How to Improve Your Order Fulfillment Process
The order fulfillment process refers to all the steps companies must take from the moment they receive an order until the items land in customers’ hands. For many wholesale distribution companies, an order fulfillment process might look like this:
- Order is received, either in person, on the phone, via email, etc.
- Order must be entered into back office systems (like an ERP or accounting platform)
- Customer is notified that the order has been received.
- Order is sent to the warehouse. A paper order might be taken to the warehouse as part of a batch, or it is sent directly from an invoicing or sales order management application.
- Order is picked: a worker goes into the warehouse, finds the items in the order, and picks them off the shelf.
- Order is packed to prepare for shipping.
- Order is shipped.
- Customer is notified that the order is on its way.
- Order arrives.
One of the ways companies judge the efficiency of their order fulfillment processes is by looking at the Perfect Order Metric. A perfect order is one that is on time, complete, and undamaged, along with the correct paperwork to accompany it. This metric is similar to fill rate, which we’ve discussed on the blog before. Although companies all say they strive for perfect orders every time, it’s a difficult thing to achieve. Here are some insights and tips to help your business fulfill orders more quickly, accurately and efficiently.
Order Fulfillment Process Challenges
Businesses face several challenges throughout the order fulfillment process. These include challenges related to demand planning, inventory management, supply chain optimization, logistics planning, and several other complex concerns. However, at the risk of over-simplifying matters, what it really boils down to is knowing and being able to make effective decisions about what you have to sell, whether a customer is likely to buy it, and how are you going to get it to them if they do. Let’s break the problem down into its different parts: 1. Demand Planning: Demand planning involves knowing in advance what demand for a product will be, as well as demand shaping, or a company’s efforts to try to generate demand, like marketing and promotions. 2. Inventory Management: Order fulfillment is all about meeting customer expectations, and it’s hard to do that if you are out of stock on the items customers want. Knowing what’s in stock and being able to provide visibility on stock levels as the order is placed prevents customers from being disappointed with backorders and delays. 3. Supply Chain Execution: When items are low or out of stock, how quickly can you get them back in stock? How quickly can your manufacturers produce more product? From there, how long will it take to get to your warehouses? These are supply chain execution questions that can also impact order fulfillment. 4. Logistics Planning: Once the items are ready to ship, how are you going to get them to the customer? How long will it take? Will the items be handled carefully so they arrive in one piece?
3 Strategies to Speed Up Your Order Fulfillment Process
When it comes to speeding up order fulfillment, there are many steps you can take to make a big impact. Start by looking at some of the “quick wins” that don’t require a massive investment of dollars, but will make a quick difference, such as classifying your inventory and ensuring that it is stored as logically as possible. The next step is to make sure that you are making the most of the systems you already have in place. Many companies have the pieces in place that are needed to improve their order fulfillment processes, but are unable to get the most from these systems. Finally, you can also look at making new investments in automation to speed up your order handling times.
- Classify your inventory to ensure rapid handling: Grouping your inventory from fastest moving to slowest moving helps to ensure that you always have the right stock levels on your most important items. Put the most popular items in a centrally located area of your warehouse to ensure that they can be picked, packed and delivered to the shipping dock in a minimal amount of time. Slower moving items can be stored in a separate area. This more logical arrangement can really cut down on the time it takes to process and fulfill orders.
- Integrate systems for more visibility into all aspects of order fulfillment: In order to quickly fulfill an order, you need visibility into several areas––demand forecasting, sales, inventory, and logistics just to name a few. At a minimum, this requires some level of integration between the sales order management system where the order is placed, and the ERP system that maintains financial data, as well as the inventory and logistics systems that that handle the processes for picking, packing and shipping.
- Automate processes: After your systems are able to provide more visibility into all aspects of the process, you should also look at how the processes themselves can be sped up. Automation doesn’t necessarily mean investing in robotics or conveyors, it can be as simple as investing in scanners to more easily enter inventory into the system as it arrives in your warehouse, or scanning it out as it leaves. And for smaller businesses, the investment doesn’t have to be huge. There are even applications that can be downloaded to a smart phone or tablet to automate this process inexpensively.
Each of these methods has a dual benefit. Reclassifying inventory from fastest moving to slowest will not only help save time in the order fulfillment process, it will also save money in terms of labor costs in the warehouse. Systems integration will help to improve the order fulfillment process but also provide better reporting and analytics that can aid decision-making and profitability. And automating processes speeds order fulfillment but also provides more accurate data for future orders. What are the challenges you face with your order fulfillment process, and what are you doing to help speed it up? We want to hear about it in the comments.