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5 Approaches to Order Fulfillment

By June Campbell

Fulfillment is simple at a brick and mortar store. The customer pays for the merchandise and carries it away. However, fulfillment is more complicated for a mail order business or a business that is selling via the Internet.

Fulfillment includes taking the order, packing, shipping and processing the financial transaction. It could also include customer service, technical support, inventory management, and processing refunds, returns and warranty claims.

Fulfillment is a vital but costly aspect of operating a business. Your situation determines which approach works best for you.

1. Drop Shipping

Drop shipping is an arrangement in which a wholesaler or manufacturer agrees to fulfil orders from items in their warehouse. You make the sale, conduct the financial transaction, and send relevant data to the company to process. Since the company ships the merchandise, you do not have to arrange warehousing or inventory management.

Many businesses will not agree to drop shipping, as they find it more profitable to process large orders instead of individual orders. However, there are exceptions. Find a company that produces merchandise that you would like to sell, then contact them and see if they will negotiate.

Alternatively, look for a company that promotes drop shipping. Run a Net search or a Yahoo search for "drop shipping." Before signing a drop shipping agreement, ask for references from satisfied merchants.

2. Set Up Your Own Mail Room

Micro businesses might set up a "mailroom" in the basement. It's cost effective, but labor intensive.

You will need a means of processing payment (i.e. credit card capabilities) and a means of keeping track of inventory, orders, refunds, etc. Yahoo's Small Business category lists numerous companies selling software for small business management.

Larger small businesses might opt to set up a mailroom in the workplace and assign employees to handle order fulfillment. This allows the most control over fulfillment as everything is done on site. You can ensure that knowledgeable people handle customer service, that packaging is appropriate, and that refunds, warranties and are processed in a timely manner.

3. Integrated Fulfillment for the Web

Businesses that are adding online sales to their regular operations require software that integrates with the existing system, manages inventory, facilitates customer service and generally handles all aspects of fulfillment.

If you're too large for the basement mailroom and too small to outsource, you might consider using one of the companies that are catering to small business. Check out Yantra, Manugistics and EXE Technologies.

4. Fulfilling Digital Products

Businesses selling only digital products (computer documents, software, music, video, etc.) have the easiest time with fulfillment. You will need a web site, shopping cart software to take the order, and a means of processing payment. The most automated businesses use technology that serves automatic download information to the customer upon processing a transaction.

Online businesses might opt to purchase web storage, shopping carts, encryption for secure ordering, and a credit card processing service individually. Alternatively, they might look for a "one stop shop" that handles the entire thing for a fee. The former is likely to be lower cost but labor intensive; the latter could be more costly but simpler to set up and manage.

To find ecommerce providers, run a Net search for "ecommerce billing fulfillment service".

5. Out-Source to a Fulfillment Firm

If your sales justify it, you could outsource the entire process to a fulfillment company. This may or may not be more expensive than doing your own fulfillment. Calculate the cost of on-site fulfillment and compare the price.

Out-sourcing reduces your control over fulfillment, as well as the amount of contact you have with your customers. If customer contact is very important to your operations, or if you need to explain your product to customers before making a sale, outsourcing might not be your best choice.

Before signing a contract, consider these issues:
  • Will the company package your merchandise appropriately? Can they handle your perishable products quickly? You want to avoid returns of damaged goods.
  • Does the firm process orders quickly enough to accommodate your turn-around time?
  • Is the company strategically located? Shipping costs and transit times will be reduced if your fulfillment company is located close to the majority of shipping addresses. For example, 74% of the U.S. population lives within a zip code less or equal to UPS zone five. A company situated in that region might be a good choice for businesses that sell primarily to the US public.
  • Are sales reps assigned to your orders and are you permitted to train them?
  • Can the firm provide references from customers running similar operations to yours?

As the comedian said, Delivery is Everything.

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