What is fulfilment?
The definition of the English word “fulfillment” ➚ (also “fulfillment”, “compliance”, “fulfill”) means fulfillment, execution, order fulfillment, order processing, contract fulfillment and service from a single source.
The term “life fulfillment” is used to describe a fulfilled and satisfied life. We refer here to the provision of logistics services.
In logistics, the term “fulfillment” refers to the assumption of the associated tasks. Fulfillment encompasses many logistical requirements and processes that serve to complete the task.
Understanding fulfilment in logistics
The entire order processing of an order is a very important process for retailers who sell physical products.
In logistics, fulfillment means the provision of the services required to process an order placed by a customer, retailer or wholesaler.
A fulfillment service provider stores, packs and ships the ordered goods as a parcel directly to end customers (D2C), via marketplaces (B2C) or as a pallet to business customers (B2B).
A retailer can take on the logistics processes and all the challenges themselves or outsource the tasks to an external service provider. If an external partner is chosen, the retailer does not incur investment costs for employees, storage space, shelving systems, software and equipment.
7 Core tasks in fulfillment
1. Warehousing
The first step in warehousing is goods receipt.
The goods are delivered to the fulfillment center in containers, on pallets or in outer cartons. These can be single-variety or mixed. If mixed goods are delivered, the items are scanned and stored individually.
It is important that all goods are clearly labeled so that they can be booked directly into the goods management system via a barcode at goods receipt.
Each item with an SKU or GTIN/EAN is assigned its own storage bin. This means that employees can go directly to the storage bin in which the item was stored for order processing.
What is the difference between a warehouse and a distribution warehouse?
In warehouse logistics, goods are stored securely in a large warehouse. When an order is called off, the goods are delivered to the desired recipient. The recipient can be a wholesaler, another fulfillment center or a provider of a marketplace platform.
Distribution warehouses are logistics centers where retailers’ goods are stored, picked according to order, packed and the parcels are shipped from there to end customers or retailers. This offers the advantage of centralized handling with fast shipping processes within the supply chain.
Optimize inventory management
Inventory management of items in the merchandise management system is of great importance in warehouse logistics. This enables retailers to keep track of their stock levels and create an inventory.
With good stock management, demand can be forecast to ensure that sufficient stock is available for retailers to meet the needs of all customer orders on time.
The logistics service provider takes control of the stock of goods in the merchandise management system. If the picker removes a product from the warehouse, the stock is automatically reduced.
By using inventory management software, many processes are automated and the inventory in the store or online dashboard is adjusted.
This prevents stock shortages, reduces excess stock and improves the overall efficiency of warehouse work and goods management.
2. acceptance of the order
In order to be able to retrieve customer orders from the online store, ERP or merchandise management system (Wawi) to the warehouse, a connection with the retailer’s system and the fulfillment provider must be integrated via an API interface.
With this technology, the necessary data exchange processes between the store system and the warehouse management software are carried out bidirectionally in both directions.
Once the order has been automatically retrieved via the connection, usually in real time, the order confirmation with tracking numbers and shipping notifications to the retailer are part of the shipping process.
Item master data maintenance
In order to be able to process orders quickly, it is important that the items are clearly labeled and the master data is maintained for the goods receiving department. The basic data includes the name of the item, the SKU, the EAN, the weight, the size, the color and the purchase price.
Retailers can provide the service provider with additional data when retrieving orders based on product factors and shipping preferences to optimize the process.
In addition to the transmission of basic data (storage of the so-called “original load”), product values such as attributes, serial numbers, Amazon FNSKU, TARIC code, hazard numbers, UN numbers, UPC, ISBN, QR codes, barcodes and images can be transmitted.
By setting up shipping preferences, retailers can determine which shipping company with which shipping method should be used for order processing for which products or in which destination country.
By automating the processes, retailers receive an overview of the individual steps of ongoing processes. This makes it possible to check whether customer orders are being fulfilled quickly and accurately. Some fulfillment service providers offer the service of displaying the processes in a portal or web-based dashboard.
3. picking – assembling the goods
Once the customer has placed an order, this order is processed in the fulfillment center. Depending on the order, one or more of the items requested by the customer are put together (pick & pack), known as single-stage or multi-stage picking.
Various technologies are often used for order picking. Goods can be put together using pick-by-voice, pick-by-light, pick-by-AI glasses or a pick list on a handheld device.
