If you are an eCommerce retailer selling products online eventually you will need to address the cost of your fulfillment operation and whether it is economical to provide this service in-house or begin the pursuit for a 3rd party fulfillment provider.  3rd party order fulfillment centers provide scalable facility environments with demand based labor.  The cost for an outsourced solution should parallel the success of your organization and provide the flexibility and resources required for quick growth or a sales drawback.  Highlighted below are 7 pieces of the fulfillment puzzle that you need to better understand to help determine which  3rd party fulfillment solution is the best fit for your company.

Securing your Product from your Manufacturer

Ideally your order fulfillment provider should have the ability and resources to communicate directly with your manufacturers and coordinate the recovery and transportation of your products to the fulfillment center where the goods will be ultimately stored until they are sold to the end consumer or brick and mortar retailer/distributor.   If your manufacturing is global in scope there are numerous obstacles associated with the transportation of ocean or air freight including customs regulations, entry bonds and managing overseas shipping agents.  Aside from the challenges of understanding international transportation, your fulfillment provider will also bring external shipping volumes to the table and can offer leveraged discounts based on their total shipping volumes accumulated by their entire customer base.

Receiving and Put Away of your inventory

The receiving and put away phase of the fulfillment operation is a critical ‘gatekeeping’   event.  At this stage the inventory is reconciled and overages, shortages and damages (OSD) need to be documented and the discrepancies and overall disposition of the inventory needs to be disseminated to your designated management team.
Your fulfillment operation should utilize and provide an Advanced Shipping Notice template (ASN) that is prepared by your company prior to the arrival of any inbound inventory.  The ASN is a digital blueprint of your inbound order and contains at minimum information regarding sku assignment, item descriptions, and quantities that should be received.  The ASN is an integral component of the receipt process as this provides the basis for the inventory reconciliation so any variation in the actual receipt can be researched and if needed claims can be filed with the manufacturer or shipping carriers in a timely manner.
Both the ASN preparation and the OSD filing should be prepared and available through a web based interface to ensure availability and provide real time visibility.  Following the reconciliation process the inventory will then be sorted and segregated by product class and filtered into the appropriate location within the fulfillment center.  A prompt reconciliation and entry in the fulfillment system will enable quicker response times to customer demand as inventory can not be picked, packed and shipped until this process is completed.

Order Entry

There are a number of ways your fulfillment company should be able to accept orders for processing and the format will depend on your volume of orders as well as the way your customers purchase your products and interact with your company.

Manual Order Entry
The least efficient but sometimes the most practical form of placing orders is Manual Order Entry.  The fulfillment provider should provide a web based interface that enables you to login and manually post orders and shipping information for your customers.  The tediousness of this process can be alleviated if the design of the fulfillment company’s software is fluid, retains and populates previously entered client data and operates with ‘point and click’ administration.

Importing Orders
If you are capturing online orders in a traditional shopping cart your shopping cart engine most likely has the ability to export order details into some comma delimited or field based format (CSV, XML etc.).  Your outsourced fulfillment provider should be able to integrate directly with your systems or at a minimum be able to accept an exported order file and import this data directly into their order management system (OMS).  By importing your orders directly into the fulfillment company’s OMS you will experience a reduction in the time involved with redundant order enrty as well as reduce the occurrence of data entry errors.  In this order entry format you will still need to manually export your order file from your shopping cart at predetermined intervals and send to your fulfillment company for import into their fulfillment software.

Automated Feed Support
Automated Feed Support is an enhancement to the above order import process.  The difference is the process is fully automated and does not require you to manually extract an order file and physically send this file to your fulfillment provider.  Your outsourced fulfillment provider should have the capability of integrating directly into your shopping cart so the communication to their order management system is seamless and near real time.  As customers purchase items from your online store the order details and shipping information flows directly into the fulfillment company’s OMS and initiates the pick and pack process.

With all of the three order entry processes the fulfillment center should provide an online interface that details changes in order status so you can monitor operational performance.  The fulfillment OMS should also send to your company or directly to your customer shipment tracking details so last mile carrier performance can be monitored.

Pick and Pack

Once your order details have been processed the physical activity of selecting the items for an order and the packaging of the components begins.  The pick and pack process should focus on order accuracy, package integrity and turnaround time.

