How To Build Your Ideal Order Fulfillment Process

January 03, 2025

by Jaidyn Farar

When one survey asked consumers about the most important shipping factors, the results were unsurprising. Respondents ranked price (63%), speed (39%), and convenience (27%) as the most vital aspects of the delivery experience.

As an online merchant, your success largely depends on your ability to provide customers with the fastest, cheapest, and most convenient delivery experience possible.

The way to get there? Understanding and optimizing every stage of the order fulfillment process.

What is order fulfillment?

Order fulfillment is the end-to-end process of receiving, picking, packing, and shipping customer orders. It includes the receiving and storage of inventory, as well as returns management.

The goal of order fulfillment is to get the right products delivered to the right customers, meeting their expectations for speed and accuracy. A well-designed fulfillment process not only improves operational efficiency but also increases customer satisfaction and loyalty.

Large businesses often fulfill orders from their own distribution or fulfillment centers or right from the store. Alternatively, they might rely on a third-party logistics provider (3PL) to store inventory and pick, pack, and ship orders.

Whether you manage fulfillment in-house or partner with a third-party provider, mastering the process is essential for keeping your business competitive.

The benefits of efficient order fulfillment

At its core, order fulfillment is simply about getting products from one place (your fulfillment center) to another (the customer). Fully optimizing the process is far less straightforward, but the organizations that go above and beyond reap major benefits.

When operating at maximum efficiency, your order fulfillment network will decrease costs, improve the customer experience, and increase your business’s ability to scale.

Lower costs. Efficient order fulfillment reduces costs by speeding up processes and minimizing errors. With fewer mistakes like mispicks or delays, you’ll save money on corrections, returns, and lost inventory.
Better customer experience. Customers want their packages to arrive within the promised timeframe, free of damage, and including all the products they ordered (no more, no less). The order fulfillment process determines whether orders are accurate, well-packaged, and delivered on time—or whether your delivery experience is marked by damage, inaccuracies, and delays. Meeting or exceeding customer expectations builds trust, encourages repeat purchases, and fosters loyalty to your brand.
Greater ability to scale. The best order fulfillment processes can scale easily as your business grows, allowing you to expand operations without needing to upgrade to new facilities or hire new workers. This makes it easier to broaden your reach, bringing in customers from around the world.

Steps of the order fulfillment process

So, how exactly does order fulfillment work? The stages of the process include receiving, picking, packing, shipping, and returns management.

1. Receiving

The order fulfillment process begins with receiving inventory from suppliers. As new shipments of stock arrive, the business inspects them to verify quantities and quality, cross-checking them against purchase orders.

Once verified, each item is labeled with a barcode or RFID tag for tracking and moved to designated storage locations in the warehouse. During this stage, the business will make sure that products are organized efficiently so they’re easily accessible for picking.

Technology like warehouse management systems (WMS) plays a critical role in tracking inventory location and maintaining real-time stock accuracy.

2. Picking

When a customer places an online order, the order information is passed from the ecommerce platform to the warehouse management system. Pickers then receive instructions via pick lists or digital devices connected to the WMS. These lists show each product’s location, quantity, and any special instructions, like expiration dates.

With their pick lists in hand, pickers navigate the warehouse, collecting items from shelves or bins and using barcode scanners to confirm accuracy. Automated solutions like robotic picking systems can speed up this step, reducing labor and error rates.

3. Packing

After items are picked, they’re sent to the packing station, where they’re checked for accuracy and prepared for shipment. Packers choose appropriate dunnage and containers to protect goods during transit, making sure every package is secure. They then generate shipping labels and attach them to packages.

For businesses focusing on branding, packing can also include adding marketing inserts, branded packaging, or personalized notes.

4. Shipping

Once packages are ready to go, they’re sorted by destination and handed off to a carrier like USPS, FedEx, or UPS for delivery. Integrated shipping software like EasyPost Enterprise Shipping is used to generate carrier-specific labels, compare shipping rates, and track delivery progress.

5. Returns processing

Though most companies would be happy to avoid returns entirely, they’ve become an important part of the online shopping experience for consumers. Handling returns is an important part of the fulfillment process.

When a customer initiates a return, the business must generate and send a return label, either physical or digital. Once the returned item arrives at the warehouse, workers inspect it to determine whether it can be restocked and sold, repaired, or discarded. Restockable items are returned to inventory, while damaged goods are disposed of or refurbished.

You should aim to make the returns process as quick and hassle-free as possible. As Eric Wimer points out, “The faster you get someone their refund, the quicker they get back into the ecosystem to shop”—hopefully at your ecommerce store.

Types of order fulfillment

While some companies run their own fulfillment networks, others choose to outsource fulfillment, relying on third-party partners to handle things from start to finish. And others avoid the hassle of inventory management by relying on dropshipping.

In this section, we’ll run through the pros and cons of in-house, outsourced, dropshipping, and hybrid fulfillment models.

In-house fulfillment

In-house fulfillment, also known as merchant fulfillment or self-fulfillment, is when a business manages the order fulfillment process internally. This approach requires dedicated space, staff, and tools to handle receiving, picking, packing, and shipping.

