Fulfillment service is the process that starts from the time the goods are received in the warehouse to the time the shopper receives the products, including the activities of taking goods from the seller, storing, processing the order, taking goods from the warehouse. , packing and shipping to the correct customer address.
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In other words, fulfillment replaces sellers to do all the work related to inventory management, order processing and shipping, ensuring products reach customers (buyers) faster. Fulfillment is also known by many different names such as fulfillment services, product distribution centers or logistics services.
A brief overview of fulfillment
The fulfillment service is growing rapidly and gradually becoming popular thanks to the explosive growth of e-commerce. Accordingly, most commercial transactions are “integed”, buying and selling activities take place faster and simpler, leading to an increase in the number of orders, for example, Amazon processes an average of 35 orders per second. <1> and requires warehouse management to best serve customers. Therefore, to satisfy customer needs and optimize business according to this trend requires prompt and timely response of the transportation and logistics industry and the supply chain. Therefore, the fulfillment service was born as a necessity with many outstanding advantages, promising to be an indispensable factor in many business activities.
Who is Fulfillment Service for
?All businesses operating on e-commerce platforms or online sellers on social networks and e-commerce platforms such as Amazon, Shopify , Lazada, Tiki… can all use fulfillment as an efficient order fulfillment and inventory management solution. Depending on the size and available resources, sellers can choose the following form of fulfillment:
1. In-house fulfillment
In-house fulfillment is also known as self-fulfillment. In particular, the company owns its own warehouse, and at the same time manages its own activities related to inventory management, processing and fulfillment. This form is suitable for 2 types of companies:
Large-scale companies are willing to spend large budgets to own their own warehouses, hire many employees to manage the warehouse and fulfill orders. Thus, in order to use in-house fulfillment, businesses must ensure that a complete and complete fulfillment process is built to avoid disordered goods, and order jams leading to customer dissatisfaction. The company has just started business (start-up) without many customers and orders, so warehouse management, order processing and delivery can all be done by themselves. However, when the start-up company operates for a long time and has more orders, the self-fulfillment form is no longer suitable.2. Dropshipping
Dropship is understood as the seller does not actually own the goods. Instead, the seller contacts the supplier to ship the goods directly to the buyer using the seller’s information. Dropship activities take place regularly on e-commerce sites Aliexpress, Shopify, Amazon, etc.
Dropship is very suitable for those who like to sell a variety of items and do not want to spend money on warehousing and activities related to handling goods, just invest in marketing activities to increase brand reputation. However, it can be seen that the risk comes from the quality of the supplier, if not careful, it will lose customers and affect the store’s reputation.
3. Outsourced Fulfillment
This is the form in which the seller/company outsources services from fulfillment companies. The fulfillment company performs all goods-related activities including picking, warehousing, order processing, delivery and collection on behalf of the seller.
Accordingly, activities related to warehousing, goods management and shipping will be responsible for the fulfillment company, even if problems arise. Thus, the company saves a lot of storage costs, staff wages and less effort in the activities that occur before and after the order. It sounds perfect, but when the company uses outsourced fulfillment, it means that you cannot fully participate in the management of goods, so you may not be assured of how the outsourced service company will handle it. However, this is still considered the optimal solution for small and medium-sized companies, saving warehousing and transportation costs, allowing maximum time to focus on business activities in the market.
Compared to 2 years ago (2015), the concept of fulfillment is still too new in Vietnam, but now many businesses have become familiar and used a lot for business activities. Along with other outsourced services, fulfillment service is gradually being trusted by businesses due to its professionalism, ensuring smooth and fast related activities. According to data from IDC (2007), more than 17% of Vietnamese businesses use outsourced services, including fulfillment, and this number is forecasted to grow rapidly in the future. Therefore, below is the information available Other related aspects of outsourced fulfillment such as service process, reasons to use and reputable fulfillment service companies in Vietnam and around the world for the company to have an objective view of this optimal solution.
How does the fulfillment service process work
?A fulfillment service process follows the following process:
Receive goods from the seller –> Warehousing –> Process when an order arises –> Delivery –> Collect money if required –> Handle after-sales requests (such as return, exchange) .
Process in the order fulfillment service chain – logistics logistics for e-commerce
The steps in the fulfillment service process are specified as follows:
– Receive goods from the seller: Employees of the fulfillment service company go to the seller’s place to receive the goods for storage.
– Goods storage and inventory management: After receiving goods, goods are stored and carefully arranged in warehouses, and goods are clearly tracked and inventoryed, regularly updated with imported quantities. – export of goods, ensuring goods are shipped on time.
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– Order processing: The order processing is fully standardized from email to buyer, order confirmation, order picking, product integrity check and delivery to packing department. The order processing process carried out by the fulfillment center is usually less error-prone because everything is clearly and carefully managed by its own management system.
