Understanding eCommerce Fulfillment

eCommerce fulfillment refers to the series of operations that kick into gear once a customer places an order online. It covers everything from inventory management and order processing to shipping and returns handling. A smoothly running eCommerce fulfillment process ensures that your customers receive their orders accurately and on time, leading to satisfied customers and potentially repeat business.

Key Stages in eCommerce Fulfillment

A well-coordinated eCommerce fulfillment process typically involves several stages:

1. Receiving inventory: This is the stage where you receive goods from your manufacturers or suppliers and log them into your inventory system.
2. Inventory storage: Once the goods are in your possession, you store them safely until they’re sold.
3. Order processing: When a customer places an order, it’s retrieved from storage, packed, and prepared for shipping.
4. Shipping: The packed order is shipped to the customer using the selected shipping method.
5. Returns management: If a customer decides to return an item, the returned item must be processed, restocked (if appropriate), and the customer’s account must be refunded.

How to Improve eCommerce Fulfillment

Improving your eCommerce fulfillment process can significantly enhance customer satisfaction and your bottom line. Here are some strategies:

1. Inventory management: Use inventory management software to keep track of inventory levels in real time, minimizing the risk of overselling or underselling.
2. Packaging process: Evaluating cheaper packaging options, whether it is a poly mailer, bubble mailer, or corrugated box.
3. Packaging design: Your product’s package size can be a determining factor as well. If its dimensional weight is larger than its actual weight, it can be more costly.
4. Shipping options: Offer multiple shipping options using different carriers and speeds to give customers the flexibility to choose based on their needs and budgets. Some carriers are cheaper or quicker depending on what it is and where it’s going.
5. Returns: Implement an effective returns policy that makes it easy for customers to return products if necessary. This can enhance customer trust and loyalty.

Finding and Selecting a Third-Party Logistics Provider (3PL)

As your eCommerce business grows, managing fulfillment in-house can become challenging. This is where a 3PL provider can help.

1. Capabilities: Examine the services they offer, their technological capabilities, and their ability to scale as your business grows. A good 3PL should be able to grow with your business and meet your customers’ increasing demands. Some 3PLs just do apparel and some just do food and beverage products. Evaluate your options and make sure they have a customized solution suited to your needs.
2. Location: Consider their proximity to your customers. A 3PL with a strategic location or multiple warehouses can ensure faster delivery times and considerably lower shipping costs.
3. Record of success: Look at customer reviews, case studies, and their reputation in the industry. A successful track record is a strong indicator of reliable service.

Working with a 3PL

Once you’ve selected a 3PL, it’s important to establish clear expectations. This includes defining service level agreements (SLAs) and maintaining open lines of communication. Regularly monitor their performance and work closely with them to address any issues or challenges. A successful partnership with your 3PL can significantly improve your eCommerce fulfillment process.

Future Trends in eCommerce Fulfillment

Looking ahead, several trends are set to shape the future of eCommerce fulfillment. Automation and robotics will play an increasing role in speeding up processes and reducing costs, allowing brands to fulfill cheaper. Sustainable and eco-friendly practices will also become more critical, with many businesses seeking to minimize their carbon footprint. Personalized customer experiences will remain key, with an emphasis on fast and reliable delivery.

One of the most critical aspects of your e-commerce business is your physical inventory. It is essential to track and monitor this inventory to ensure you have the necessary amount to meet customer expectations, limit stockouts, and keep your accounting accurate. Inaccurate inventory counts can cause you to lose money and lead to customer frustration if you cannot fulfill an order, especially if they were able to purchase a product without an out-of-stock notification. 

What Is an Inventory Sheet?

Inventory sheets can look different based on the business in question, but they typically will include a checklist of the following information:

• Inventory type
• SKU or serial number
• Amount of inventory on hand
• Price per unit

The function of an inventory sheet is to track available inventory. This can be counted in various ways using different methods. An inventory sheet is a tool to help organize and keep track of the count. 

What to Include on Your Inventory Sheet

Inventory sheets can include a variety of information ranging from simple to complex. You can decide what to include on your inventory sheet based on the needs of your e-commerce business. 

