Think of how you will manage customer service. Pick a fulfillment service that is compatible with your CRM, that can track orders and handles returns, and that offers customer support on-site.
4. If you want to integrate with your PIM, order management, shopping cart, and eCommerce software program, then you need to look for those integrations.

It’s important to understand that there is no single e-commerce order fulfillment service that fits every type or size of business. What might work for others may not necessarily be the best solution for you. You need a partner that specializes in storing the products you sell and is capable of reaching the majority of your customers.

Your online business can be built on the foundation of e-commerce fulfillment. It’s not a simple process with multiple touchpoints that ensures your customers receive what they order over the internet. It’s an incredibly complex process. If you make mistakes in this segment, it can adversely affect the goodwill and reputation of your company.

In any case, if you are a seller who is experiencing rapid business growth, then a third-party fulfillment model is a great option for you. All medium-sized businesses can greatly benefit from a third-party fulfillment model. WAPI will ensure that your end customer satisfaction no matter what your business plans are, as we provide the best eCommerce logistics services in the industry.