9 common e-commerce fulfillment challenges (and how a 3PL can solve them)

[Updated post from October 12, 2021]

The virtues of selling directly to the consumer are well-known: Better supply chain visibility, stronger customer relationships, and no middlemen taking a slice of the pie.

But we hear a lot less about the difficulties holding many e-commerce brands back from achieving profitability and robust business growth. The faster your business grows, the more important it is to ensure that your fulfillment operation can scale effectively and maximize opportunities.

This is where partnering with a 3PL (third-party logistics) provider can make all the difference to your brand's success. 3PL partnerships help to address many of the common challenges that e-commerce brands face on their journey to success, including expensive shipping, effective returns management, and offering memorable experiences that strengthen customer loyalty and engagement.

We're going to dive into 9 of the biggest challenges of e-commerce fulfillment – and how your 3PL can transform challenge into opportunity.

E-commerce fulfillment challenge #1: Difficulty scaling fulfillment

E-commerce brands can become a victim of their own success if their fulfillment strategy isn't able to keep pace with their growth. As order volumes escalate, this can result in lengthy delays to order fulfillment and delivery.

Moreover, scalable e-commerce fulfillment isn't just about scaling up with an influx of sales – but also about scaling down afterward. Order volumes are rarely uniform, with consumer demand typically experiencing both seasonal peaks and troughs throughout the year. If fulfillment operations cannot reduce labor levels and storage space when it isn't needed, running costs will be much higher than necessary.

The advantage of partnering with a fulfillment provider is that they can allocate you the right amount of space and resources you need to fulfill orders seamlessly at different parts of the year, as opposed to taking out costly, inflexible leases on private warehouses. This way, your brand only pays for the services you need - and nothing you don't.

E-commerce fulfillment challenge #2: Logistics is taking up too much business time

E-commerce fulfillment is manageable when you only have small order volumes to worry about. Fresh inventory, shipping labels, and packaging materials can be stored in a garage or a storage unit until needed, while order data can be managed via spreadsheets.

But as your brand scales, managing logistics can quickly morph into a full-time job. From inventory management and packing orders to processing returns and printing shipping labels, fulfillment takes time away from managing areas of your business that are crucial to growth.

Moreover, if your brand doesn't have in-house expertise in how to coordinate order fulfillment effectively, this has an impact on the effectiveness of the fulfillment process. As order volumes grow, you may find yourself lagging in your efforts to fulfill orders quickly and accurately.

By looping in an experienced 3PL to manage fulfillment on your behalf, this burden is taken off your shoulders. This frees up your brand to focus on other business processes such as marketing and customer experience that are integral to attracting customers.

E-commerce fulfillment challenge #3: Last-mile delivery inefficiencies

The so-called ‘last mile problem‘ is one of the biggest order fulfillment challenges in logistics. While order processing, picking, and packing can be done in bulk to increase efficiency, this economy of scale stops at the point of delivery.

Every e-commerce order has its unique destination, meaning this final stage of fulfillment is liable to experience the biggest inefficiencies and mistakes. Poor delivery routing, heavy traffic, and failed deliveries all serve to make the last mile of delivery the most expensive and cumbersome part of the order fulfillment process.

When consumer expectations for fast and stress-free delivery are at an all-time high, brands cannot afford to let their customer down with lackluster last-mile management. Late, failed, or poorly-communicated deliveries result in poor experiences that don't meet customer expectations, potentially damaging their relationship with your brand.

Partnering with an e-commerce fulfillment provider that has partnerships with regional and local carriers make it possible to shorten delivery times through more effective delivery routes. You’ll also gain access to logistics experts who can identify flaws in your last-mile delivery strategy that are adding precious days onto delivery, improving customer satisfaction and brand loyalty.

E-commerce fulfillment challenge #4: Seamless integrations

Direct-to-consumer order fulfillment is about far more than just moving goods from A to B. Unless you have fast and reliable integrations between your e-commerce platform and your OMS (Order Management System) you're not even going to know what inventory you have in stock – much less where you need to send it.

The purpose of integrations is to ensure that accurate information is communicated seamlessly between different systems. The average e-commerce business relies on a large number of platforms working together efficiently, from their e-commerce platform and payment gateway to the Warehouse Management System. But unreliable integrations can result in data being lost or corrupted, which can cause massive disruption for your fulfillment operation.

Partnering that a tech-focused e-commerce fulfillment provider is essential to accessing pre-built, reliable integrations between your systems. Ryder E-commerce's proprietary Ryder platform offers native integrations with major e-commerce platforms including Shopify in addition to traditional EDI systems. This enables merchants to access real-time insights about orders, shipping, and inventory levels – all from one intuitive interface.

E-commerce fulfillment challenge #5: High shipping costs

Nothing in this life is truly ‘free' – and this includes shipping. With brands now expected to foot the bill for home delivery services, shipping costs are constantly at risk of biting into profit margins. This is complicated by issues such as high DIM weight and peak season surcharges, which can drive up shipping costs to unsustainable levels.

