Sana Abdulrahman
Supply Chain Management 4.2
Fulfillment
Degree Programme in International Business
2019
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MANAGEMENT SUMMARY
Fulfillment is the process of taking an order and executing it. An order is considered
fulfilled as soon as it has reached the customer. There are many crucial steps that are
involved in the order fulfillment process. Many eCommerce companies outsource their
fulfillment to Third-Party Logistics (3PL) services. The order fulfillment process is a
fundamental part in managing the supply chain and involves the receiving phase, the
processing phase, the delivery phase, as well as returns processing. Order fulfillment
varies based on the industry and also depends on the size of the company. The
inventory will be stored in their warehouses until sales are made and in exchange for
not having to store and manage inventory, the company has to pay a fee from each sale
that is made. However, many smaller companies prefer to handle their own order
fulfillment process in order to maintain quality control and keep as much profit as
possible. There are many benefits from outsourcing to 3PLs that are dominant over the
disadvantages. Furthermore, Sustainable packaging becomes more important to
today’s consumer. A company’s sustainability effort is competitive advantage with the
modern consumer. Possible recommendations for the future of sustainable fulfillment
could be for instance, seminars held by fulfillment companies such as Moonen
Packaging on why sustainability and a greener environment is very important and
marketing the benefits of going green. Lastly, the company visits contributed
information and knowledge about sustainable packaging fulfillment, packaging that is
made from products and materials that can be recycled and are safe for environment
and people.
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TABLE OF CONTENT
MANAGEMENT SUMMARY………………………………………………………2
1 RESEARCH SET UP……………………………………………………………….4
1.1 Research Objective……………………………………………………………........4
1.2 Research Questions………………………………………………………………...4
1.3 Methodology…………………………………………………………….…………5
2 LITERATURE REVIEW……………………………………………………..........6
2.1 Fulfillment…………………………………………………………….....................6
2.2 The Order Fulfillment Process……………………………………………………..6
2.3 Fulfillment Warehouse……………………………………………………………..9
2.4 Benefits…………………………………………………………………………....10
2.5 Disadvantages.…………………………………………………………...………..11
2.6 Improving Operational Efficiency……………………………………….………..12
2.7 Fulfillment Impact on Sustainability……………………………………………...13
2.8 Moonen Packaging………………………………………………………………..14
Conclusion……………………………………………………………………………15
Future Recommendation…………………………………………………………....15
Bibliography………………………………………………………………………….16
LIST OF TABLES
Table 1. Justification of Methodology………………………………………………...5
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1 RESEARCH SET UP
1.1 Research Objective
The aim of this paper is to examine and answer the following question: Why is order
fulfillment beneficial for eCommerce businesses and why should fulfillment
companies consider going green?
1.2 Research Questions
1. What is Fulfillment?
2. How does The Order Fulfillment Process work?
3. What is a Fulfillment warehouse?
4. What are the pros and cons of outsourcing Order Fulfillment?
5. How can Fulfillment warehouses improve the operational efficiency?
6. What impact has fulfillment on sustainability?
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1.3 Methodology
Research topic
1. What is
Type of Research
Type of Data
Source
Qualitative
Desk
(Ecommerce-
Fulfillment?
2. How does
platforms, 2019)
Qualitative
Desk
The Order
(Croxton, 2003)
(Biedron, 2018)
Fulfillment
Process
work?
3. What is a
Qualitative
Desk
Fulfillment
(Sides, 2017)
(Day, 2017)
warehouse?
4. What are the
Qualitative
Desk
(Sides, 2017):
Qualitative
Desk
(Jensen, 2017)
Qualitative
Desk
(Rakesh, 2018)
pros and cons
of
outsourcing
Order
Fulfillment?
5. How can
Fulfillment
warehouses
improve the
operational
efficiency?
6. What impact
has
(Steele, 2019)
fulfillment on
(Moonen, 2019)
sustainability?
Table 1. Justification of Methodology
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2 LITERATURE REVIEW
1. What is Fulfilment?
2.1 Fulfilment
Fulfillment is a term that is used when an order is completed. The fulfillment process
starts with taking an order and then executing it. The execution process makes sure
that the order is then delivered to the customer. However, there are more crucial steps
behind the fulfillment process which ecommerce companies have to consider. Most
ecommerce companies outsource their fulfillment to third parties that specialize in
such. (Ecommerce-platforms, 2019)
2. How does The Order Fulfillment Process work?
2.2 The Order Fulfillment Process
Order fulfillment is a fundamental process in managing the supply chain. It can be
described as the process of receiving, processing, and delivering customers’ orders.
