Order Fulfillment: Commodity or Competitive Advantage?

February 23, 2021 by Harry Drajpuch

If your company sells its products online, there’s an important question that you need to ask yourself: can customers buy your products – or very similar products – from other eTailers? If the answer is ‘yes,’ you need to look for ways to get a leg up on those competitors.

In addition to great customer service, order fulfillment is going to be the key competitive advantage that separates you from the pack. In this article, we’ll explain this advantage in greater detail and help you identify 3PL partners that treat fulfillment as a sales-driving asset and not just a commodity.

What is Order Fulfillment?

order-fulfillment-101950547Simply put, order fulfillment involves everything that happens ‘after the click’ (i.e., after your customer completes an online order). The basic elements of fulfillment include receiving the order in the warehouse, picking the order from inventory, packing it, and shipping it to the customer.

When you consider that this same process will be repeated for every one of your company’s online orders (whether they number in the hundreds, thousands or even millions), you can see that the opportunity for mistakes – and disappointed customers – is high. If an order isn’t accurate, if it arrives late, if the packaging doesn’t present your brand in a positive light…these are all things that can make your customers choose a competitor for their next order.

Conversely, when these things are executed flawlessly and the brand is presented favorably, your company can win long-term customers.

The fulfillment process is a critical competitive lever you can pull to win the hearts (and wallets) of your customers. Because of this, many companies outsource order fulfillment to an expert 3PL provider instead of handling it themselves.

Entrusting order fulfillment to a 3PL

When it comes to order fulfillment, there are many advantages a 3PL brings to the table that your operation will not likely enjoy on its own. Some of these include:

  • The ability to scale operations, where the warehouse space and resources you use (and pay for) flexes with your order volumes
  • The ability to expand your warehouse network across multiple 3PL distribution centers
  • The ability to economically manage labor when you have fluctuating volumes – 3PLs can cross-train associates and shift them across operations as needed
  • The ability to personalize every aspect your product’s packaging – from dunnage and inserts to the outer package
  • The ability to leverage automation to drive labor productivity without having to invest significant capital on your own
  • The ability to obtain lower parcel rates as 3PLs can negotiate with carriers based on their aggregate shipping volume across all customers
  • The ability to handle multi-channel fulfillment with your retail customers in addition to B2C

While 3PLs can certainly provide a host of fulfillment benefits for your operation, that doesn’t mean that every 3PL will truly give your brand the competitive advantage it needs.

Choosing a 3PL that gives you a competitive advantage

Many 3PLs see order fulfillment as a commodity – a non-customized service where all customers and products are treated largely the same. Other 3PLs, however, truly understand the competitive advantage that fulfillment can bring to a brand and will essentially work as a member of its customers’ teams to optimize operations and boost performance.

So, how can you tell the difference between these two types of 3PLs?

One way is how they approach pricing your business. If a 3PL is willing to give you a price quote based only on the information you enter in a form on its website, that 3PL views fulfillment as a commodity. They’ll store your product, pick it, pack it, and ship it, but they may not go the extra mile to optimize your operations.

A 3PL that treats fulfillment as a competitive advantage is going to put a lot more thought and effort into lining up your needs with its service capabilities. Before it can give you a quote, such a 3PL may ask for product and packaging samples that reflect what you want your customers to receive. It will then ask questions to understand current processes and may suggest ways of doing it better.

In short, you’ll likely have a significant amount of back and forth with this type of 3PL before you ever receive pricing.

In addition to this first impression, there are many other characteristics of 3PLs that indicate their ability to be a true strategic partner versus just another vendor. Following are some things to look for during the vetting process.

Is the 3PL proactive? Asking for samples and working with you to suggest fulfillment optimization strategies before providing pricing is a good sign. Once your product is in the 3PL’s warehouse, the 3PL largely becomes your eyes and ears. For example, you need your provider to speak up if products are arriving from the manufacturer in less-than-stellar shape. This can save you from disappointing customers, dealing with returns, and tying up your customer service reps with complaint calls.

Does the 3PL have experience with your product? Finding a 3PL that has experience in your industry and handling products like yours is always beneficial. Such a 3PL will have a better understanding of your customers’ expectations, as well as the shipping and ordering cycles common within your vertical.

Can you check the 3PL’s references? Ask these references about the experience of their customers. Is the 3PL offering a level of service that sets their company apart from the competition? Is the fulfillment process helping or harming the customer experience? Also, be sure to ask about their experience dealing with the 3PL when issues arise.

Does the 3PL have adequate coverage with well-trained associates? Be sure to ask about the 3PL’s associate retention rate and their ability to adequately staff your account. In light of the COVID pandemic as well as increasing competition for qualified associates among 3PL providers, logistics talent is at a premium. You need to make sure that your 3PL has a handle on staffing (and training) before it can make good on the competitive advantage it promises.

Customer experience is key

Ultimately, it is the experience of your customers that will determine whether order fulfillment is a competitive advantage for your brand. It’s very difficult to win new customers but very easy to lose them. When you partner with a 3PL for order fulfillment, remember that you’re entrusting that provider with a key aspect of the customer experience.

If you’re looking to turn fulfillment into a competitive advantage, talk to the fulfillment experts at Amware to start a conversation.

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Filed Under: Fulfillment Services