Warehouse employees (PackAngels) are assisted by machines such as ground conveyors, conveyor belts or exoskeletons during complex or heavy work steps.
Fulfilment service providers charge different prices for picking the goods. Some charge a flat rate for the entire process, while others charge for individual items such as incoming orders, the quantity of items and SKUs.
4. packing the goods (pick & pack)
At the packing table, employees in the warehouse scan the items in the customer order again, put them together and pack them professionally in a suitable box. For this purpose, wet adhesive tapes, reinforced corrugated cardboard and filling material are used.
There are different packaging options depending on the product. For example, there is special packaging for bottles or posters. The cardboard packaging can be made of environmentally friendly material and different thicknesses.
Some suppliers offer the customer service of gift-wrapping or reusable packaging.
Either the retailer’s cardboard packaging or that of the logistics service provider can be used for packing.
Fulfillment on demand is also offered in some cases. In this case, personalized cards, inserts or flyers are printed and enclosed with the package.
In pick & pack, the team in the warehouse is an important factor in logistics. Well-rehearsed workflows for warehouse specialists are a decisive success factor.
Retailers must comply with packaging regulations. For example, they must be entered in the packaging register, even if they use an external logistics service provider.
Since July 3, 2021, the legislator has stipulated that the distributor or manufacturer of the goods must register the shipping packaging and participate in the system.
At the end of the year, the logistics service provider informs the retailer of the amount of packaging used.
5. frank, label and declare the consignment
Once the items have been securely and properly packed, the shipment must be sufficiently stamped, labeled and, in some cases, declared to customs.
Shipping labels are sometimes created directly by the retailer and transferred to the warehouse. As a rule, these are created by the fulfillment service provider and attached to the shipment. Of course, it is very important that the delivery address is validly transferred from the retailer to the fulfillment service provider.
The belt size, weight, address, destination country and type of delivery must be taken into account for franking.
There are also special regulations, such as shipping to islands or certain customs regulations in non-EU countries, which must be declared on the shipment, as well as shipping to Switzerland, the UK or Northern Ireland.
Certain products must be properly marked on the outside of the carton. This can be indications for batteries, dangerous goods, packages over 31.5 kg or easily breakable products in the shipment.
6. shipping
Shipping with on-time delivery is a crucial component for customer satisfaction in e-commerce fulfillment. The fulfillment process and communication in fulfillment must run smoothly.
In many cases, customers expect fast shipping within 1 – 2 days. Delays or errors can lead to negative evaluations and lost sales precisely then.
Logistics companies often use transport companies such as DHL, GLS or DPD for shipping, which deliver goods to customers nationally in Germany, throughout the EU and internationally on a daily basis.
In the B2B sector, the shipping service provider UPS is often used. This offers high reliability and quality in direct delivery of even large and delicate products.
Some retailers can also use their own shipping account with the logistics service provider or they can use their own account. Each retailer receives their own billing number and the shipping prices depend on the order volume.
To optimize shipping and delivery, the fulfillment software should transmit the current status and
Sellers can offer their customers various shipping options and delivery times during the ordering process, such as express shipping, DHL small parcel, merchandise mail, bulky goods or international shipping.
Storage locations or packing stations can be defined by the customer. According to experience, this increases the regular delivery rate and avoids errors during delivery.
Some deliveries, such as bulky goods or pallets, can only be delivered by a forwarding agent. This option must also be stored in the retailer’s system and in the logistics provider’s merchandise management system.
Online retailers should communicate with customers and the service provider throughout the entire shipping process.
This allows information on tracking, any delays or problems to be provided quickly by the parcel service provider. Then the support can react in time and offer an individual solution.
To do this, the seller relies on automatically receiving the shipment data from the shipping service provider or the warehouse.
If the delivery processes are set up optimally and the products are delivered reliably, the delivery meets customer expectations, satisfaction increases and there are fewer returns.
7. returns management
The average returns rate in e-commerce is 28%. So every third delivery comes back. Of course, the return rate is very dependent on the products that are sold.
Returns management can be very time-consuming. Returns have to be accepted, unpacked, inspected, partially reprocessed or destroyed. For sellers, this means enormous effort and costs. In addition to the product costs, there are the costs for shipping and returns processing.
Different prices are also charged for returns processing. The prices vary from simply accepting the return to a visual and functional check.
The fulfillment service provider can grade the returns according to A, B or C quality. A goods can be offered for sale again directly. Returns as B goods can sometimes be resold at a discount. Otherwise, the items must be disposed of properly, which in turn costs money.