Customers’ orders put the supply chain in motion. However, there are more steps
involved in the order fulfillment process. The order fulfillment process is about
creating a network and a process that allows companies to meet customer requests as
well as minimizing the total delivery cost. This process has to be implemented crossfunctionally with all the parties involved. (Croxton, 2003)
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There are two types of fulfillment, fulfillment in-house or like many ecommerce
companies do, outsourcing it to a third-party fulfillment service that will handle the
process for you. If a company decides to outsource, they have to ship their inventory to
the third-party fulfillment service. The inventory will be stored in their warehouses
until sales are made and in exchange for not having to store and manage inventory, the
company has to pay a fee from each sale that is made. However, many smaller
companies prefer to handle their own order fulfillment process in order to maintain
quality control and keep as much profit as possible. The order fulfillment involves the
receiving phase, the processing phase, the delivery phase, as well as returns
processing. Order fulfillment varies based on the industry and also depends on the size
of the company. There are also other factors such as order volume, if it’s a business-tobusiness (B2B) or business-to-consumer (B2C) transaction. Therefore, the fulfillment
process can vary depending on the scenario. (Biedron, 2018)
Receiving Phase
In the receiving phase, third-party fulfillment services receive inventory from suppliers
and manufactures. After receiving the inventory in the warehouse, the following steps
need to be carried out (Biedron, 2018):
 Items need to be counted and it needs to be made sure that the received items
match the items ordered.
 Check to assure that the items have not been damaged during transit.
 Data needs to be added to the management software in order to track location,
counts, and the sales number of each item.
 SKUs/Barcodes need to be controlled and added if they are missing or not
labelled appropriately.
 Items need to be assembled individually into ready-to-ship packages, if
necessary.
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Finally, when the inventory is correctly accounted for it, it will be placed on the
shelves. Storing the inventory properly will help to maximize speed as well as the
accuracy of the order fulfillment operations. Each SKU has to be stored in its own bin.
Furthermore, SKUs that sell the most, should be in bins that are easier accessible and
close to the packaging stations. (Biedron, 2018):
Processing Phase
When an order is received, the processing phase begins. Fulfillment software`s are
usually integrated with shopping cart software`s so that when orders are placed online,
the order will be automatically sent to the fulfillment house. As soon as the order is
received, someone will pick up the item/items and take them to the order packing area.
The item/items will be checked for quality in the packing area and will be packaged
with the best fitting material. After packing slips and other inserts are added, the box
will be sealed and is then ready to be moved to the shipping station. (Biedron, 2018)
Delivery Phase
As soon as the order has reached the shipping station, it will be prepared to be
delivered to the customer. The package will be weighed, and the best shipping method
will be selected. The end destination of the shipment depends on the product and the
shipping service the customer paid for, this could be the postal service, international
carriers, or providers such as DHL, FedEx, and UPS. Finally, when the package is
ready for shipment, the shipment station will update the status of the order and the
customer will be able to track their orders until they have been delivered. Once the
order has been delivered and reached the customer, it is considered fulfilled.
Depending on the terms of policy of a company and the reason for the return,
customers are allowed to return products during a certain given time frame or ask for a
refund or replacement. (Biedron, 2018)
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Returns Processing
As important it is to have a processing operation that is streamlined, it is equally
important to make sure that the process for handling customer returns is a similar
process. Therefore, returns are an important aspect of order fulfillment. Nowadays,
customer who purchase items online often base their purchasing decision on how easy
it is to return it. If an item is returned because it is defect or damaged during transit,
the order fulfillment process starts all over again. Furthermore, it is also important to
reach out to the suppliers and inform them about the issue with their product. Effective
order processing lies in organization. If items are correctly entered into computer
systems, labelled properly, and shelved it will maximize efficiency. (Biedron, 2018)
3. What is a Fulfillment warehouse?
4. What are the pros and cons of outsourcing Order Fulfillment?
2.3 Fulfillment Warehouse
A fulfillment warehouse can be described as a type of Third-Party Logistics (3PL)
provider which “receives, holds, and transports a consumer product in the ordinary
course of business but who does not take title to the product.” Fulfillment warehouses
store inventory from businesses and ship their orders. Furthermore, fulfillment
warehouses offer additional services such as exchange and returns management. In
this way, companies receive the maximum benefit when outsourcing their
warehousing and fulfillment processes. (Sides, 2017)
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Third-Party Logistics (3PL)
Third-Party Logistics (3PL) are companies specialize in integrated operation,
warehousing and transportation services that support to transfer goods between
suppliers and customers, and now; lots of companies are getting more and more
developing in this area and get success. (Day, 2017)
2.4 Benefits
Many third-party warehousing and fulfillment companies offer flexible plans and
pricing to accommodate company’s unique sales cycles. There are many benefits of
outsourcing order fulfillment, such as: (Sides, 2017)
 Increases flexibility and ability to scale: In today’s e-Commerce world,
finding the right fulfillment warehouse is key to growth and flexibility.