Order Accuracy
Picking errors are damaging to your reputation with your customers as well as detrimental to your bottom line.  Nothing frustrates a consumer more than finally receiving their order only to have it contain the wrong item or an incorrect quantity.  Mis-shipments will result in return charges and a subsequent redelivery charge assuming the customer doesn’t cancel the order.  Your fulfillment provider should hold themselves liable for the direct cost associated with retrieving and fulfilling a return and replacement order.  That being said the end customer is still frustrated even though the direct costs of replacement are incurred by the fulfillment center.  Best practice is for your fulfillment center to have a published flow process with defined Quality Checks (QC) that mitigates such issues.  The pick and pack process should be broken into two separate events and managed by two separate teams.  Pickers are assigned to item selection for a given order and purposefully navigate the aisles until the collection is complete.  The order is then entered into a packing queue where the packers reconcile the order selection and verify order accuracy against the order invoice/packing list.  Once the order selection is verified, the packers accumulate the contents of the orders into suitable shipping container and the package is sealed for shipping.

Package Integrity
Your outsourced fulfillment vendor is a forward extension of your company and the packages being shipped to your customers needs to be representative of how you as a company do business.   The presentation value and structural integrity components need to be balanced to ensure your orders arrive intact and appear professionally packed.   Your fulfillment provider should discuss your product mix with you to determine the appropriate void fill (foam peanuts, paper, sealed air, etc.) required for each of your packaged items and also give you guidance on a suitable shipper that conforms to ISTA standards so your shipment survives the expected hazards with standard shipping.

Shipment Turnaround
Turnaround times should meet or exceed your customer’s expectations and can be used to gain a competitive advantage.  Your fulfillment vendor should be able to provide same day turnaround for orders received before a specific cut off time.  If you can offer same day shipping for orders placed before 4:00 PM you will attract more attention than the online store that promises next day shipping.  In order to achieve a rapid deployment of shipments, your fulfillment vendor needs to be efficient and utilize the appropriate technologies.  Automated facilities with conveyor networks expedite the fulfillment process by eliminating redundant travel by personnel.  Handheld and automated scanning devices drive accuracy and eliminate sight verifications that can slow down warehouse activities.  Surges in volume are also easier to manage with the right technology in place and will ensure continuity in expected service levels even during peak shipping times.

Returns Management

Returns are an inevitable part of selling products online and your fulfillment vendor should design a comprehensive returns management plan to address all of the variables associated with returned merchandise.  Your returns policy should also be addressed within your shopping cart or home page so your customers fully understand how to initiate a return request and the proper format in which you will receive returns for refunds, replacement or store credits.  Return policies that are not properly documented and understood by both the fulfillment vendor and the end customer will create bottlenecks in your reverse logistics process and frustrate your customer base.

Return Merchandise Authorization (RMA)
Issuing a Return Merchandise Authorization (RMA) is the first stage of the reverse logistics process.  A purchaser contacts the supplier or fulfillment vendor directly and is issued a unique transaction ID or what is referred to as an RMA Number that will follow the shipment throughout the return process.

Return Shipping
Return shipping can be addressed by either a preprinted return shipping label prepared and included with the initial outbound shipment, issuance of a call tag by the shipper at the time of a return request or by the customer making their own arrangements with a carrier to return the product.  Regardless of the method for retrieval a RMA # needs to be initiated and accompany a return shipment.

Return Receipt, Evaluation and Order Disposition
Once a return product is received, the item needs to be reconciled against the original order and evaluated against the RMA request.   The fulfillment vendor should recognize whether the item is suitable for release back into good inventory, should be quarantined for additional inspection, hold for refurbishment, or set aside for disposal.  Regardless of the disposition the end result should be tracked within the fulfillment vendors Inventory Management system for accountability and reporting analytics.


One of the benefits of outsourcing your fulfillment is the advantage of upgraded technology.  Realistically it is not feasible for your typical eCommerce business to implement and support advanced Inventory Management, Warehouse Management and Order Management systems. Your fulfillment vendor should provide these tools in a web based environment so you have real time visibility into your transactions, reporting and inventories.  Ideally these technologies should have a hierarchical design so members of your management team or distributors see information pertinent to their assigned responsibilities.  Additional features should include the ability to import and export data from your in-house applications into the fulfillment vendors software to mitigate redundant data entries and reduce input times.