Here are some of the basics that are generally the foundation of an inventory sheet:

• Each individual item: Every item in your inventory needs to be accounted for and tracked on your inventory sheet. This will include variations, such as if you have different sizes or colors of clothing, for instance.
  
• SKU or serial number: The SKU is an alphanumeric code that identifies a particular item and can be an easier way to track products. Each size, color, and variation of every item will have its own specific SKU to go with it.
  
• Price per unit: The price per unit is how much you are paying for each unit of inventory. If you buy product in bulk, the price per unit is the total amount spent divided by the number of units.
  
• Amount in stock: You will need to track exactly how many of each item you have in your inventory by noting the amount that is in stock or on hand. Since this changes as product comes in and out, accurate counting is needed to keep this line item accurate.
  
• Location: You can also optionally decide to track your inventory’s physical location on your inventory sheet. If it is housed in a fulfillment center, for example, you can include the shelf, bin, or pallet where this particular item is stored. If you have more than one storage area for inventory, you will need to note inventory location on your inventory sheet.
  
• Price: You can also track the sale price as an optional line item on your inventory sheet.

Inventory Sheet Template & Tips for Building Your Inventory Sheet

There are a variety of free inventory sheet templates that you can use, such as this one from Microsoft, or you can create your own. 

Here are the steps for building an inventory sheet:

1. Open a new spreadsheet. You can use any spreadsheet program that you prefer, including Excel or Google Sheets. 
2. Name your headings and be sure to include the core elements.
3. Enter the items and all necessary information.
4. Add additional information as needed. If you have specialty products or materials from a supplier, this can be noted here.
5. Save it as a standardized file type that you can easily access.
6. Be sure to timestamp it each time you update information. Include a signature field where employees who are checking inventory can sign off.
7. Update the inventory sheet as needed.

It is beneficial to create and save a master inventory sheet template that is blank. This way if you need an inventory sheet in the future for different items, you can easily pull this one back up without needing to start from scratch.

Outsourcing Inventory Management & Fulfillment

As your business grows and evolves, inventory management can become even more time-consuming, but it will be an essential part of your day-to-day operations. It can save you time and money by outsourcing inventory management and order fulfillment to a 3PL (third-party logistics) provider. 

A 3PL generally uses advanced software and technology to track and monitor inventory continuously in real time. This can ensure that your inventory counts remain accurate. As product comes in from suppliers and goes out through order fulfillment, your inventory counts will be automatically updated. 

Inventory counting can be extremely time-consuming, especially as your inventory grows. An e-commerce fulfillment company such as a 3PL can help with the logistics of inventory management and order fulfillment. This allows you and your employees to focus on other aspects of your business, knowing that inventory is being accurately tracked. Even if you store your product in a fulfillment center off site with a 3PL, you will have instant access to your inventory counts and details, right from your computer. 

Outsourcing inventory management and order fulfillment can often eliminate the tedious task of physically counting inventory, as the 3PL will manage all of the comings and goings of your product for you. 

A 3PL will also often be able to provide you with the most cost-effective warehousing and shipping solutions. 3PLs work directly with the major shipping carriers to be able to provide you with discounts and savings on shipping as well. As your company grows, a 3PL can help you to keep up with demands to keep your customers happy and your profit margins up. 

References

Inventory List. (2022). Microsoft.

When ordering materials or inventory from a manufacturer, they will typically require that you commit to buying a specific quantity to help ensure that their production is cost-effective and still turning a profit. This is a minimum order quantity, or MOQ. 

This MOQ does not always line up with the number of materials or inventory you need to purchase, however. 

It is important to know how to calculate an optimal MOQ for your business and how to maximize this. Making the most out of your MOQ can help to increase your profit margins and directly impact your bottom line. 

Minimum Order Quantity (MOQ) Meaning

The lowest number of units a business is willing to sell a customer at a time is the minimum order quantity. With e-commerce, the business is often a manufacturer or supplier, and the customer is the online retailer. Any merchant can decide to implement an MOQ, however. 