 No warehouse to manage: When companies decide to outsource their product
storage to third-party fulfillment warehouses, they do not have products to
receive, stock, count, pick, pack, and ship. Furthermore, they also save money
because there is no need to hire staff, train, manage, and payroll.
 Improved efficiency and service: Cooperating with top-level fulfillment
houses also leads to gaining competitive advantage. Companies will benefit
from their dedication, expertise, efficiency, and best practices.
 International shipping becomes easy: Working with 3PL fulfillment
warehouses can save a lot of money and time in terms of the logistics of
international shipping. Orders that are fulfilled can cause a bottleneck.
Therefore, cooperating with 3PL fulfillment warehouses can help to ensure fast
transit as well as a successful delivery.
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 Save money: When a business decides to work with 3PL warehouses costs
such as warehouse rent and equipment, labor, utilities, insurance, materials, and
inventory management will be eliminated.
2.5 Disadvantages
Outsourcing to 3PL warehouses may have many benefits for businesses. However,
there are also disadvantages that need to be taken into consideration when deciding to
cooperate with a fulfillment warehouse. (Sides, 2017)
 Customer experience still falls on you: When customer do not receive their
order on time or receive a wrong/defect product, they will hold the company
accountable and not the fulfillment warehouse. Therefore, it is important to
cooperate with a reliable 3PL warehouse. Furthermore, a poor fulfillment
warehouse will also affect a company’s brand reputation.
 Transitioning and set-up fees: When companies consider working with 3PL
warehouses, they are required to upfront costs for integrating software and
systems with the company. These fees will be usually charged once.
 Lack of inventory on-hand: When a business decides to store their inventory
in 3PL warehouses they will not have inventory accessible on hand. Therefore,
it is very important for companies to receive a small amount of inventory inhouse to train staff or for showrooms as well as to ensure quality control.
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5. How can Fulfillment warehouses improve their operational efficiency?
2.6 Improving Operational Efficiency
Fulfillment warehouses fulfill customer demand in either B2B or B2C businesses.
Therefore, fulfillment centers need to be as efficient as possible in order to maximize
customer satisfaction. Hence fulfillment warehouses do not generate profit – they are
pure cost centers. Transportation and labor are the two biggest expenses. The
following considerations help to improve fulfillment warehouse efficiency: (Jensen,
2017)
 Planning is critical, but only works when you have accurate data:
Understanding historical performance by line item (pick, pack, support labor
spend) as well as utilizing past data for the hour/day/week is very important.
Without KPIs, it is not possible to make good decisions about order fulfillment
and the process path flow.
 What goes in must come out (and vice versa): Picking and packing should be
equal (input vs. output). If this process fails, the warehouse loses efficiency and
has to make up that cost somewhere else.
 There are only three ways to increase output: When production (output) is
lost, it affects efficiency. In order to increase output, a fulfillment warehouse
has to add labor hours (hiring/overtime) as well as increasing working hours per
day to process faster. However, processing faster is very complex. It is also
helpful to involve the workers and ask for ideas to improve operation.
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 Forecast accuracy is difficult to achieve: Depending on the operation size and
variability level, fulfillment services need to plan for their forecast’s lower and
upper level. For instance, if the daily/weekly forecast accuracy ranges between
+/-10 percent, there should be a plan to solve 90 percent and 110 percent of the
forecast that the operations team can seamlessly execute.
 Always optimize for shipments with an understanding of what adds value
and what does not: Every process that does not produce shipment volume,
should be considered indirect cost.
