Accepting the order

The customer order is the most important stage of the sales process and the fulfillment process. It is easy to treat order acquisition as a stage that is only impacted by sales, but the teams responsible for order fulfillment (Operations, Customer Service, Finance) are all responsible for key components of the buying process.

The easiest way to see the responsibility they bear is to consider the information the customer requires before completing the transaction. A few examples include:

• Shipping costs
• Shipping policies and timelines
• Return policies
  

It is imperative that potential customers have access to all relevant data before the sale is completed. And these teams (Operations, Customer Service, Finance) must make sure that data is available and accurate.  In addition, they must follow through on the promises made in those deal terms or customers won’t return.  So in many cases, the impact of the fulfillment process is felt before the sale is even made.

Order fulfillment begins

System connections are vital to successful, low-cost order fulfillment.  Standard systems usually include:

• ERP (Enterprise Resource Planning) like NetSuite, SAP, Oracle or Sage
• Ecommerce like Magento, Shopify Plus, Hybris, or Demandware
• WMS - (Warehouse Management System) like 3PL Central or an IMS like Stitch Labs
• TMS (Transportation Management System) like ShipHawk

Most companies run an ERP alongside an eCommerce platform of some kind.  Many also run a WMS and a TMS.  

Automation starts with the flow of the order data from the commerce platform into the other systems for processing.  It is not possible to completely automate fulfillment if the systems are not connected.  Modern APIs and plugins make these connections easy and fast for most shippers.

NOTE: Every company should run some level of TMS as software for running logistics has been proven to lower shipping costs and is available in all sizes and costs, including free.

Order Fulfillment Best Practices (Step One)

• Provide customers will all relevant data and terms up front and in front of any registration walls. You will notice order conversion fall if any information that is required to complete the sale is gated.
• Ensure policies (shipping, returns, costs, etc.) are clear, easy to find, and acceptable to the target audience.
• Understand the customer by gathering all relevant information in a non-obtrusive way
• Connect all internal systems (ERP, TMS, etc.)
• Maintain accurate inventory data

Order fulfillment automation

What happens after the order has been finalized?  The customer clicked buy, the money transfer was initiated, and now the order must be shipped.

There are 5 levels of order fulfillment automation that shippers can choose from.  Each level provides a little more automation than the preceding level.  And each level impacts the next five steps of the order fulfillment process.

The 5 levels of order fulfillment automation

1. Manually select and key order - Manually select order, print pick slip, and print labels, one order at a time.
2. Scan box to populate order - Manually verify order details and rate carriers. Print one order at a time.
3. Scan box to populate order then batch - Manually verify order details and rate carriers. Batch process multiple orders.
4. Scan box to print label - Scan box and fully automate one order at a time.
5. Don’t scan - Fully automate multiple orders.  

A level one automation is a completely manual process where a level 5 automation is a completely automated process.  Usually, a shipper’s fulfillment labor costs are directly correlated to the fulfillment automation level employed in their warehouse(s).

Order Fulfillment Best Practices (Step Two)

• If inventory data is accurate and complete, the best practice is to employ level 4 or 5 automation.  These levels remove manual decision making and rely on data-driven business rules to decide how each order is fulfilled.
• If inventory data is incomplete, best practice is to employ level 3 automation, but re-keying updated order details may be required and may result in an increase in errors, carrier charges, and packing materials usage.  
• If inventory data is incomplete, the best practice would also include improving inventory data.

Generating the pick list

This step is frequently referred to as “pick-and-pack.” Although we separate pick-and-pack into multiple stages, it starts with pulling the order from the shelves.

There are multiple methods for generating the pick list:

• The interface of a workstation can be used to reference order contents.
• A pick list can be manually printed when the order is confirmed.
• A pick list can be automatically printed upon order confirmation.
• A pick list can be populated on a mobile device.

