A Guide to E-Commerce Shipping and Fulfillment
As a growing e-commerce business, you need to get your shipping and fulfillment strategies in order if you want to be successful. No customer wants to wait over two weeks for their order, and even that is pushing it now, thanks to major corporations like Amazon who have incredibly fast shipping times. Your shipping and fulfillment strategy is one of the most crucial parts of doing business, so you need to nail it from the very beginning to make sure you always have product moving in and out. Luckily for you, we’re discussing the important parts of every basic shipping and fulfillment strategy, so you can get started on making yours the best it can be. Here’s a simple guide to e-commerce shipping and fulfillment to follow along with.
E-Commerce Packaging Decisions
When you first started your e-commerce company, you probably stuffed boxes in your living room and printed out customer addresses on plain copy paper before heading to the post office to pay for shipping. This was a good strategy for a budding entrepreneur, but now that you’ve blown past what the entry-level strategies can provide by successfully increasing your demand, it’s time to finally put your actual shipping and fulfillment strategy into action.
Product packaging is one of the biggest obstacles you will need to tackle in your shipping and fulfillment strategy. There are a lot of packaging decisions that need to be made, including what box size you need, which tape will do the trick, and if there needs to be any cushioning loaded inside with your product. You’ll also need to decide if customized packaging is something you want in your strategy to help create a memorable unboxing experience for your customers.
Your product packaging will be one of your biggest spending areas, and it will also directly affect the cost of shipping a product. This is because the box size and weight play into how much you will be charged for each parcel. Whether you choose a customized box printed in style or plain brown corrugated one, this is going to be one of the most important parts of your shipping and fulfillment strategy from the beginning.
Determining Your Shipping Costs
Before you start exploring all of the different shipping options and how much they cost, there is a simple question you need to answer: Who is going to pay for shipping? Are you going to absorb the cost of shipping to provide free shipping to the customer? Or, will you charge the customer for shipping and risk losing people at the end of the checkout process?
While most people would agree that free shipping is the best option for your customer, you have to consider if your budget can handle those shipping costs without tipping over. There are many strategies you can use to absorb the cost of shipping without it becoming a major problem. If you don’t plan on fully taking on the cost of shipping, you could split the bill in half and cover some while the customer gets a reduced rate. You could also make it seem as though the customer is receiving free shipping but add the cost back into the actual product cost, but this will make your items seem more expensive up front. Or if you just want nothing to do with the cost of shipping, you can simply risk losing sales and charge the customer the full amount when they check out.
Another less popular option is for you to simply pay the shipping and keep your product costs as they are. Keep in mind, when you pay shipping costs, you will drastically affect the customer’s decision to buy. It’s well-known that many people will go through the checkout process and abandon their cart due to high shipping costs. But you have to be sure that you’re earning enough profits to justify such a large chunk of your budget to paying for shipping costs.
Many companies use the split method that allows customers to receive a discounted rate while the company absorbs the remaining costs. This strategy keeps your spending lower while still encouraging consumers to commit to sales with lower shipping rates.
International shipping helps broaden your audience and grow your customer base beyond your home country. But there are different things to consider with your international shipping strategy, specifically the customs documentation required, and the additional taxes or fees customers should be aware of.
It’s best to include all of the details about extra taxes and fees for other countries in your shipping policy, so no customers are surprised by the additional charges. You also need to ensure your customs documentation is prepared for each order to help the officers who receive it know what’s in the packages and what type of product it is. This will increase the speed at which your products can get through customs and get to their destination.
When it comes to fulfillment, there are four main ways you can get things done.
The in-house or DIY method of fulfillment involves you and your team doing all of the work from your home, office, or company-owned location. For in-house fulfillment, you process and pack the orders before sending them to a carrier who will transport your products the rest of their way. You’ll need a solid tracking system and good inventory management skills to make in-house fulfillment work. With this method, all of the pressure is on you to get orders shipping on time, so it can be stressful if you don’t have enough resources to move product at the rate of your demand.