6. What impact has fulfillment on sustainability?
2.7 Fulfillment Impact on Sustainability
3PLs and eco-efficient transportation lead to better transportation planning, better
inventory and warehouse management, lower inventory cost and sustainable supply
chain operations. (Rakesh, 2018)
Nowadays, going green is rapidly increasing. Sustainable packaging becomes more
important to today’s consumer. Research has shown that 64 percent of consumer
worldwide choose to buy from or boycott a brand on their stance on political or social
issue. A company’s sustainability effort is a competitive advantage with the modern
consumer. Many eCommerce companies are rethinking their packaging in order to cut
supply chain costs, reduce waste, and improve customer experience. (Steele, 2019)
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2.8 Moonen Packaging
Moonen Packaging based in the Limburg town of Weert is a company that streamlines
the packaging process from production to waste processing. For instance, Moonen
Packaging has 17,000 employees that use sixteen million coffee cups a year. These
come now piled in a biodegradable bin bag and are transported to the Aterro waste
processing plant, where they are converted into biogas and compost. People become
more aware of what’s going on because the story of the whole process is printed on the
coffee cup, says Roel Schreurs, commercial manager at Moonen. (Moonen, 2019)
Lately, Moonen Packaging has taken care of the distribution of a type of paper that is
made from agricultural waste. They chose to collaborate with PaperWise, which is a
company founded by a former employee of Moonen. They also jointly financed part of
the product development, says Roel Schreurs. Moonen could have distributed it
exclusively, but the choose not to. Gains that are made in the short term do not
outweigh the environmental benefits. This is something Moonen Packaging tries to
communicate to a large audience. In 2014, Moonen Packaging was officially named
the ‘greenest company in the Netherlands’. (Moonen, 2019)
The company visit at Moonen Packaging showcased that they strive for more
sustainability and a greener environment in the long run. Furthermore, the aim to
inspire more businesses to run their business sustainably. Moonen Packaging focuses
on cost-effective and environmental packaging. Environmental packaging is made
from products and materials that can be recycled and are safe for environment and
people.
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Conclusion
To conclude, outsourcing the fulfillment process to Third-Party Logistics (3PL) can
beneficial to larger e-commerce companies and maximize their profits. It is also
important to opt for fulfillment service that integrate with the company’s goal and has
a good reputation. The most suitable fulfillment warehouse will not only save the
business a lot of time but also money. In addition, it is of importance to cooperate with
a fulfillment warehouse that offers additional services such as customer returns,
refunds and exchanges. It depends on the size of the company if working with a 3PL
should be considered. A business that has not enough space, time, and human
resources should hire a fulfillment house.
Future Recommendation
For the future of fulfillment, it is important that more and more fulfillment service
companies become aware of why sustainability and a greener environment is very
important not only for the people and the planet but also for the business itself. Ecoefficient transportation leads to sustainable supply chain operations. Fulfillment
companies such as Moonen Packaging should held seminars on the impact of
fulfillment on sustainability and educate other companies on why it is important to go
green and reduce waste by rethinking their packaging. Furthermore, the benefits of
going green should be marketed as well and that a company’s sustainability effort is a
competitive advantage with the modern consumer.
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Bibliography
Biedron, R. (2018, October 24). Breaking Down the Order Fulfillment Process.
Retrieved from: https://www.purchasecontrol.com/uk/blog/what-is-order-fulfillment/
Rakesh, R. (2018). Sustainable evolution and selection of potential third-party logistics
(3PL) providers. Retrieved from: https://eds-a-ebscohostcom.zuyd.idm.oclc.org/eds/detail/detail?vid=2&sid=cdc00995-7f89-4d41-8b15804ecf8dcdc9%40sdc-vsessmgr01&bdata=Jmxhbmc9bmwmc2l0ZT1lZHMtbGl2ZQ%3d%3d#AN=edseee.80
30949&db=edseee
Sides, K. (2017, September 18). The Definitive Guide to Warehousing and
Fulfillment. Retrieved from: https://www.shipmonk.com/blog/definitive-guide-towarehousing-fulfillment
Jensen, N. (2017, November 18). 5 Ways to Improve Fulfillment Center Efficiency.
Retrieved from: https://www.inboundlogistics.com/cms/article/5-ways-to-improvefulfillment-center-efficiency/
Moonen Packaging. (2019). Striving for more sustainability together. Retrieved from:
https://corporate.moonenpackaging.com/en/story-moonen
Steele, R. (2019, January 23). Sustainable Ecommerce Packaging Saves You Money.
Retrieved from: https://www.pfscommerce.com/blog/sustainability-ecommercepackaging/
Day, N. (2017, July). Estimating the efficiency of third-party Logistics over the world.
Retrieved from: https://eds-b-ebscohostcom.zuyd.idm.oclc.org/eds/detail/detail?vid=5&sid=0989d0b2-73cb-42b2-80f00c887d853368%40sdc-v-
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sessmgr02&bdata=Jmxhbmc9bmwmc2l0ZT1lZHMtbGl2ZQ%3d%3d#AN=edseee.80
30949&db=edseee
Croxton, K. (2003). The International Journal of Logistics Management. Retrieved
from: https://www.emeraldinsight.com/doi/abs/10.1108/09574090310806512
Ecommerce Platforms. (2018). What is Fulfillment? Retrieved from:
https://ecommerce-platforms.com/glossary/fulfilment
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