Order Fulfillment Best Practices (Step Three)

• Auto generate pick lists either on paper or a mobile device

Box selection

After items are picked, the order moves to packaging selection. The first step is to select the right shipping box. With a manual strategy, a staff member looks at the ordered items, maybe measures, and chooses a box by eyeballing the options. With this method, it's impossible to determine whether this was the most efficient choice. This variance affects both the cost of packing materials and the shipping cost since most carriers now employ dimensional pricing.

An automated approach would use software to configure the order when it is placed by the customer.  Configuring the order in advance offers several key benefits:

1. Knowing the box the order will be packed in allows proper rating at the point of sale.  The box size will impact the shipping price if shipment pricing rules use real shipping rates for setting buyer shipping prices or subsidies. Accurately determining the price in advance means the price the customer pays is also accurate.
2. Determining the proper packaging allows cross-carrier and cross-mode rating so the optimal carrier and service can be selected in advance and the shipment labels can be batch processed.
3. Knowing the box in advance allows the optimal box to be indicated on the pick ticket or sent, automatically, to the box making machine. This could eliminate packing stations in the fulfillment process.

Box selection affects both the cost of packing materials and the shipping cost since most carriers now employ dimensional pricing.

With the right technology solution, you can set a standardized process for choosing the best boxes based on item weight, size, and value.  This functionality also supports the ability to combine orders.

Order Fulfillment Best Practices (Step Four)

• Auto determine packing materials and box selection at the time of sale
• Indicate appropriate box on pick slip
• Use an API to communicate box size directly to a box making machine (if one is used)
• Combine orders whenever possible

Packing Materials

Selecting the box is the first step in packing an order. Additional materials are required to wrap and/or pad the items so the meet the carrier’s packing requirements and are eligible for cargo insurance. Materials should be programmatically assigned and measured for cost analysis and to support programmatically generating final packed weights and dimensions.

Labor

Calculate labor by order while taking into account materials usage and the labor required to utilize different material times. Not only does this help to determine the portion of the true shipping cost that is related to labor, it also serves as a benchmark from which to measure and track labor utilization.

Order Fulfillment Best Practices (Step Five)

• Programmatically assign packing materials
• Measure labor on a per order basis

How to select the right shipping carrier for every order

As noted above, there are many options for carrier selection starting with manually keying in the final package weight and dimensions, populating a list of possible carriers, and selecting one based on the requirements of each specific order. Not only is this process time consuming, but it is also proven to increase the shipping cost.

One of the most popular shipper requests is to remove order-by-order decision making from the warehouse team. Fulfillment automation allows shippers to set rules to automatically select the best carrier. This may be the cheapest or it may be the least expensive once additional factors like on time delivery performance and damage are factored in. Carrier selection workflows can be eliminated no matter how many carriers are involved.

Business rules and logic

The best way to keep shipping costs to a minimum is to use preset business shipping rules to define carrier selection criteria and then to automate the selection for every order. The system can account for far more variables than a human, and the system is not swayed by preference. The variables that must be considered when selecting a carrier include:

• Package weight
• Package dimensions
• Order value
• Carrier type (parcel/freight)
• Packaging type (carton/pallet/drum/loose/unpacked)
• Origin address and type (commercial/residential)
• Destination address and type (commercial/residential)
• Service requested
• Carrier historic service performance by lane
• Carrier historic damage rates
• Carrier base rate
• Accessorial charges

The lowest shipping price will only be realized when all relevant components are factored into the query. And even if the shipper uses only a few carriers, the best carrier will change based on each order’s unique characteristics.

How actual service times impact true shipping cost

When ShipHawk examined delivery times from hundreds of thousands of 2-day shipments, we found that USPS Priority Mail frequently outperformed both FedEx and UPS 2-day services.

• USPS Priority Mail average time in transit - 2.17 days
• FedEx/UPS 2-day - 2.46 days

Order Fulfillment Best Practices (Step Six)

• Pre-configure business rules to account for shipping policies, shipping subsidies, carrier cost requirements, and carrier service requirements.
• Automate carrier selection at the point of purchase.
• Batch label print or use scan to print functionality.