A supplier may set their MOQ at 500 units, for example, meaning that you have to buy at least 500 units of this inventory each time. The merchant can also set a dollar amount, such as 500 units or $1,000 MOQ for retail or wholesale partnerships, meaning you either have to purchase 500 units or spend $1,000 on products.

Calculating MOQ

There is no specific set “right” amount for an MOQ. Instead, it should be calculated based on the ability to keep your ordering and inventory storage costs to a minimum, so you can maximize profits. 

There are some empirical factors to consider when calculating an MOQ:

Use Demand Forecasting to Determine Future Demand

Take into account product type, competition, seasonality, and potential growth to help determine the average demand for the products. Keep an eye on sales forecasts at least once each week and adjust your production quantities as needed. You will also need to use inventory forecasting to match your supply with the demand. 

By using demand forecasting, you can get a better idea of how much inventory you will need on hand at any particular time. Be sure to take into account any lead time that will be required to ship inventory out so you have it when you need it. 

The actual MOQ a manufacturer sets may not be vastly different from what you need. By calculating your desired MOQ, you can ensure that you are staying within your needs and budget.

Understand Your Break Even Point

To calculate this, you need to look at your ordering costs, which are the expenses needed to buy products or materials from the supplier, and how many products you need to sell to turn a profit. When you know what it takes to get back to even, you can then calculate an MOQ that helps to increase profit margins.

Calculate Your Holding Costs

The holding costs are the expenses involved with storing your products. Different products can cost varying amounts to store. 

The holding costs will then need to take into account any specialized warehousing requirements, the costs associated with storing products of that size, and how long they need to be stored. Generally speaking, the goal is to not keep products in your inventory, needing to be stored, for very long. 

Capitalize on MOQs

The MOQ from a supplier or manufacturer will need to fit into your specific budget to ensure that you are still able to make a profit. If the MOQ from a particular supplier is too high, look for other distributors or suppliers. 

Making the most out of your MOQ will directly tie into your bottom line and impact your profit margins. Here are some tips:

• Negotiate with suppliers and manufacturers. It never hurts to ask a supplier if they are willing to work with you to offer a lower MOQ. Ask if they are willing to allow you to purchase multiple products to meet the quota instead of identical units. Creative thinking and conversations with suppliers can often have positive results.
  
• Build relationships with your manufacturers. In the end, the manufacturer wants to see you succeed since your profits can directly impact theirs. When you are buying inventory from a manufacturer consistently and then selling your product for profit, everyone wins. When you focus on building up this human relationship, you can often work together to come up with a favorable MOQ. It could even potentially lead to a partnership with your business eventually.
  
• Offer preorders to customers. When customers prepay for your products, this can help to raise the necessary money to buy inventory and meet the MOQ your manufacturer requires.
  
• Use a 3PL (third-party logistics) company. A 3PL can help with inventory management and the entire order fulfillment process. Using advanced technologies that provide detailed data analytics, you can maximize your profit margins and eliminate inefficiencies.
  
  A 3PL often has relationships with shipping carriers and the ability to distribute your inventory across different fulfillment centers to lower shipping costs. This can leave you with more funds to purchase products while elevating profits. 

What Minimum Order Quantity Means for Your Business 

The meaning of MOQ, or minimum order quantity, is the fewest number of units that a manufacturer will allow you to purchase at one time. You can often lower the unit cost by purchasing in bulk, and more units can often cost less. A high per-unit cost can force you to increase your product prices, which can cost you sales.

The goal is to keep your expenses as low as possible to support your profit margins. This means being aware of the ideal MOQ for your business. 

References

Business and People: Why Relationships Are Essential for a Successful Business. (July 2018). Forbes.

How physical distribution is conducted will greatly influence a company’s customer satisfaction rates, distribution costs, and delivery timelines. While e-commerce sales take place online, the physical distribution process is essential to the success of the business. Without smooth physical distribution, an e-commerce business will likely fail.

What Is Physical Distribution?

Physical distribution involves the movement of finished products from a distribution center to the end customer. It isn’t just one process. For e-commerce businesses, physical distribution consists of several different fulfillment processes, such as warehousing, inventory management, order processing, picking, packing, and shipping.

