Fulfillment in business generally refers to the steps a firm takes to fulfill orders that have been placed via the phone, Internet, or in person. Fulfillment can also refer to a specialized firm known as a specialty fulfillment center that does nothing but fulfill orders; these companies do so by handling all the steps of fulfillment for other firms or for other branches of the same firm.
Regardless of who is handling order fulfillment, the steps are fundamentally the same. How a given enterprise takes care of the orders its customers place at its point of sale is the basic definition of fulfillment. Some firms have to custom-build an item to each different customer's specifications to fulfill orders, while other firms simply pick products off of shelves, pack them, and ship them off to ordering clientele. What makes fulfillment important is how it shapes the future of a given business—the numbers of customers buying (or not buying) and the amount of product selling (or not selling) can be used to forecast the future of the business and how much inventory will be needed the same time next week, month, or year. What sales are forecast to be and what they actually turn out to be are always two different things, but sales forecasts will always determine how much product is warehoused by the fulfilling entity.
THE STAGES OF FULFILLMENT
The stages of fulfillment include the sale of a product or service; the confirmation of that order; the production, assembly, or custom-building of the ordered good; the billing and charging of the client for the good; the packing, shipping, and delivery of the product; and lastly, any returns or exchanges associated with the original order placed.
The Sale. A product can be sold in any number of locations: from a sales floor, over the Internet, through television and radio offers, or from a catalog order form that came in the mail. For many smaller retailers, the use of a specialty fulfillment center begins here. An entity like Amazon.com or eBay will allow anyone from a sole proprietor to a medium-sized retailer to place their items on sale through their Internet portals. From here, the customer can browse and pick the product they want to buy, and Amazon.com or similar online retail centers will handle the rest of the fulfillment process.
Order Confirmation. Orders can be confirmed in multiple ways, but a growing method for many companies is the e-mail confirmation. Easier and faster than a follow-up phone call and also less wasteful of resources like time and paper, the e-mail confirmation is a convenient way for both firm and client to keep confirmations for record-keeping purposes. E-mail confirmations usually come with an order tracking number, company contact information, and even links where the order's status can be checked. Also, if an order needs to have any information edited, a client can usually respond to the e-mail confirmation or find the information needed within the confirmation that leads them through the process of changing the order or any address or payment information.
Readying the Order. Once the order has been confirmed, the next step is to ready the order's contents for delivery to the client. In some instances, assembly or special creation may be required. For example, a custom-order T-shirt company may have to silk screen T-shirts with a specific image for an order. In other instances, an order will be “picked and packed” from existing inventory by warehouse workers and then simply double-checked for accuracy before shipping.
Billing and Charging the Customer. A customer can be billed and charged immediately when they order online. Usually this requires the customer to input credit card information or checking account and bank routing numbers into fields on a Web site's point-of-sale page. In other sales settings, the customer will be charged immediately by a sales staff member; in some cases, a customer can be charged upon delivery of the item.
Shipping the Product. Often times, an order will not be shipped until payment has cleared. Payment will also usually include the cost of shipment, which is determined by the customer's choice of regular or some method of expedited shipping. Each fulfillment house will use a different method for shipping goods, but popular choices include UPS, DHL, the United States Postal Service, and Federal Express.
Returns and Exchanges. If a customer is shipped the wrong item or if upon receipt the customer is unhappy, the firm in charge of fulfillment will be asked to remedy the situation by use of its return or exchange policy. In some cases, no refunds are granted but exchanges for other products are allowed. In other cases, a firm will allow exchange for credit or simply exchange the product with the same product of the correct size, shape, or color.
There are pros and cons to outsourcing fulfillment. One of the major advantages is not having to worry about the cost or space needed to warehouse goods. Additionally, contracting a fulfillment house frees up employees from packing orders, dealing with returns and exchanges, and keeping tabs on warehouse inventory. In this way employees can be hired to focus on other aspects of maintaining and accelerating the growth of a firm. Choosing a fulfillment house is not always an easy choice; final decisions should be based on price, proximity, and range of services offered.
While outsourcing fulfillment has its advantages, by doing so a business eliminates a critical avenue of contact between itself and the consumer. If order processing goes smoothly, all is well, but businesses run the risk of losing customers if the customer has trouble dealing with the outsourced fulfillment agency. If there is a problem of some kind (such as a delay or a lost order), many customers will wonder why they are dealing with a third party (the outsourced firm), and not speaking directly to someone at the business itself. In other words, having satisfied customers by using a more expensive, in-house fulfillment center might leave a company better off than if it switched to a less-expensive outsourced fulfillment agency that somewhat alienates its customer base. With this and other potential problems in mind, businesses should take extreme caution to insure that the advantages to outsourcing fulfillment are not outweighed by a decrease in customer service.
Anderson, David M. Built-to-Order & Mass Customization; The Ultimate Supply Chain Management and Lean Manufacturing Strategy for Low-Cost On-Demand Production without Forecasts or Inventory Cambria, CA: CIM Press, 2008.
Henderson, Danna. “Outsourcing E-commerce Order Fulfillment” Available from: http://entrepreneurs.about.com/od/beyondstartup/a/orderfulfill.htm.
Mulcahy, David E. Eaches or Pieces Order Fulfillment, Design, and Operations Handbook. Boca Raton, FL: Auerbach Publications, 2007.
"Fulfillment." Encyclopedia of Management. . Encyclopedia.com. (April 26, 2019). https://www.encyclopedia.com/management/encyclopedias-almanacs-transcripts-and-maps/fulfillment
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