Carrier booking and dispatch

There are several options for carrier notification and dispatch:

• Call the carrier each time a shipment is processed
• Schedule a recurring pickup
• Have the carrier drop a trailer for loading as orders are ready (applicable to high volume shippers only)

Once the carrier has been chosen, the order information needs to be entered into the proper carrier system so they know when the shipment will be available for pickup. Even if a recurring pickup is scheduled, the shipment data must still be communicated to the carrier so they send the right equipment to pick up the shipments.

Order Fulfillment Best Practices (Step Seven)

• Use third party software to connect to all carriers via a single API. This is the most cost effective connectivity.

Carrier pickup pitfalls

There are several additional carrier pickup pitfalls shippers need to be aware of:

• Linear foot rule - Less-than-truckload pallets can not take up more than the predetermined parameters of weight and space (usually 11 linear feet and 500# per linear foot) on a single truck. Doing so may result in linear foot charges that may be in the thousands of dollars.
• Cubic capacity - Each truck has a limited cubic capacity. If a day’s shipment volume exceeds the cubic capacity of the truck, a portion of that day’s shipments will not be picked up.
• Orders not ready on the dock - Trucks don’t wait. The driver has a route to run with other customers who need pickups as well. Shipments not ready when the truck arrives will frequently be left behind.
• Scheduling for multiple same-day pickups - Many companies have seasonal fluctuations in shipment volumes. If carriers are not notified, and more than one truck is needed to handle the quantity of shipments, the overflow will be left for a pickup the following day.

Order Fulfillment Best Practices (Step Eight)

• Don’t violate the carrier’s linear foot rules. Book a partial or full truck for larger loads.
• High volume shippers should arrange to have their carriers drop trailers so they can be filled at the convenience of the shipper.
• Notify carriers of all changes in shipment volume

Synchronizing data and carrier tracking

Today's customers want to know order status immediately and they want to be kept up-to-date on every stage of the shipment. Most carriers provide shippers with a tracking number for generic shipment status updates. Sending customers to the carrier website is a manual and inefficient way of updating customers.

The alternative most shippers are moving to is to provide buyers with a branded, on-site tracking experience. Automated push notifications can send customers updated tracking information based on their preferences. This gives customers a greater sense of control over the shopping experience and leads to more repeat purchases. Not only does tracking enhancement save the time and energy it would take to deliver information but it also optimizes the end user experience of the brand.

Order Fulfillment Best Practices (Step Nine)

• Keep buyers on brand and bring tracking data back to a page the company controls.
• Keep customers updated by email and text message.
• Include order status updates alongside tracking information so the customer has one place to get all information related to their order.

Automate carrier invoice reconciliation

A sharp-eyed accountant knows how to match the information on bank statements with carrier invoices. But, there's no need to pay for more accounting fees than you need to.

The insights provided by a quality transportation management system ensure accurate data in real time. In addition, original shipment quote criteria and carrier prices are stored so they can be automatically referenced when the carrier invoice is received. As with other processes, shipping software can remove or reduce human error that can add additional costs to the invoice reconciliation cost.

Rebills

When the carrier says the shipment criteria is different than the criteria submitted in the quote, companies can run into rebills, which can be costly. These changes generally come about due to submission of misinformation about package weight, dimensions, dimensional weight, or freight class. This soft cost is probably one of the least expected that businesses run into. Fortunately, it is avoidable.

A modern transportation management system takes into account all the characteristics of the order and the destination up front so quotes are accurate. The system also stores a record of the quote and the data used for the quote so when carriers try to come back for more money, shippers have the evidence to back up the lower price.

Order Fulfillment Best Practices (Step Ten)

• Use software to manage and automate carrier invoice reconciliation.
• Store initial quote criteria and carrier quote data to use to refute carrier rebills.