After hours of bouncing between online stores, marketplaces, and Instagram, your would-be customer finally finds the perfect silky kaftan to wear to their friend’s upcoming pool party. With a credit card in hand, their shopping journey grinds to a halt when they see your vague delivery estimates and unfavorable customer reviews about inconsistent delivery schedules. Suddenly, they’re no longer so sure about that kaftan.
Today’s customers expect speedy, hassle-free deliveries. The goal is to keep your customer order cycle time as short as possible, as punctual delivery not only helps maintain customer satisfaction, but also creates repeat buyers. By contrast, one unpleasant delivery experience can turn even the most loyal customer into a former customer. Here’s what you need to know about optimizing your order fulfillment cycle time.
What is order fulfillment cycle time?
Order fulfillment cycle time, sometimes shortened to OFCT or fulfillment time, is the time it takes online customers to receive a purchased item. The order fulfillment process varies depending on the item, quantity in stock, the supply chain process, and the buyer and seller’s locations. For online shoppers, the closer the promised delivery date is to the order date, the better the experience.
Efficient ecommerce platforms ensure a customer’s order arrives within the expected order fulfillment time. Making your fulfillment time as short as possible can mean optimizing your supply chain capacities and choosing a competitive third-party carrier for parcel delivery.
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How to calculate fulfillment times
Fulfillment times vary for different businesses and products, but a simple order cycle time formula can help you determine the average length of time between a customer purchasing and the expected order delivery.
To calculate your fulfillment time, you need the following product information:
The sourcing component of fulfillment refers to the duration between when a customer places an order and when you gather all the raw materials necessary to produce or assemble the product. If a product is ready to be shipped and in-stock at the time of the purchase, there is no sourcing time.
Production time, also known as packing time, is the time it takes to assemble or produce a product, retrieve it from a warehouse shelf, inspect it for quality, and package it for shipment.
This is the purchased product’s travel time, beginning from when the shipping team completes its packaging to when it arrives at the customer’s receiving address.
Calculating fulfillment time
Add each factor together to obtain your order fulfillment time:
Sourcing time + Production time + Delivery time = Order fulfillment cycle time (OFCT)
If a customer orders your product on July 15, here’s how you can figure out the OFCT. You may already have the product in stock at a fulfillment center in the customer’s region, so there’s no sourcing time involved. The warehouse staff packages the product that same afternoon (packing time) and ships it out the next day. When the customer receives the product on July 19 (delivery time), the total fulfillment time is four days.
If a customer places the exact same order but wants a customized detail that takes a week to complete (adding sourcing time), the total fulfillment time is 11 days.
The fulfillment time formula is not to be confused with the cash cycle time formula, also called the cash-to-cash formula, which calculates the time it takes for businesses to turn over inventory, receive payment, and pay suppliers.
Benefits of improving order fulfillment cycle times
Ecommerce stores’ fulfillment models vary depending on the nature of the business and its offerings, but there are recognized benefits of improving order fulfillment times that apply across industries:
Creates brand loyalty
Fast fulfillment times encourage customers to return for future purchases, leave positive reviews, and recommend your brand to others, all of which can boost sales. Speedy fulfillment times contribute to customer satisfaction. Customers buy from businesses—directly or via third-party ecommerce platforms—when they have reliable, fast fulfillment times.
Builds customer trust
When you meet fulfillment times, you build customer trust. A customer who spends money to purchase a funky wooden phone case online for their niece’s birthday can be confident it will be delivered when promised if there’s a history of short fulfillment times.
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Attracts new customers
A business with a reputation for fast fulfillment times can reach potential customers through word of mouth or online reviews. Quick fulfillment also improves customer retention by enhancing the customer experience and encouraging repeat business, helping turn new customers into consistent ones.
Facilitates good business practices
Doing well in one area of the fulfillment cycle will positively affect others. A business that runs like a well-oiled machine likely has a superior customer ordering system and excellent supply chain management and warehouse flow, among other key factors.
Strategies to improve order fulfillment time
Having the shortest fulfillment time possible takes money and foresight. Here are seven ways to improve your fulfillment time:
Track and analyze metrics
Measuring fulfillment can illuminate patterns that impede deliveries. Track fulfillment time metrics by analyzing the percentage of packages delivered on-time and damage-free and the percentage of correct purchase orders filled. It’s never too late to start full and accurate documentation. Isolate every part of the process, including the supply chain cycle time, to uncover any bottlenecks or pinch points.
Use inventory management software
Inventory management software tracks and manages orders, and each one offers a different specialization. Choose software best suited to your business’s product, supply chain, and fulfillment model. Many inventory management software programs integrate with Shopify, including Katana, ZhenHub, and ShipBob.
Use reliable suppliers
If you manufacture or assemble products from raw materials, make sure your suppliers are reliable to minimize disruptions. Late material deliveries can impact your fulfillment times. Ideally, diversify your sources for each material to reduce dependency on a single supplier.
Choose local vs. global materials
Whether you are a small business or corporation based in the US, local sourcing often comes at a higher cost than overseas options, as some countries can manufacture goods for significantly less than in the US. However, local sourcing offers several benefits. For example, delivery times can be faster and more dependable when geopolitics, extreme weather, or international emergencies disrupt global shipping.
Optimize your warehouse layout
Optimizing your warehouse layout can streamline processes, minimize travel time for employees and equipment, and enhance the flow of goods.
Workers should have easy access to shelves and bins for efficient retrieval, facilitated by a well-organized layout that accommodates utility vehicle movement. High-volume businesses can enhance their fulfillment speed by distributing warehouses across multiple cities or regions.
Update inventory in real-time to best serve customers, giving accurate information about products in stock and realistic delivery times.
Use a suitable shipping company
The primary delivery services in the US include the US Postal Service, UPS, FedEx, and DHL. Different companies often excel in various regions of the US and abroad; others specialize in handling unique package types. Ask colleagues for recommendations and experiment with delivery companies. Many customers are willing to pay for expedited shipping costs if it means faster delivery, so consider offering this option.
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Order fulfillment cycle time FAQ
What is the average order fulfillment cycle time?
When a US customer buys an item from a US-based ecommerce store, the typical fulfillment time is three to five days. However, for a store that carries products requiring post-purchase manufacturing, customization, or assembly, fulfillment times can vary widely.
Can order fulfillment time vary for different types of orders?
Yes, the fulfillment time can vary depending on whether the product is ready to ship, if it needs to be assembled from raw materials, whether the item is in stock, and the order volume.
How does technology and automation help improve fulfillment times?
Software helps to track each step of the fulfillment process, from issuing a purchase order to product packing time. You can analyze the entire process and find areas that need improvement.