Shipping Small Business

Fulfillment 101: Glossary + How It Works

by Sarah Craig

Fulfillment 101_ Glossary + How It Works (1)

This guest post is from our friends at ShipBob, an eCommerce fulfillment solution.

If you run an eCommerce business, chances are you’re familiar with the concept of order fulfillment: picking, packing, and shipping orders placed on your online store or marketplace to your customers.

Order fulfillment can be done in-house, via dropshipping, or through a third-party logistics (3PL) provider. No matter which fulfillment method you choose, we hope this article serves as a helpful primer on all things related to eCommerce fulfillment.

Fulfillment terminology

Let’s start with the lingo. Here are some fulfillment-related terms to get familiar with before diving into your fulfillment strategy.

  • 3PL: Third-party logistics. Many eCommerce companies choose to outsource parts of the logistics process (including order fulfillment) to a 3PL provider.  
  • Carrier: The shipping company used for delivery, such as UPS or FedEx.
  • Dropshipping: An order fulfillment method in which the manufacturer produces, stores, and ships the product. When a customer places an order, the manufacturer ships the order directly to the customer.
  • Fulfillment center: The space used by a third-party fulfillment provider to store and manage inventory and pick, pack, and ship orders.
  • Self-fulfillment: Also called in-house fulfillment. An order fulfillment method in which the eCommerce business owner handles all fulfillment in-house, without the help of a third-party provider.  

How order fulfillment works

Now that you’re better versed in the most commonly used fulfillment terminology, let’s dive into how the order fulfillment process works, specifically when you choose to outsource fulfillment to a third-party provider.

1. Receiving

If you outsource fulfillment to a 3PL, you’ll need to send your inventory to their fulfillment center(s) in order for them to begin processing orders for your online store.

Each 3PL has its own process, called ‘receiving,’ for obtaining and storing inventory in the fulfillment center. This often includes storing items in designated locations, such as a bin or shelf, and inputting these locations into an inventory management system to help keep track of everything.

2. Picking

The fulfillment process really begins with picking. When a customer’s order is pushed to your 3PL’s system, a packing slip is created that gives the locations and quantities of each item ordered. 3PL staff then collect the products from their designated locations.

3. Packing

With all items in hand, it’s time to get them ready to ship. This includes choosing the best packing materials to protect your products and keep the package as small and light as possible to save you money.

This packaging can include boxes, bubble mailers, poly-bags, and more, depending on your preferences and what your 3PL has in stock. Some eCommerce sellers also choose to use custom packaging to highlight their brand.

4. Shipping

Once the order is ready to go, it needs a shipping label. Often, 3PL companies have relationships with shipping carriers that allow them to purchase discounted shipping labels on the merchant’s behalf.

Many major shipping carriers pick up packages from the 3PL’s fulfillment centers on a daily basis. Once the order ships, tracking information is shared with you and your customer.

Choosing a fulfillment strategy

Order fulfillment may seem complicated, but it’s all about understanding how each part of the process fits together. Different businesses have different needs, so it’s important to consider your order volume, resources, and plans for growth when setting up your order fulfillment strategy.

As your business grows, working with a 3PL can help you save time and money on order fulfillment. Freeing up the time and space taken up by fulfillment allows you to focus instead on growing your business.

Do any of the following sound familiar?

  • I spend several hours a week packing boxes and shipping orders
  • I ship more than 100 orders per month
  • I’m running out of space to store my inventory
  • I need more time for strategic projects, like marketing and product development
  • I don’t want to invest in a distribution infrastructure (e.g., warehouses, forklifts, labor, etc.)

If any of the above resonate with you, it might be time to outsource fulfillment. Click here to learn more about how working with a 3PL!


Rachel is a Content Marketing Specialist at ShipBob, where she creates content that helps eCommerce merchants grow their businesses. ShipBob empowers businesses of all sizes to offer 2-day shipping and maintain control over inventory, orders, and shipments.

Start your 30 day free trial of TaxJar.
No credit card required.