– Delivery and collection of money: The company delivers the goods to the buyer at the right address and time. In addition, if the order has not been paid, the fulfillment company will collect it for you if there is a request from the seller.
– Handling after-sales inquiries: Online purchases are easy to cause problems of exchange or return after purchase, the cause may be faulty products, customers are not satisfied with the product, etc. The fulfillment company receives the return request and directly processes it according to the seller’s policy and decision, ensuring the balance of the buyer’s interests and limiting the damage to the seller. A big plus in the fulfillment process is that sellers can track inventory and order status; Buyers know the shipping process and get information support when needed.
Why is fulfillment service important, especially in the current context?
As mentioned above, the appearance of fulfillment is an inevitable consequence of the strong development of internet and e-commerce (average growth rate of 35% per year <2>). That strong growth also entails many problems for businesses that fulfillment itself is solving very well, in which there are generally 3 core problems. So what are those problems and how does fulfillment work optimally?
Manage and reduce inventory costs
According to a report by Peoplevox (2016), 82% of e-commerce businesses saw an increase in revenue, showing that e-commerce has opened up huge business potential. This also means that the number of orders will increase, businesses have to import more goods into the warehouse, increase the number of employees to manage goods, ensure products reach consumers on time. However, the confusion begins when businesses have to balance between marketing and sales activities and inventory management. Besides, warehousing costs are not low, and the wages to be paid to employees even when there are no orders make businesses a headache.
The role of fulfillment in this regard is to lease warehouses, provide a full package of services before and after the order arises at a more favorable price. As a result, the company saves about half of warehouse and staff costs as well as has time to focus on business activities.
Balance of seller benefits and buyer satisfaction
Delivery in the right quantity, on time is important in online sales because it affects buyer satisfaction. According to a recent study, 48% of customers who refuse to continue buying on e-commerce sites have been slow to deliver <3> However, in reality 63% of businesses admit to not delivering on time <4 > due to many objective factors.
Therefore, fulfillment as a solution to ensure customer satisfaction in this case. The order fulfillment service professionally arranges and processes orders to deliver on time and in the right quantity to the buyer, and collects money for the seller if required. Thus, sellers can sell goods, earn profits without losing processing and delivery time while buyers are satisfied when receiving goods on time.
Cross-border sales
If in the past the domestic market was still a “fertile land” for exploitation, now this “land” has become a cramped “village pond”. Sellers are appearing more and more while keeping the original demand and customer base. In other words, the level of competition is harsher when the market has 10 sellers while there is still only 1 buyer. So how to “survive” in this situation? The best way to survive is to find other segments that are ignored or exploit unmet need and export products abroad. However, finding segments and needs is not easy, so selling abroad is an effective way in this case. With the fulfillment service, businesses can “export online” more easily. Many fulfillment companies have branches located in many countries, serving the maximum demand of “fishing in ponds”, expanding business activities when the domestic market is saturated.
Finance service companies in the country and the world
The fulfillment service has been successfully implemented by Amazon (USA) for a long time under the name FBA (Fulfillment by Amazon), which is also one of the first units to offer this service. Along with the requirements for the development of the forwarding industry and the supply chain mentioned above, more and more fulfillment service businesses appear to meet market needs. Accordingly, the following areas have reputable companies.
For the Europe – America region and the whole world, it is possible to see the strong development of the fulfillment service (FBA) of the “giant” Amazon. This company has served 70% of Amazon sellers, with more than 2 million products managed and shipped using fulfillment service. Accordingly, despite being a “big man”, FBA still has limitations, this service is limited to Amazon, so sellers using FBA cannot sell on other sites like Shopify, BestBuy, ..so sellers must look to other companies with warehouses in the US to sell on many different sites.
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In Asia and surrounding areas, with a narrower influence than Amazon, Rakuten and Alibaba are considered the two “Eastern pillars” in e-commerce-related solutions, including fulfillment. In particular, Rakuten is considered as the “Japanese version of Amazon” that has grown strongly in the Japanese market and expanded to a global scale, serving 40,000 businesses around the world <5>. Along with Rakuten, Alibaba is currently standing on the shoulders of “giants”, entering fierce competition with Amazon and Google. Alibaba’s scale expands with Aliexpress, a website that mainly caters to wholesalers, supporting dropshipping services on major e-commerce platforms like Shopify.
The data of the article is referenced from the following documents:
<1> Top 10 Brands That Changed the World – Genk
<2> 24.9% of online shoppers “decry” the delivery process – Thoibao.today
<3> Vietnam e-commerce: Potential and challenges – Baomoi
<4> The “pain points” of e-commerce retailers in the latest survey – Smartlog Logistics