However, customer loyalty is at stake. This leaves many e-commerce brands with a tough decision to make; put off potential customers by charging for shipping, or risk of making a loss on sales.

Partnering with a 3PL means that your shipping strategy isn't restricted to such black and white decisions. Access to wholesale shipping rates lessens the burden of shipping on your business, while knowledgeable industry professionals can assist you in formulating a shipping strategy that finds the right balance of cost and speed. Implementing proper cartonization to minimize packaging waste and streamline package size can also save considerable sums by lowering the DIM weight of shipped packages.

E-commerce fulfillment challenge #6: Adding your brand to the fulfillment process

When you're handling a few hundred orders per month, it's relatively straightforward to add embellishments to the order fulfillment process that enhance the customer experience.

Additions such as custom packaging, inserts, and free samples are value-added extras that showcase a higher level of care for your customer, helping to drive customer loyalty and meet the demand for unique experiences.

However, highly customized fulfillment practices don't tend to scale well as your order volumes grow. Creating a memorable unboxing experience adds a lot of additional costs and time to the fulfillment of each order.

This puts e-commerce brands in a tough position. Losing these trimmings can disappoint loyal customers and take away what makes your business unique. But it may not be feasible to continue with such time-consuming practices.

Partnering with an e-commerce fulfillment provider who offers custom fulfillment services ensures that your unboxing experience can scale effectively alongside your order volumes. A full suite of value-added services, including kitting, subassembly, and branded packaging allows you to execute your brand's vision flawlessly with every order.

E-commerce fulfillment challenge #7: Managing high return volumes

Handling returns is a fact of being an e-commerce merchant. Online shopping behaviors are fundamentally different from how consumers shop in-store, with shady practices such as bracketing and ‘wear once and return' now well-established. Combined with the genuine reasons that customers make returns, it can feel as though there are just as many parcels coming into your facility as there are going out.

While e-commerce returns will typically peak following the holiday season, merchants need to be prepared to manage an influx of returns at any time. If returns processing is slow and unwieldy, returned merchandise starts piling up at your fulfillment center, resulting in lower customer satisfaction and lost resale opportunities.

Outsourcing reverse logistics to an e-commerce fulfillment partner can help your business transform returns from a liability into a revenue generator. Ryder offers advanced integrations with three of the top returns management providers – Returnly, Happy Returns, and Loop – in addition to self-service returns options via the Ryder platform to streamline your returns workflow.

E-commerce fulfillment challenge #8: Finding the right fulfillment location

Location, location, location holds just as true of fulfillment as it does for other businesses. The location of your fulfillment center determines not only shipping times to customers, but also how much it costs to ship orders and what shipping options are available.

However, the best way to future-proof against business growth and changes in the retail marketplace is tough for e-commerce companies to predict. A fulfillment center that is strategically located right now might be defunct in five years if customer growth occurs in a different region, causing brands to constantly play catch-up with shifting priorities.

Partnering a 3PL that can offer multiple locations for fulfillment offers your brand freedom and flexibility to keep pace with customer needs, while still optimizing your operation for cost and speed. A multi-node fulfillment strategy using multiple warehouses also ensures that your business can scale by selecting facilities that are close to your customer hubs, thereby increasing customer satisfaction through faster, more seamless delivery.

E-commerce fulfillment challenge #9: Keeping track of inventory

Managing inventory effectively is critical to avoid missing out on sales opportunities or accumulating excess inventory that ties up valuable capital. Yet as selling channels proliferate, inventory management quickly becomes a full-time job. Common challenges such as SKU proliferation and dead stock are time-consuming to manage if your business is relying on manual processes, such as spreadsheets and hand counting units.

A 3PL that can equip your business with a real-time inventory management system makes it possible to see your inventory levels at one glance, as well as measure inventory turnover to avoid accurate forecasting reorder points.

Why should brands outsource e-commerce fulfillment instead of using self-fulfillment?

If you're an emerging e-commerce brand, you're likely facing one or more of the order fulfillment challenges listed above. This is a sign that your self-fulfillment strategy has outlived its effectiveness and that it's time to partner with an experienced e-commerce fulfillment provider. 

Many D2C brands choose to self-fulfill orders when they're establishing a customer base and finalizing product offerings. Fulfilling orders in-house gives you complete control over the end-to-end fulfillment process and the freedom to experiment with different packing techniques.

However, self-fulfillment also carries several financial and opportunity costs as your brand grows.

Storing inventory, packing orders, and handling shipping are manageable when you only have a few hundred orders per month. But as your business scales, order fulfillment absorbs more time and resources. You'll need more people, better inventory management systems, and more storage space – all of which come with a hefty price tag. Even minor issues, such as carrier costs going up or a change in customs regulations, have the potential to derail a fledgling fulfillment operation. 

By partnering with an e-commerce fulfillment provider early on, you can avoid the growing pains that come with being a successful ecommerce brand. Ryder E-commerce is a best-in-class fulfillment provider that can help your e-commerce business to scale effectively with our advanced proprietary technology and nationwide fulfillment network. Contact us today to find out how we can help your brand to whether the challenges of D2C fulfillment.