Depending on the size and location of an online business, they may use one distribution center or several that are strategically placed around the country. By having centers in different regions, businesses can reduce shipping costs and expedite delivery timelines.

What Activities Are Involved in Physical Distribution?

Physical distribution is triggered by an order. From that point, the physical distribution process starts.

Warehousing is involved in the first part of the process since warehouse management systems are involved in order processing. Picking and packing are the next activities involved, followed by shipping. 

Physical distribution applies to both raw materials and finished products. For e-commerce retailers, it primarily involves finished products.

What Costs Are Associated With Physical Distribution?

Basically, all costs associated with the fulfillment process are also associated with physical distribution. These include costs for warehousing, carrying inventory, order processing, receiving, and packing and shipping. In addition, administration and transportation costs are involved with physical distribution.

How Does Physical Distribution Affect E-Commerce Businesses?

Even if the bulk of your business takes place online, the physical distribution of products is the core of your e-commerce business. If you don’t deliver the final products in a timely and efficient manner, you won’t grow your customer base. In short, physical distribution is key to the success of your business.

With a good physical distribution process, you can accomplish the following:

Faster Order Fulfillment & Shipping

If you fulfill orders quickly and they reach customers fast, you’ll have happier customers. This means they are more likely to order from your business again and to recommend it to others. 

If you use distribution centers throughout the country, your product is stored closer to customers. It can be packed and shipped faster, and shipping times will be shorter since there is less distance to travel. Assess where the majority of your orders are shipping, and consider a fulfillment center in that region.

High Customer Satisfaction Rates

Faster shipping times mean happier customers. It’s a simple rule of e-commerce that shorter delivery timelines equal a better customer experience overall. 

If you are able to cut costs by utilizing various distribution centers, you can pass some of those savings along to customers in the form of free shipping or discount offers. Any time you give a perk to a customer, you are increasing customer goodwill and this leads to higher customer satisfaction rates.

Reduced Costs

By optimizing your physical distribution process, you can cut costs. Again, you can benefit from using regional distribution centers. 

By storing more of your products in areas that are closer to your customers, you can reduce shipping costs. This can boost your bottom line, and you can pass some of these savings on to your customers. 

How to Optimize Physical Distribution 

There will always be ways to refine your physical distribution process. Analyze how things are working currently, and pinpoint areas that could be improved. 

Here are some areas to give special attention:

Automated Order Processing

You shouldn’t manually be processing orders when automated systems can do much of the work for you. Implement automated order processing via warehouse management systems (WMS) or other software solutions. 

Your order processing should be linked to your inventory management system. This allows your inventory to be updated in real time.

Inventory Management

A warehouse management system is crucial to keeping your inventory under control. Without this type of system, you’re more likely to have difficulty forecasting supply needs and maintaining a steady inventory. And this can result in logjams, errors in the fulfillment process, and delayed orders. 

With a good WMS, there will be fewer order errors and fewer instances of items being out of stock. Because the process is streamlined, orders will be fulfilled faster, and they’ll get to your customers more quickly.

Data Management

You can’t improve your physical distribution until you know exactly what is happening at every step of the process. By collecting data on each activity, you can assess where you have room for improvement. 

Logistipedia Can Help You Target Improvements in Your Physical Distribution

At Logistipedia, we can give you the information you need to make sound decisions on your physical distribution process. The task of compiling and analyzing this information on your own can be overwhelming. Let us help.

Reach out to us today to get started on optimizing your physical distribution.

What Is Product Tagging?

Product tagging involves putting descriptive tags on products as a form of organization and product management. This was traditionally associated with brick-and-mortar stores, as retailers would add sticky labels with UPC barcodes to products. 

Today, product tagging is also used for e-commerce businesses. Online businesses add various descriptors to the product descriptions, and users can search by the product tags to more easily find products.

Why Use Product Tags?

First off, product tags just make it easier to manage your inventory. They serve as a straightforward way to keep track of products. By adding a description of what the product is, you can easily categorize similar items together.

