By Entrepreneur Staff


Fulfillment Definition:

The process of receiving, packaging and shipping orders for goods

While any company selling products directly to consumers through the mail must deal with fulfillment, this term is most often associated with e-commerce. Once your website is up and running--and you're getting tons of orders--you need a way to promptly fulfill and ship those orders. Entrepreneurs can either outsource the fulfillment and distribution process or set it up in-house.

Full-service fulfillment companies offer up an end-to-end solution: They take your products from warehouse shelves, pack them, hand them to shippers and then send an automated e-mail response to your customers to let them know their packages are in transit. They can also handle your credit-card processing, supply current inventory levels to your website, reorder products, offer call-center services, send notices of shipping and handle returns. There are literally thousands of these companies to choose from, but experts say the best way to find one that suits your needs is by word-of-mouth. Ask computer-savvy friends or talk to the employees who manage your website and ask them for referrals.

If you're using your hosting company for shopping cart and credit-card functions or doing this in-house, you can just use some of the fulfillment companies' options--such as pick-and-pack, returns processing and customer service support. If you're shipping a small number of orders, you may want to fill your orders yourself.

To do this, you'll want to use the major package delivery companies--Federal Express, UPS or the U.S. Postal Service, since they're considered the most reliable. All these carriers offer downloadable software on their websites that allow you to track customer orders and also begin shipping immediately. However, the downside is that you'll either have to go to your local post office to ship the packages or schedule pickups with whichever delivery company that you eventually choose.

So should you outsource? One e-commerce distribution and logistics expert advises that outsourcing to a fulfillment company only makes good financial sense if the entrepreneur has more money than time. If you have no cash to spare, then you should do it yourself. But if you can make more money by spending your time on other things, you should look to outsourcing.

Before you choose a fulfillment company, however, make sure that it wants the business of a small company (many do not) and that it's reliable. And no matter what type of fulfillment operation you set up, it shouldn't cost more than 10 percent of sales, plus the actual shipping costs.

More from Operations

Capital Equipment

Equipment that you use to manufacture a product, provide a service or use to sell, store and deliver merchandise. This equipment has an extended life so that it is properly regarded as a fixed asset.

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The process of receiving, packaging and shipping orders for goods

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The process of bringing goods from one country for the purpose of reselling them in another country

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An expense item set up to express the diminishing life expectancy and value of any equipment (including vehicles). Depreciation is set up over a fixed period of time based on current tax regulation. Items fully depreciated are no longer carried as assets on the company books.

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