Many fulfillment partners also handle these entire returns processing processes with customer support.
Other fulfilment services
In some cases, the fulfillment provider also provides other services.
These include:
- Customisation
- Invoicing
- Dunning system
- Payment processing
- Cross Docking
- Marketplace pre Fulfilment
- After-Sales-Service
- On-Demand Product Fulfilment
- Value-added services (bundling, labeling, gift wrapping)
3 PL Fulfillment (Party Logistics)
The logistics processes in fulfillment can be handled by a single company (all services from a single source) or by several companies in outsourcing.
Of course, a retailer can also take over fulfillment itself, known as “self-fulfillment”. The most common procedure on the market is to take over the entire transactions of 3 companies (parties):
- A company for the procurement and sale of goods.
- A fulfillment service provider for storage space, picking, packing and shipping.
- A company for delivery to the customer.
This constellation is referred to as 3 PL fulfillment.
A classic 2PL fulfillment provider is, for example, Fulfillment by Amazon (FBA). Here, retailers can outsource all tasks and offer their products on the marketplace. Store their goods, use the pick & pack service and delivery to the customer through Amazon fulfillment.
In general, a distinction is made between 1PL, 2PL, 3PL, 4PL and 5PL service and includes the number of companies (parties) involved in the process.
Fulfilment costs
Fulfillment fees are charged based on the service provided. The effort can be charged per hour or per unit. A monthly basic fee is also often charged.
The fees for fulfillment can be roughly divided into 5 areas :
- Incoming goods
- Storage fees
- Picking and packing
- Outgoing goods
- Shipping
Storage fees are often calculated per cubic meter or occupied shelf rack. Incoming goods, order picking and outgoing goods are usually charged per item or package.
Additional services such as the packaging of items, customs declaration, enclosure of flyers, gift wrapping, processing of returns or refurbishment will be charged additionally upon agreement and proof of expenditure.
Transparency of
Costs may also be incurred for the storage of the goods. You should take this disadvantage into account when selecting a provider.
What are the biggest cost drivers?
Source: © EHI-Studie ➚ „Warehousing, transport and returns processing in e-commerce 2021“
Sellers in e-commerce have to bear some costs, just like in bricks-and-mortar retail. Retailers must therefore charge prices for their products that offer a sufficient margin.
With high competition and low specialization, there is usually high price pressure on the market, especially in e-commerce. This is an opportunity to reduce costs by bundling and optimizing tasks.
Retailers can use clever mixed costing to provide customers with favorable offers and highlight these, especially on promotional days. The additional logistical effort can be absorbed by an external logistics service provider by deploying its employees as required.
For which companies is fulfillment worthwhile?
Fulfilment is suitable for companies and organizations that want to benefit from efficient, reliable and professional handling of storage, shipping and returns of their products. Here is a summary of who fulfilment is particularly suitable for:
- E-commerce companies: Fulfilment is an ideal solution for e-commerce companies and brands that need to process a large number of online orders. It allows them to outsource storage and shipping so they can focus on marketing and growing their business.
- Small businesses: Small businesses that have limited storage capacity or do not want to specialize in logistics tasks can benefit from fulfillment services. It enables them to keep their operating costs low and still offer professional shipping.
- Startups: Startups with limited resources can use fulfillment to reduce their operating costs while having a scalable solution for shipping. This facilitates growth and expansion.
- Companies with seasonal business: Companies that have strongly fluctuating seasonal sales figures can use fulfillment to react flexibly to changes in demand. You don’t have to worry about adjusting your storage capacities.
- Companies that want to concentrate more on their core business: Fulfillment allows companies to focus more on their core business while outsourcing logistics tasks to specialists. This leads to greater efficiency and productivity.
- Companies that need fast and reliable shipping: Fulfilment partners can often ship faster and more reliably, which increases customer satisfaction and makes companies more competitive.
- Companies looking to expand internationally: Fulfillment can be helpful for companies looking to expand internationally, as it makes it easier to process orders in different countries and regions.
There are many aspects that speak in favour of a fulfilment service, which is an important support for companies in retail of all sizes and industries in order to optimize logistics processes. At the same time, time and resources are freed up for the main business and bottlenecks are avoided. But there are also disadvantages to using an external fulfillment service.