Outsourced (Managed by another company)
Outsourcing your fulfillment process can help you focus on more creative aspects of your business, such as product creation and branding. With this method, you partner with another company who has the space and capability to fulfill orders as they come in. You send your products from the manufacturer to this company and they store it until it’s time for delivery. Once they receive order details from your company, they will pack and ship the boxes for you. While it takes a lot of the stress off your shoulders to outsource fulfillment, it can also be a major pain if the company you partner with doesn’t have good communication and a strong operation.
Drop-shipping is a popular fulfillment option for budding e-commerce businesses who can’t afford to pay for large wholesale orders. When you work with a drop shipper, they handle the order fulfillment and shipping process entirely. You simply design or provide the product instructions while they package and mail it for you, only charging for actual sales. This eliminates your need to buy bulk products and keep them in stock until an order arrives. With drop shipping, however, you have less control over the finished product, and you may never see it before the product reaches the customer. That is something to keep in mind if you want to be able to confirm quality and functionality of every product.
Combination of the Above
Some companies use a combination of the other methods of fulfillment to create their entire strategy. Perhaps some of the slow-moving items are fulfilled in-house while more popular products are outsourced for fulfillment. You have the ability to use all the different options to create a custom strategy if a single one doesn’t satisfy what your company needs.
Receiving & Organizing Products
The first step towards fulfilling your orders is to get products from the manufacturer or whoever is making them, whether you’re working on your own to create items or sourcing them from other people. You have to keep a steady stock on hand that will match your level of demand, so you can quickly and efficiently ship them out, unless you’re drop shipping products.
Once you receive the finished products, it’s time to organize them and make sure they are easy to find when a new order comes in. You’ll need to locate multiple items and pack them quickly, so the better organized you are, the less time you’ll spend looking for merchandise. There are multiple ways to manage an inventory, whether by hand or with technology. Either way, you have to have a system in place to make sure you know what’s in stock and where it is.
Packing Products Efficiently
The next step of your fulfillment process is to pack and prepare each order for shipment. This involves getting the box for your product, filling extra space with void fill materials and cushioning, and sealing it with tape and shipping labels.
To effectively pack products, you need to plan ahead and create a space where workers or machines can do the job. If you will be packing boxes with manual labor, you will need workstations that enable employees to fill as many boxes as possible without creating too much downtime. Downtime is any time during the day spent refilling supplies or fixing mechanical errors. The less downtime, the more productive your packaging line will be.
Another option is to invest in automated equipment that will speed up your packing process and regulate the amount of materials used. While automation generates huge savings compared to manual labor, it has high start-up costs. Automation also improves productivity because a machine can go for hours and days without tiring. It will also provide higher performance because each box is packed and sealed with carefully calculated results, where as human error can cause boxes to be packed incorrectly as the day goes on.
Labels and Packing Slips
When it comes to fulfilling different orders, there’s going to be some orders where multiple different skus need to be packaged together. This is where a printed invoice or packing slip can help those combining items into boxes make sure everything is included from the order. You’ll want to have a system in place for including packing slips or invoices with a fulfillment request, that way every worker is able to get the right items without missing anything for an order.
Labels are another huge part of the fulfillment process, as you need a secure way to print and apply labels for shipments. There are various printers and application process you can use. No matter what strategy you choose, you’ll want a reliable label printer and system to created pre-paid labels, so you don’t have to wait and pay at the carrier location. They can simply come and pick up your parcels, scan them into their system, and be on their way. For different label application methods, check out this article we wrote on the subject.
Hopefully, you’ve gained a better understanding about the e-commerce shipping and fulfillment process. It may seem intimidating at first, but there are plenty of resources and helpful tips out there to help you nail the perfect strategy for your company. Once you have your plan in place, you can start shipping products with confidence knowing your customers will always get them on time.