When you tag products with a UPC (universal product code), it can simplify the inventory management process. Since products are scanned into a system, you don’t have to estimate inventories. You can see exactly how much you have and where it is.

Product tags can also aid your marketing efforts. You can highlight certain selling points on product tags, persuading consumers to take a second look at an item and ultimately purchase it.  

What to Include on a Product Tag

Product tagging allows you to quickly feature information on products. This can help customers learn details about the product, aiding their shopping process, and it can help warehouse pickers to find items more easily. Ultimately, product tagging makes it easier for both employees and consumers to find and learn about your products.

Here is what you want to include on product tags:

Product Name

This is simply the name of the product. It may be a name that the manufacturer sets, or it can be one chosen by you. Just make sure you use it consistently.

Product Summary & Details

List any product description, ingredients or materials, and sizing information here. You are free to include any information you want in this section but aim to keep it brief. Use concise language to ensure it doesn’t take up too much space. If it’s too long, consumers simply won’t read it.

Barcode

This is essential for product tracking. This code can be scanned at any point in the intake, fulfillment, or delivery process, enabling you to keep a clear view of your inventory at all times. Barcodes are external product tracking codes, so they won’t be unique to your business. 

SKU

Whereas barcodes are universal, SKUs (stock-keeping units) are unique to your company. They are used for internal tracking within a company, and they can make it easier to manage your products. 

SKUs are more granular than UPCs, so they offer you a higher level of detail than UPCs. You don’t have to use SKUs, but if you do, it can be helpful to have them on your product tags.

Product Price

You can add your product prices to product tags, though it isn’t required. 

How Product Tagging Is Used for E-Commerce Businesses

By using product tagging for your online business, you’ll add another level of organization to your site. Customers can get more detailed in their searches, and they can find the exact products they are looking for more quickly. 

For example, rather than just searching for boys’ shoes, they can search for boys’ Batman shoes, and see all the results at a glance. You choose how you’ll best use product tagging to benefit your customers and your employees. 

If you don’t add product tagging, it’s likely that customers will grow frustrated with pages upon pages of search results. People grow fatigued when they are given too many options, so product tagging whittles their results to show them fewer results that they want. It takes some of the work away from customers, streamlining their search process.

Most of the major e-commerce sites, like Shopify and Wix, allow you to easily add product tags to listings. They have simple processes by which retailers can add product tags as items are added to their online shops. 

In addition to online product tagging, you can still use physical product tagging to keep products organized during the fulfillment process. When customers receive their orders, these physical product tags will help them to clearly identify the products in their orders. 

How to Simply Product Tagging

Though the benefits of product tagging are clear, it can be a tedious process. Technology can help. 

Visual artificial intelligence (AI) is able to scan product images and identify details in a form of automatic product tagging. Though there will still need to be human checks on the process, visual AI can save businesses a chunk of time and effort.

Logistipedia Can Help With Product Tagging Challenges

At Logistipedia, we help businesses manage the details of their inventory management and fulfillment. Reach out to us today, and we can help you address any product tagging challenges you’re facing. We can also help you implement a product management system that works for your business. 

Product Tagging FAQs

What are product tags?

Product tags are descriptions you add to products to make it easier to identify and find them. 

What is included on a product tag?

You can include anything you want on a product tag, but most businesses will include the product name, brief description, materials or ingredients, and SKU. In some instances, the price may also be included.

How should I use product tags on my site?

When tagging products, consider the terms consumers generally search for when looking for that product. This will practically help consumers to find what they are looking for, and it will aid your SEO efforts. 

Should I use physical product tagging for my e-commerce business?

While online product tagging will be most important for your e-commerce business, physical product tags can help to keep your inventory organized. These tags can also enhance the unboxing process when your customers receive their orders, helping them to easily identify each product.

References

The Difference Between Product SKU & UPC Barcode. (May 2022). QuickBooks Blog.

Instagram Rolls Out Product Tagging Feature to US Users. (April 2022). TechCrunch.  

How Tags Are Revolutionizing Digital Marketing. (October 2011). Forbes.

Creating and Using Tags in Shopify. Shopify.