As an eCommerce seller, scaling your business can bring new challenges and opportunities. As you grow, it may make sense to outsource your order fulfillment to a third-party logistics (3PL) provider. This will allow you to focus on other areas of your business, such as marketing, retention and customer service. Outsourcing fulfillment to a 3PL can also help to improve the efficiency and scalability of your operations, allowing you to take on more orders and expand your customer base.
When it comes time to talk to 3PLs, it's important to be familiar with the key terms and concepts associated with order fulfillment and logistics. By speaking the same language, you'll be able to communicate effectively with potential partners and make informed decisions about which provider is the best fit for your business. These are some of the terms you need to know, including inventory management, pick and pack, drop shipping, shipping carrier, and additional terms associated with 3PL providers such as cross-docking and consolidation. Understanding the key terms will help you to effectively communicate with 3PLs and make the best decision for your business.
Here is a list of the terms, and everything you need to know when talking to a 3PL:
- Order fulfillment: The process of receiving, processing, and delivering customer orders. This can include tasks such as receiving and processing customer orders, managing inventory, selecting and packaging products for shipment, and arranging for delivery.
- Inventory management: The process of tracking and managing a company's stock levels, including the movement of products into and out of a warehouse. This can include tasks such as forecasting demand, determining reorder points, monitoring stock levels, and scheduling replenishment orders.
- Pick and pack: The process of selecting and packaging individual items from a larger inventory to fulfill a specific customer order. This process typically involves identifying the items that need to be picked, locating them in the warehouse, and packaging them for shipment.
- Pick fee: a charge assessed by a warehouse or fulfillment center for the process of selecting and preparing products from storage for shipment. This fee is incurred when an order is picked for the shipment and can be applied on a per unit, per order or per case basis. This fee is used to offset the labor costs associated with picking and packing items for shipment.
- Additional pick fee: a charge assessed by a warehouse or fulfillment center for each additional item in an order, beyond a certain threshold, in addition to the standard pick fee. This fee is incurred when an order is picked and packed for shipment. Additional pick fee can be applied on a per unit, per order or per case basis. This fee is used to offset the additional labor costs associated with picking and packing additional items in an order.
- Warehouse management system (WMS): A software application that helps companies to manage their warehouse operations, including inventory management, order fulfillment, and shipping. A WMS can be used to track and manage inventory levels, locate products within a warehouse, optimize picking and packing processes, and generate reports and analytics on warehouse performance. It can also integrate with other systems such as enterprise resource planning (ERP) and transportation management systems (TMS) to provide a comprehensive view of inventory, order and shipment information.
- Receiving: The process of accepting and processing incoming products, materials, and supplies. This can include tasks such as inspecting, counting, and verifying the accuracy of shipments against purchase orders, and updating inventory systems accordingly. It is the first step in the order fulfillment process, where the received items are checked for accuracy and quality and then stored in the warehouse for further processing.
- Cart: refers to a shopping cart system provided by e-commerce platforms such as Shopify, WooCommerce, Etsy, Amazon, Magento and others. These systems allow merchants to set up and manage an online store, including features such as product catalogs, inventory management, and checkout. These carts are software applications that allow customers to select and temporarily store a list of items they wish to purchase on an e-commerce website.
- Kitting: The process of combining multiple items into a single kit to fulfill a customer order. This can include items such as instructions, accessories, and packaging materials. Kitting can be used to create custom bundles or packages that can be sold as a single unit. Fun fact: Tondo Fulfillment can fit on the fly, meaning, we do not need to pre- assemble bundles which opens up your inventory count.
- Drop shipping: A fulfillment method where a retailer does not keep goods in stock, but instead transfers customer orders and shipment details to a wholesaler or manufacturer, who then ships the goods directly to the customer. This allows retailers to offer a wider variety of products without having to maintain a large inventory.
- Backordering: The practice of fulfilling customer orders for items that are currently out of stock by placing them on a waiting list for future delivery. This allows customers to still place an order for a product that is temporarily out of stock, and ensures that the customer will receive the product as soon as it becomes available again.
- Shipping carrier: A company that transports packages and parcels from one location to another. This can include major carriers such as UPS, FedEx, and DHL as well as regional and local carriers such as USPS. Fun fact: Tondo Fulfillment has shipping discounts as high as 40%!
- Lead time: The amount of time it takes for a company to process and ship an order after it has been received. This can be affected by factors such as stock availability, order volume, and shipping distance.
- Return and refund policy: A set of guidelines that outline a company's procedures for handling customer returns and issuing refunds. This can include information on the conditions under which products can be returned, who pays for return shipping, and how refunds are issued.
- Tracking number: A unique number assigned to a package or shipment for the purpose of tracking its progress during transit. This number can be used to track the package online, and can provide information on the package's location and expected delivery date.
- Bill of Lading (BOL): A document that serves as a contract between a shipper and a carrier and acts as a receipt for goods being shipped. This document provides information such as the type and quantity of goods being shipped, the names of the shipper and receiver, and the shipping route. It also acts as a legal document that can be used to prove ownership of the goods.
- Fulfillment center: A warehouse or facility where orders are received, processed, and shipped. Fulfillment centers are designed to handle the storage, packaging, and shipping of products, and are often equipped with automated systems and technology to streamline these processes.
- Cross-docking: A logistics strategy where products are received at a warehouse and then immediately shipped out to another location, without being placed into inventory. This can help to reduce costs associated with storing and managing inventory, and can also help to speed up the delivery process.
- Packaging and labeling: The process of preparing products for shipment by wrapping, boxing, and labeling them with the necessary information such as shipping address, return address, and tracking number. This process is essential to ensure that orders are delivered to the correct address and that they can be tracked throughout the shipping process.
- Last Mile Delivery: The final step in the delivery process, when an order is delivered to the customer’s door or final destination. This is considered the most critical part of the delivery process as it directly affects customer satisfaction.
- Wave planning: The process of grouping orders together for picking and packing based on specific criteria such as delivery date, shipping carrier or location. This can help to increase efficiency and reduce costs by allowing multiple orders to be processed and shipped together.
- Split shipping: The process of shipping items from multiple locations to fulfill a single customer order. This can be used to speed up delivery times or to reduce shipping costs by shipping items from a warehouse closest to the customer.
- Consolidation: The process of combining multiple small shipments into one larger shipment to save on shipping costs. This can be done by grouping together orders from multiple customers or by combining multiple small orders from a single customer.
- Reverse logistics: The process of handling the return, repair, and disposal of products after they have been sold. This can include tasks such as inspecting returned products, processing refunds or exchanges, and disposing of damaged or unsellable items.
- EDI (Electronic Data Interchange): A standard format for electronic communication that allows different systems and software to exchange data and automate business processes such as ordering and invoicing. EDI can be used to automate order fulfillment processes, reduce errors and increase efficiency by eliminating the need for manual data entry.
In conclusion, understanding the key terms and concepts associated with order fulfillment and third-party logistics (3PL) is essential for effectively communicating with potential partners and making informed decisions about outsourcing your order fulfillment. Whether you're just starting out or looking to scale your business, having a solid understanding of terms such as inventory management, pick and pack, drop shipping, shipping carrier, and additional terms associated with 3PL providers like cross-docking and consolidation, will help you navigate the process and make the best decision for your business. This is everything you need to know with respect to terms when talking to a 3PL, and by familiarizing yourself with these terms, you'll be well-equipped to make the most of your eCommerce operations.