In-house fulfillment lets businesses maintain complete control over their fulfillment workflow and customer experience. Although it doesn’t come with added fees like outsourced fulfillment, it can still be costly and time-consuming. This is especially true for businesses with fluctuating order volumes or limited space.

In-house fulfillment is often chosen by small businesses with manageable order volumes. But it’s also the go-to strategy for larger businesses with the infrastructure and expertise to fulfill orders efficiently.

Outsourced (third-party) fulfillment

Outsourced fulfillment involves partnering with a third-party logistics (3PL) provider to handle storage, order processing, and shipping. The 3PL operates large fulfillment centers and uses technology to streamline fulfillment across multiple locations. This makes outsourced fulfillment a good option for businesses with geographically dispersed customer bases

The major benefit of outsourced fulfillment is scalability; with a 3PL handling fluctuating order volumes and seasonal surges, the ecommerce merchant doesn’t need to constantly invest in new logistics infrastructure.

However, outsourcing also requires relinquishing some control over the fulfillment process, and miscommunication or service issues can directly impact customer satisfaction.

Dropshipping

Dropshipping is a model where suppliers ship products directly to customers, eliminating the need for a business to purchase and store inventory. When a customer places an order, the business simply forwards it to the supplier, who handles the picking, packing, and shipping.

Dropshipping is appealing because you can get started without a large upfront investment. But it’s also risky; businesses sacrifice control over inventory and shipping, which can lead to stockouts or delivery delays. Dropshippers may also struggle to find reliable suppliers to partner with.

Hybrid fulfillment

Hybrid fulfillment combines two or more fulfillment methods. For example, an organization might handle some orders in-house while outsourcing others to a 3PL, or they might use dropshipping for specific products.

A hybrid approach offers flexibility, allowing businesses to adapt their strategy based on order volume, product type, and customer location. However, it also adds complexity and requires strong coordination.

Things to consider when choosing an order fulfillment strategy

To choose a fulfillment method, start by evaluating your business’s needs and goals.

Business size

Business size and order volume play a critical role when crafting a fulfillment strategy. Smaller businesses with limited orders may find in-house fulfillment manageable and cost-effective, while larger or rapidly scaling businesses might benefit from the flexibility and capacity of a 3PL.

Questions to consider:

What is my current order volume?
How many distinct products do I sell?
How much do I expect volume to grow in the next 6–12 months?
Do I have the staff and space to manage fulfillment internally at my current size?
Are my operations equipped to handle seasonal or unexpected order spikes?
How much time and money am I willing to invest in fulfillment infrastructure?

Sales channels and technology

The sales channels you use—such as your website, marketplaces, or social platforms—determine the level of technology integration you need in your fulfillment strategy.

Whether you outsource or keep logistics in-house, you’ll need a fulfillment solution that integrates with your ecommerce platform and other channels.

Questions to consider:

What platforms and sales channels do I sell on? How well do they integrate with potential fulfillment providers?
Do I need real-time inventory tracking to avoid overselling?
Does my tech stack support multi-channel or omnichannel order management?
How important is automation in my fulfillment workflow?

Location of customers

Your customers’ locations impact shipping times, costs, and your ability to meet delivery expectations. So when choosing between in-house and outsourced fulfillment, take location into consideration.

While a single in-house warehouse may work well for a small, localized business, a company with a national or international customer base might need the reach of a 3PL with distributed fulfillment centers.

Questions to consider:

Are my customers concentrated in specific regions, or are they geographically dispersed?
How important is fast delivery to my customers? Can I achieve that with my current setup?
Would distributed fulfillment centers help me reduce shipping costs and transit times?
Do I need international fulfillment capabilities?

Customer experience

Whichever fulfillment strategy you use, remember that your most important goal is to create a great customer experience.

“Promote your delivery experience to being a first-class citizen. For years, we've all lived through a world where your delivery experience … [was] just a cost to manage. Those days are dead and gone. … So think about the experience that you want your customers to have, and then implement your carrier network, implement your software, implement your automation, your process, your people … around what you want that end experience to be.” — Kevin Gaul

How to master order fulfillment: 5 best practices

Mastering order fulfillment doesn’t happen overnight, but businesses with the right expertise and technology can develop seamless processes that cut costs and save money.

The best practices in this section can guide you on your order fulfillment journey, but if you want to make sure you’re seeing the big picture, consider bringing in outside experts to help. For example, Summit Advisory Team’s consultants offer expert guidance on everything from omnichannel operations to warehouse management. Learn more here.

1. Implement a multi-carrier shipping strategy

Customers care a lot about shipping speed, and they’re not afraid to spread the word when they have negative experiences. Almost a third of those who experience delays say they’re likely to discourage family and friends from purchasing from the business.

Cost matters too—while affordable shipping is a baseline expectation these days, over 40% of consumers say that free shipping is a very important consideration when shopping online.

