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The Founders Guide to Ecommerce Order Fulfillment Terminology

October 29, 2019

Order fulfillment has many moving parts. As a small business owner, it is a good idea to familiarize yourself with the terminology. That way, there will be no surprises if you outsource fulfillment to a company that charges a fee for different parts of the fulfillment process. It will also help you handle in-house fulfillment professionally if you decide to go that route. 


Here is a list of all the order fulfillment terminology you need to know in 2019:


SKUs

SKUs stands for Stock Keeping Units. The products in your warehouse each have an SKU to help keep track of inventory. You will add SKUs to inventory management software on the computer system. When an order is placed, the software identifies the correct item that the customer ordered based on the SKU. This ensures the right item is picked, packed, and delivered to the customer.


Stickering

Many retailers want stickers placed on the boxes containing the products. For example, K-Mart may request that their product codes be applied to retail boxes prior to shipment. Fulfillment centers can apply stickers to your boxes if needed. There is usually a fee for this service.


Picking and Packing

Pick and pack refers to locating and boxing the item(s) for delivery to the customer. A warehouse staff member will find the item based on the SKU, then prepare it for shipment. If you hire a fulfillment center, there is always a fee for picking and packing orders. The fee can vary. You may receive a discount on the fulfillment fee if you fulfill a lot of orders each month. Necessary packaging materials are usually including in the fulfillment fee. The pick fee is based on the number of items in a shipment.


Slotting

The placement of stock inside a warehouse matters quite a bit. The decision about where to store inventory can have a significant impact on order picking efficiency. Slotting is all about optimizing the storage of inventory, which can improve order fulfillment speed and reduce mistakes.


Receiving

When you outsource fulfillment tasks to a company, one of your first steps will be shipping your products to their receiving department. Once the warehouse receives your products, they are cataloged, sorted, and placed on storage shelves until sold. Some fulfillment centers charge for receiving items in bulk, while others don’t charge a receiving fee at all. The receiving fee can be hourly or based on the number of SKUs.


Storage Fees and Storage Insurance

Products are stored in warehouses. This can be your own warehouse; however, renting or owning storage space can be cost-prohibitive for many small businesses. Instead, online retailers often rely on third-party fulfillment centers to store their inventory. Of course, they charge a storage fee for this service. However, this usually is much less than the cost of renting and owning a private storage facility. Storage fees are charged monthly. The fee is calculated as the cost per cubic foot or per pallet. You may also wish to pay for storage insurance depending on the value of your inventory.


Customer Support

This is one of the most challenging parts of order fulfillment. Customers often have questions after the order is placed. They may need help locating an order, want to inquire as to why an order is delayed, wish to change an existing order, change the delivery address, or want to cancel an order altogether. Damage in shipping, incorrect orders, lost or stolen shipments, and more can also necessitate a customer support team. You can always consider outsourcing your customer support, as well.  


If you outsource fulfillment, the level of customer support can vary significantly from a dedicated 24/7 customer support team to automated or email support alone, and everything in between. Think about the level of support your products require when you hire a fulfillment company.


UPC

The Universal Product Code or UPC is a 12-digit code split into four unique parts. The first is a single digit that identifies the remaining digits. For example, UPCs that start with 0 may designate a regular UPC, whereas a 5 indicates a coupon or voucher. The following five digits represent the identity of the manufacturer, and the next five refer to the specific item number. The single-digit, in the end, is used to verify the code when it is scanned.


Bill of Lading

A BOL is a document used to show the receipt of freight services. It is proof that the carrier received the goods from the shipper in good condition. It is a type of contract. All products should be checked to ensure that the delivery is not damaged and that all items on the bill are present before signing.


Shrinkage

This refers to the loss of inventory caused by theft, damage, scrap, product breakdown (ex. food or cosmetics past their shelf life), and more. A professional storage facility can reduce shrinkage by keeping your products stored in a safe, secure, temperature-controlled environment. 


Set Up

You can set up inventory by adding it to the inventory management software yourself, but this can be burdensome if you have a lot of SKUs. Fulfillment centers can do this for you for a fee. Inventory management software helps manage and control the logistics of fulfillment to reduce mistakes and streamline operations. Correct set up is the first step to an efficient order fulfillment process.


Supply Chain

Technically, the supply chain starts from creating the product from raw materials until the finished product reaches the customer’s doorstep. Needless to say, there are many parts of the supply chain. Likewise, there are many supply chain strategies that can be used to reduce costs and streamline logistics. 


No one supply chain strategy is better than the other. It really depends on your business model and goals. The logistical process that makes up the supply chain is customizable. Order fulfillment is an essential part of the supply chain. Manufacturers, sellers, shipping providers, and customers all play a role in the supply chain. 


Sound complicated? 

You can increase online sales by hiring supply chain managers, or you may consider outsourcing parts of the supply chain (such as order fulfillment) to companies that specialize in it. 


Outsourcing parts of the supply chain to the experts help take the burden off small business owners since it can be difficult to ‘do it all’ yourself. Doing this frees up your time and energy to focus on growing your business rather than trying to become an expert in supply chain management overnight.


Don’t let in-house order fulfillment complicate your business. If you don’t have time to build your own fulfillment operation, an eCommerce order fulfillment company may be the solution you need.

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