Order fulfillment vs supply chain: What is the difference?

If you do not work in logistics then terms like Order Fulfillment and Supply Chain may seem like the same thing. In actuality they are different terms that denote two entirely different functions of the logistics process.

What’s the Difference Between Order Fulfillment and Supply Chain

The term supply chain refers to the connected system of vendors, organizations, and resources that source, produce, and move goods from origination to the end-customer. Order Fulfillment is but one link in the greater supply chain that includes six fulfillment stages:

• Inventory Management
• Warehouse and Storage
• Receiving
• Pick & Pack
• Shipping
• Returns

In other words, the path an item travels from where it’s made to the hands of the customer is called the supply chain. The link in the supply chain where that item is picked from warehouse shelves, packed into boxes and shipped to the final customer, is called order fulfillment.

Understanding the Supply Chain and Order Fulfillment Process

Once you know the process of how an item gets to your customers, then you can improve the process and make your business better as you grow. The following example illustrates the various steps that a product might take as it travels from the manufacturer to a customer.

Step One: The Manufacturer Creates the Products

The manufacturer makes the correct number of products based on the established needs of the wholesaler.

Step Two: The Wholesaler Orders the Products

The wholesaler stocks the correct number of products needed to fill all of the orders that come in from their retailers, and then pays the manufacturer for the products.

Step Thee: The Manufacturer Ships the Products to the Wholesaler’s Warehouse

The manufacturer passes the products to a cargo carrier to transport to the wholesaler. The manufacturer then pays the cargo carrier.

Step Four: The Cargo Carrier Transports the Products to the Wholesaler’s Warehouse

Depending on the shipping method chosen and locations of the businesses, the products can be transported by train or truck. Delivery time can take anywhere from a few days to several weeks to arrive.

Step Five: The Wholesaler Stores the Products in a Warehouse/Fulfillment Center

The shipment carrying the products arrives at the wholesaler, who then updates their inventory numbers to let retailers know what is available.

Step Six: A Customer Places an Order on the Online Retailer

A customer places an order with an online retailer and pays for the item. The order is confirmed with the customer then processed.

Step Seven: The Online Retailer Places the Order With the Wholesaler

The retailer sends the order to the wholesaler manually or via automatic order notifications, then pays the wholesaler for the ordered products.

Step Eight: The Wholesaler Fulfills the Order

The wholesaler pulls the order from their shelves, packs the items into boxes, and ships the order to the customer using a courier service, then pays the courier service. At this point the customer typically receives a shipping confirmation email.

Step Nine: The Parcel Service Ships the Product to the End-Customer

Depending on the shipping method chosen, it could take a few days or up to a few weeks for the shipment to actually arrive at the customers door.

Step Ten: The Customer Receives Their Order

The product makes it from the manufacturer to the customer. At this point the customer can choose to keep the item, or send it back and initiate the returns process.

What is an Order Fulfillment Service

At the end of the day, order fulfillment is simply a business function. Like any business function, it can be outsourced to a professional order fulfillment service, also known as Third Party Logistics Provider (3PL).

What is 3PL?

A 3PL is a third-party fulfillment logistics company that provides outsourced logistics services to brand in need of supply chain management. In other words, a 3PL is a service you hire to manage the various functions of your supply chain, such as:

• Inventory Storage & Management
• Freight Forwarding
• Shipping/Receiving & Distribution
• Order Fulfillment
• Cross-docking
• Picking and packing

A 3PL can also help you manage your fast-moving eCommerce supply chain with a network of fulfillment center locations, connected technology, and, of course, deep supply chain management expertise.

What is Supply Chain Management and Why is it Important

Now that you understand the difference between order fulfillment and supply chain, we can delve into the specifics of supply chain management, optimization and fulfillment planning strategy.

Order Fulfillment and Supply Chain Strategy

Though it has a lot of bells and whistles, order fulfillment is a simple enough process: get the correct product to the correct customer in the quickest, most cost-effective way possible. With that goal in mind, speed and efficiency becomes a top priority.

1. Choose the Right Order Picking Process - There are several different methods of order picking available to you depending on the nature of your business. It’s up to you to determine which one right for your business by evaluating the size and scale of your operation.
2. Increase Inventory Visibility - If you sell on multiple channels, then your order fulfillment process can benefit from greater transparency of stock levels. The more visibility you have on stock levels, the better your likelihood of avoiding a stockout and/or overstocking.
3. Improve Order Management - Knowing and communicating the status of orders in real-time through your warehouse management system enables your delivery network to keep track of progress, identify shipping bottlenecks, and alert customers when their order arrives.
4. Prioritize Warehouse Location - Be sure to choose warehouses and fulfillment providers that not only meet your picking and shipping requirements, but are also located within your consumer market.
5. Outsource Order Fulfillment to a 3PL - With greater resources at their disposal, 3PLs like Flowspace can deploy different inventory volumes to different warehouses across the country and choose the fastest, most cost-effective delivery method for your company and your customer, no matter where they live.

Choose the Best Fulfillment Service for Your Supply Chain

Flowspace can help you improve your order fulfillment and supply chain in a number of beneficial ways. With 1000+ warehouses and fulfillment centers nationwide, Flowspace is the best way to optimize your order filling process, minimize shipping times, and increase customer satisfaction. Contact us today to get more information.