The takeaway for merchants? You need to do everything in your power to make sure packages arrive on time and don’t cost an arm and a leg to ship. Implementing a multi-carrier strategy is one of the most impactful shipping decisions you can make.

Relying on a single shipping carrier exposes your fulfillment operations to unnecessary risks, including delays, capacity issues, or cost spikes. A multi-carrier approach mitigates these risks by giving you the flexibility to choose the best carrier for each shipment based on cost, speed, and reliability.

To implement a multi-carrier strategy, analyze your shipping data to identify patterns in volume, regions, and customer preferences. Next, partner with carriers that align with your needs, and integrate their systems with your fulfillment software.

To automate the process, simply use multi-carrier shipping software that automatically connects with dozens of national, international, regional, and local carriers.

2. Forecast demand accurately

Accurate demand forecasting ensures you maintain optimal inventory levels, avoiding overstocking or stockouts. This is critical throughout the year, but especially for busy times like the holidays.

Poor forecasting can lead to delayed orders, higher storage costs, and missed revenue opportunities. And the larger your organization, the larger the impact.

Businesses should analyze historical sales data and identify trends by season, product category, and sales channel. Using advanced forecasting tools, such as demand planning software or AI-powered analytics, can help you account for factors like market trends, economic shifts, and upcoming promotions.

3. Make data-driven decisions

Data is the foundation of effective order fulfillment; in order to optimize processes, you need to know exactly what’s going on in every logistics facility at any given moment. What are your order accuracy rates? What about pick-and-pack times and shipping costs? Tracking these metrics reveals inefficiencies to address, while relying on intuition alone can lead to lost time and money.

To implement data-driven decision-making, you’ll need to invest in technology that tracks key performance indicators (KPIs) across your fulfillment network. A warehouse management system (WMS) or enterprise resource planning (ERP) platform can centralize data collection and visualization, while a dedicated shipping data analytics platform lets you dive into the specifics of delivery.

4. Automate the process

Automation reduces manual errors, speeds up fulfillment, and gives your team more time to focus on strategic tasks rather than repetitive work.

While small and large organizations alike benefit from automation, it’s especially impactful for large enterprises with complex fulfillment logistics. Technologies like automated picking systems, conveyor belts, and shipping label generation software are game changers in these high-volume environments.

To take full advantage of automation, start by identifying repetitive tasks in your fulfillment workflow, such as inventory updates, picking, and shipping label creation. Then invest in systems to handle these tasks with precision.

While physical automation is exciting, don’t forget about the software running things behind the scenes. All of your automation tools must be integrated with your WMS or ERP to provide end-to-end visibility and efficiency.

5. Create contingency plans

Even with a robust fulfillment process, unexpected supply chain disruptions—extreme weather events, carrier strikes, increased shipping rates and surcharges, system failures, and more—can derail your operations. Contingency plans help you respond quickly and effectively, minimizing the impact on customers and your bottom line. Without a plan, your team may scramble to find solutions under pressure, leading to poor decisions and delays.

Creating a good contingency plan starts with identifying potential risks in your fulfillment process. Once you’re aware of potential pitfalls (diving into your fulfillment data will help reveal them), you can develop alternative workflows, such as integrating with backup carriers or shifting order processing to another warehouse.

In addition to preparing for shipping issues, make sure to maintain relationships with secondary suppliers so you never run out of critical inventory.

Potential challenges to consider

It’s useful to be aware of some of the challenges businesses commonly face when starting up (or scaling) their fulfillment operations.

Inventory visibility. Many organizations lack inventory visibility because they rely on outdated systems or fragmented processes that fail to provide real-time updates. The result? Stockouts or overstocking, each of which comes with harmful consequences. To avoid these issues, invest in an inventory management system that integrates with your fulfillment tools to offer real-time tracking.
Seasonal changes. Seasonal fluctuations in demand can overwhelm fulfillment operations if you’re not prepared to handle them. By using historical data to predict seasonal spikes, you’ll give yourself plenty of time to align staffing, inventory, and carrier resources accordingly.
Workforce management. Managing a warehouse team during peak periods or in a tight labor market can result in inefficiencies and high turnover. To make the most of your workforce, try implementing cross-training programs so staff members can handle multiple roles. Get more ideas for handling logistics labor challenges in this podcast episode.

Frequently asked questions

Before wrapping up, let’s take a look at some frequently asked questions.

What is the difference between order fulfillment and shipping?

Order fulfillment encompasses each task that’s required to transport products from a business to the end customer. Shipping is one stage of the broader order fulfillment process; it involves choosing carriers and shipping methods, generating labels, and tracking packages.

Is order fulfillment part of the supply chain?

Yes, order fulfillment is an important part of the supply chain. It involves receiving, processing, and delivering customer orders, bridging the gap between inventory management and final delivery.

Make order fulfillment easy

Crafting a cost-effective, scalable order fulfillment process isn’t easy—but EasyPost Enterprise can make things simpler for high-volume shippers. This suite of solutions offers both technology and expert guidance to help your business save money on shipping without sacrificing quality.

Talk with one of our fulfillment experts to learn what EasyPost Enterprise can do for your business.