Order fulfillment turns shopper dreams into reality. This article presents strategies to optimize parcel order fulfillment and help shippers stay competitive in today’s fast-paced market.

The efficiency of order fulfillment can make or break a business. It is the most critical part of the sales cycle. Order fulfillment can be broken down into four steps:

1. Receiving the Order: Capturing order details, checking inventory, collecting payment, and formally accepting the order
2. Processing the Order: Picking products, packing them, and preparing for shipment
3. Shipping the Order: Selecting the appropriate carrier, printing shipping labels, and sending the package to the customer
4. Handling Returns: Efficiently managing returns to maintain customer satisfaction and minimize losses

Each of the above steps has a dollar and time impact. Spending excess time on a task adds cost and decreases customer satisfaction. This leaves a company open to customer regret, order cancellations and, in the worst case, customer defections.

The order fulfillment process is a loop (see Figure 1) because each step sets up subsequent steps for success or failure. As an example, failing to check inventory levels before accepting an order can cause backorders. Customers must then wait for a complete order or freight charges will increase from split shipments.

Figure 1: Key Order Fulfillment Steps

Optimization finds the best possible solution from all viable options. It can maximize necessary components (like profits or throughput) or minimize components (like cost per order) that are less desirable.

Parcel order fulfillment is difficult to optimize. New product introductions, changing order quantities, promotions, seasonality, dimensions, etc. introduce multitudes of variables and constraints that overwhelm many traditional optimization processes.

It is also unlikely that companies can perform a comprehensive “clean sheet” optimization. Decisions made in the past introduce fulfillment tradeoffs (see Figure 2) that must be accounted for.

Figure 2: Common Fulfillment Tradeoffs

What can be done, however, is finding improvements that increase efficiency, reduce costs, and improve supply chain velocity. To succeed, follow a structured approach of “baseline, prioritize, and accelerate.”

Steps to Take

Baseline your current fulfillment operations before implementing any optimization effort. Establishing a solid reference point involves assessing your current performance, identifying bottlenecks, and understanding your operational capabilities.

Measure your current performance using key KPIs such as order accuracy, order cycle time, inventory turnover, warehouse space utilization, and return rates. These metrics provide a quantitative baseline against which you can measure future improvements.

Next, conduct a thorough walkthrough of the fulfillment process. Document each step, from order receipt to delivery, and identify areas where delays or errors occur. Consider the impact of growth on these processes.

Look for performance gaps versus your competitors. Likewise look at non-competing companies to stretch performance expectations and avoid being disrupted.

Lastly, collect feedback from customers and employees to identify specific pain points and areas needing improvement. Customer feedback highlights satisfaction issues while employee feedback identifies hidden operational inefficiencies.

Prioritizing warehouse initiatives requires a methodical approach. Start by listing all potential initiatives and evaluate their costs, both initial and ongoing, as well as their expected timeframes for implementation and benefits realization.

Focus on initiatives that offer the highest return on investment (ROI) with the lowest cost. These should be prioritized as they provide significant improvements without straining the budget. For example, implementing a basic inventory management system might be more cost-effective and quicker to implement than a fully automated picking system.

Next, assess the time factor. Prioritize initiatives that can be implemented quickly and provide immediate benefits. Short-term wins build momentum with stakeholders. For instance, reorganizing the warehouse layout for better efficiency can be done relatively quickly and yield immediate results.

Plot initiatives on a cost versus time matrix graph. Initiatives falling in the low-cost, short-time quadrant are prime candidates for immediate action. High-cost, long-time projects should be scrutinized for their long-term strategic value and possibly broken into smaller, more manageable phases.

Lastly, companies should deploy accelerators that can provide significant cost and time improvements. These fall into three categories: integrating systems, inventory management, and infrastructure.

Systems Integration

Integrating advanced system technologies into your fulfillment process can dramatically improve efficiency and agility. Key technologies to merge include Order Management Systems (OMS), Warehouse Management Systems (WMS), and shipping software.

An OMS consolidates orders from multiple sales channels into a single system. This integration ensures a centralized view of all orders, simplifying the processing and reducing errors. By automating order updates and inventory adjustments, an OMS enhances both speed and accuracy in the fulfillment process.

A WMS automates and optimizes warehouse operations. It helps in organizing the warehouse layout, ensuring products are easy to find and reducing the time taken to pick and pack orders. It also helps manage the costliest warehouse component: labor.

Shipping software streamlines the shipping process by automating carrier selection, rate shopping, label printing, and shipment tracking. By integrating with your WMS and OMS, the most cost-effective and quickest shipment option will be chosen and customers will be able to self-serve any questions around package deliveries.

The next accelerator is inventory management. Poor inventory management can lead to stockouts, overstocks, and ultimately, dissatisfied customers. Here are three suggestions.

Accurate demand forecasting tools minimize the risk of overstock and stockouts. These tools use historical sales data, market trends, and seasonal patterns to predict future demand.

Real-time inventory tracking ensures an accurate on-hand number, across multiple locations and channels. This visibility allows for better planning and quicker responses to demand changes, improving both speed and cost efficiency.

Lastly, adopting a just-in-time (JIT) inventory approach reduces carrying costs by ordering stock only when needed. This method requires a reliable supply chain but significantly cuts down on storage costs and reduces the risk of obsolete inventory.

Our last accelerator is automating repetitive tasks to save time and reduce human errors. Implementing automated picking systems such as integrated conveyance, robotic pickers, goods-to-man, or voice-directed picking enhances picking speed and accuracy. Automated packing machines can also quickly and accurately pack products, further reducing the time and labor to prepare orders for shipment.