Fulfilment goal
Around 80% of entrepreneurs hope that outsourcing to a fulfillment partner such as Fiege Now, Orange Connex, Subke, DHL or DPD will give them a competitive edge, enable them to use external resources to fulfill time-consuming tasks and make their work significantly easier. Bottlenecks, which can occur particularly in seasonal business, can also be avoided.
Logistics providers should ensure a scalable, cost- and process-optimized service for online retailers with a reduced error rate. They are an important component for efficient storage, management and control of the flow of goods and information.
Practical advantages of using this logistics solution:
- Taking over the inventory management of the articles including stocktaking,
- Taking over the entire order processing,
- Retailers can concentrate more on their core business,
- Shortening order processing,
- Increase customer service,
- Take-back and possible professional disposal of the products,
- Increase in bearing frequency,
- Leverage specialized logistics and expertise (pre FBA),
- Sending bulk mailings,
- Reduction of inventories.
Around 70% of online businesses already use a fulfillment service. However, only around 40% of companies with an annual turnover of less than €5 million do so. This is due to the fact that smaller companies start with in-house fulfillment, while companies with strong growth prefer to use an external provider.
Maintaining competitive advantages through fulfillment
There is a certain selection of logistics providers available for online business, which differ in terms of target group, tasks and fees.
By outsourcing tasks to a third-party provider, retailers and online retailers say they want to improve the following services:
- Optimization of the order status for customers,
- Improved returns processing with inventory reporting and photo creation,
- more sustainability in packaging and shipping,
- Reprocessing of the products,
- Planning and controlling the flow of goods, information and money along the entire supply chain,
- Flexibility in the use of storage space,
- Reduce the risk of incorrect picking and delivery,
- Absorbing the higher workload on action days,
- Locations of storage with good infrastructure to the end customer,
- Customer care,
- Transmission of the electronic signature upon delivery of the shipment,
- Collection service of the goods,
- Payment processing by invoice.
Result of the survey on fulfillment at Subke
Our question was: “What is particularly important to you in fulfillment?”
As a percentage of participants surveyed. Number of respondents: 2023 n=95 Source: subke.com
Pro:
- Outsourcing tasks: relieving the company of time-consuming tasks.
- More time for core business: focus on strategic and important tasks.
- External storage capacity: Access to storage space capacity without the need for your own warehouse management software and investment.
- High number of orders can be processed: scalability and flexibility in order processing.
- Professional packaging and shipping: Ensuring high-quality and reliable packaging and delivery to customers.
- Flexible access to employees: If necessary, a larger team can be deployed to handle the tasks.
Contra:
- Dependent on the third-party provider: Risk of dependency and trustworthiness of the service provider.
- Bound by long contract terms: Restriction of flexibility with contract commitment.
- Difficult quality control: the challenge of ensuring quality standards.
- Increased communication necessary: Need for close cooperation and constant coordination.
- Price adjustment: Possible price increases due to external service provision.
- Extensive contractual obligations: A key point in fulfilment is the service contract. The contract should be carefully examined and negotiated if necessary.
Reading tip:
Please note that this is a general overview and there may be individual advantages and disadvantages depending on the specific situation and needs of the company. Ask several service providers to compare the services and the contract.
FAQ - Fulfilment
What is the difference between fulfilment and eFulfilment?
eFulfillment refers to the entire order processing process for online retailers in e-commerce. This includes the acceptance of orders from the store, storage, picking, packing, franking, shipping and the processing of returns. The term
In eFulfillment, orders are automatically retrieved from the online store and the entire order processing is handled for the end customer. While the term
What does confection mean?
Picking is the process of assembling goods or products from a warehouse to fulfill orders from customers or other departments. This can be manual or automated and often includes packing and shipping orders.
What is meant by labeling?
Packaging refers to the process of assembling and packing products to make them ready for sale or shipment. This can include, for example, the assembly of individual parts into a finished product, labeling, or packaging in cartons or films.
What does pre-fulfillment mean?
Labeling refers to the application of labels or tags to products or packaging to communicate information such as ingredients, origin, shelf life or warnings. It is used to identify and distinguish products and is required by law in many industries.
What is DHL Fulfilment?
The “pre-fulfillment” service is often used by online retailers who sell their goods on marketplaces such as eBay, Amazon, Temu or Zalando, but who use an external fulfillment service provider rather than the marketplace provider for warehousing and, in some cases, order processing.
What does micro-fulfillment mean?
DHL Fulfillment is a service offered by Deutsche Post DHL Group that supports companies in the storage, packaging and delivery of their goods.
