Order fulfilment

What is order fulfillment?

Order fulfillment is the end-to-end process from when a customer places an order till it gets delivered. This involves receiving order, packing, sending the package, and delivering the order. In a modern context, order fulfillment might also include handling returns and exchanges.

Let’s consider a classic example from the retail industry to understand order fulfillment: an accessories company, where a customer’s recent order gets automatically routed to a nearby fulfillment agency, where picking, packing, and dispatching happens. If the customer returns the product, it reaches the same fulfillment center for a quick and seamless transit.

Why order fulfillment matter?

Order fulfillment is important for retail, eCommerce, and logistics companies for the following reasons:

1 - To ensure fast deliveries and satisfied customers.

2 - Make reorder cycles better, well-planned, and data-driven.

3 - To facilitate safe, sustainable and cost-effective deliveries to customers.

4 - To allow smooth collaboration between suppliers, fulfillment centers, customers, and other teams involved.

5 - To prevent stock-outs and be able to meet customer demands, allowing seamless collaboration between teams.

Order fulfillment has gained utmost importance now, thanks to the rise of eCommerce platforms, global marketplaces, and the rise in customer expectations. At the same time, growth of tech, cloud & SaaS, automation becomes equally stronger, enabling swift order fulfillment processes.

Step-by-step process in order fulfilment

Order received: Customer places an order through the website, call, email, or POS systems.

Product allocation: Check product availability, assign, and match the product for the order.

Order picking: A warehouse staff is assigned to take care of the picking, packing, and labeling of the order.

Shipment: The packed consignment is assigned to a courier partner to ship it to the customer.

Returns management: If needed, order fulfillment will also be about reverse logistics.

Types of order fulfilment models

Order fulfillment has come a long way, from companies being able to only deliver locally to making international fulfilment happen in a day.

Some common types of order fulfillment are in-house fulfillment, 3rd third party fulfillment, hybrid, and dropshipping.

Both in-house and 3rd party order fulfilment happens the same way, except for one change; 3PL in order fulfillment is when order packing and shipment is handled through a 3rd party agent.

Dropshipping is the most recent type of order fulfillment, where the supplier handles order fulfilment and shipment entirely, preferred by startups and companies with lean inventories.

How to measure order fulfillment rate?

Measuring order fulfillment success can be through formulas like perfect order rate, which considers the delivery of products in perfect condition to total orders.

Order fulfilment rate = Perfect order rate = (perfect orders / total orders) * 100

A decent order fulfillment rate for a mid-sized business is between 90 to 95%.

Order fulfillment success can also be calculated through other formulas like inventory turnover rate, order cycle time, return rate, order accuracy rate, return rate, fill rate, and other similar KPIs.

Rather than using spreadsheets and struggling with the number crunching, you could set up order fulfilment and inventory management dashboards, which can measure all the above KPIs, or any custom

How data analytics and AI transformed order fulfillment?

Like every other logistics and supply chain areas, AI could change how order fulfillmentfulfilment works, making it fast, agile, and more streamlined.

Demand forecasting for smarter stock planning: Usage of ML and AI models to analyze sales data, seasonality, and other external factors to predict demand, stock up right products in the right locations, and enable fast movement of goods.

Inventory analysis for real-time visibility: Through smart, intuitive, and real-time dashboards, order fulfilment, inventory, and customer support teams can track fulfillmentfulfilment status, pending orders, returns and exchanges, where they are stuck at, and more such data in one place.

AI-based slotting: Picking the right product in a busy warehouse takes up lot of time and effort. AI-based slotting solves this by suggesting smart product placement recommendations, based on the order book or demand predictions, placement constraints, warehouse layout, and other storage instructions.

Smart routing of orders: AI could be employed to switch the right order to the right fulfillment center, especially for companies with country-level and global operations.

AI Route planning: AI-based route planning for delivering orders, clubbing multiple orders together for a fast, fuel-efficient, and smart order delivery.

Predictive maintenance to manage equipment in better condition: Since order fulfillment also handles a lot of equipment like fleets, operating them in better conditions and preventing breakdowns is a priority. Predictive maintenance tools is the way to do proactive maintenance here, where fleet condition, emissions, noise, CO₂ emissions, and other parameters could be tracked, and any alarming conditions could be identified and repaired ahead.

Real-time updates and chatbots: Other than the above applications, retail, eCommerce companies could set up chatbots and Generative AI based applications to solve user queries and be available for customers 24/7.

Order fulfillment is becoming a crucial part in supply chain and logistics, yet even with advanced tools and digitization, it remains fragmented at many parts. Data-driven tracking systems ensure every touchpoint—from warehouse to doorstep—is visible, predictable, and measurable.

With a smart data & AI strategy, your business can gain:

1 - Happier customers

2 - Reduced logistics costs

3 - Agile operations

4 - Proactive service, not reactive fixes