If your small business is like many others, your U.S. order fulfillment strategy probably looks something like this: you order products from China. You wait a month or two for your container to arrive and clear customs, most likely at a West Coast port. Then you transfer your container from the port to a nearby fulfillment warehouse.
Boom – you’re done. You’re ready to have those orders fulfilled and have your goods shipped to customers around the country. Except there are some key ingredients missing from your e-commerce fulfillment strategy.
- Beyond Amazon FBA: creating your own order fulfillment strategy
- In the zone: free shipping, two-day delivery, and location, location, location
- Intermodal logistics and your winning e-commerce order fulfillment strategy
- The bicoastal order fulfillment strategy
- Customer satisfaction depends on order fulfillment success
Beyond Amazon FBA: creating your own order fulfillment strategy
If your business is like a lot of e-commerce startups, you may have chosen Fulfillment by Amazon the first time you outsourced your U.S. order fulfillment. While there are many downsides to FBA, the upside is that you instantly have access to Amazon’s vast network of fulfillment warehouses. Your goods will end up in the FBA warehouse or warehouses that Amazon chooses. You don’t have to develop a fast order fulfillment strategy because Amazon will do your thinking for you.
When you’re ready to sell outside the Amazon ecosystem or just want to determine your own e-commerce order fulfillment plan, you will need a deeper understanding of your fulfillment processes. Your customer satisfaction levels will go up or down depending on the speed and accuracy of your order fulfillment.
One of the most important choices you’ll make is your third-party logistics (3PL) provider, and one of the most important factors in choosing that provider is the location. Your local fulfillment center or the one closest to the port where your goods enter the U.S. may not be the best choice for your business.
The first step to creating your U.S. order fulfillment strategy is to understand the geographic distribution of your customers. If you sell Los Angeles Dodgers memorabilia and most of your customers are located on the West Coast, a Los Angeles fulfillment center might be a perfect choice for you. Your shipping container can go from port to warehouse quickly and cheaply, and most of your customers will get their orders quickly.
If your products have national appeal, you’ll need a more nuanced order fulfillment strategy.
In the zone: free shipping, two-day delivery, and location, location, location
The fastest way to get your customers to abandon their shopping carts is to charge too much for shipping or to have ship times that are too long. The location of your fulfillment warehouse has everything to do with shipping times and costs, so it can be a make-or-break factor in your e-commerce success.
Carriers like FedEx and UPS charge for shipping by zone. If an order ships and delivers across one zone, the price will be lower than a package that travels through three shipping zones. A warehouse in Los Angeles will have higher per-order shipping costs, if your customers are evenly distributed across the U.S., than one in Nevada or Tennessee.
The location of your fulfillment center has an equally big impact on shipping times. A bi-coastal warehouse strategy with one fulfillment center in Utah and the other in Tennessee, for example, can provide two-day shipping to 97% of the addresses in the U.S.
If you offer free shipping on some or all your products, you’re making your customers happy, but you could make your profits sag. Those shipping costs are now your costs, so keeping them as low as possible is even more important. Your best order fulfillment strategy will include a 3PL provider in a strategic location.
Intermodal logistics and your winning e-commerce order fulfillment strategy
Of course, that shipping container full of your inventory won’t magically transport itself from the port to a centrally located fulfillment center. You’ll need to hire a freight company to handle your intermodal logistics.
This is where the beauty of shipping containers and intermodal transport enhances your logistics process. If you ordered a full shipping container, your container can be loaded from the ship to a truck or train for transport to its final destination. No one needs to handle or repack your merchandise, so your products are less likely to be damaged or lost.
Trucking your container (or partial container) inland will add to your initial shipping costs. It might even double the cost to get your products from the factory in Asia to the point of fulfillment, but this will be offset by a substantial savings in shipping costs and shipping times.
To figure out if this intermodal approach will benefit your order fulfillment strategy, do the math. Figure out the cost difference between shipping the items in a container to your end customers from a fulfillment warehouse on the coast and one that’s more central. Add in an estimate of potential sales lost due to unfavorable shipping terms. You may already have data for this in your shopping cart abandonment statistics. Then compare the difference to the added cost of shipping by the container or the pallet to the centrally located fulfillment center.
It is usually cheaper to ship pallets or whole containers closer to your customer base than to ship individual packages from a more remote location. Trucking product closer to the end consumers is called zone skipping. It’s a good idea to add this e-commerce strategy to your plan if you want to provide great customer service to shoppers in far-flung locations.
The bicoastal order fulfillment strategy
Let’s imagine that you import and sell bicycle accessories. You have strong markets in cities with lots of bike riders. These include New York, Portland, Denver, and Austin. You need an order fulfillment process that will ship to all these places quickly and cheaply. Your order fulfillment strategy might include bicoastal fulfillment warehouses. With strategically placed warehouses on both sides of the country, you can reach close to 100% of the U.S. with two-day shipping and lower shipping rates.
As your business grows, it’s a good idea to choose a 3PL provider with at least two fulfillment centers to serve both coasts and the middle of the country. This will, of course, require a bit more coordination on your part. Before you implement a bi-coastal fulfillment strategy, be sure that you have good inventory management processes in place. Make sure your 3PL can deliver real-time inventory updates to help you manage your stock across two locations.
Customer satisfaction depends on order fulfillment success
If you want to attract repeat customers to your e-commerce store, your order fulfillment strategy may be the most critical aspect of your business. Order fulfillment is your best opportunity to “touch” your customer. Great service, fast shipping, and low shipping costs are the positives that your buyers will remember the next time they need to place an order.