Fulfillment Service in E-Commerce Logistics
Fulfillment Service in E-Commerce Logistics
Fulfillment Service in E-Commerce Logistics
Arkadiusz Kawa
Poznan University of Economics and Business, Poznań, Poland
ABSTRACT. Background: The logistics service of e-commerce is usually limited in the literature to the issue of
product delivery to customers. However, before goods are sent to the customer, the vendor has to order them from the
supplier. Next, they are taken into the warehouse and stored, and after the order has been placed, they are packaged and
sent to the customer. These processes are defined in e-commerce as fulfillment. Due to their complexity and time and
cost pressure of e-customers, they are more and more often conducted by external operators. Despite the dynamic
development of the fulfillment service in e-commerce practice, this still remains a relatively unknown issue in
management theory.
The aim of this paper is to present and analyze the fulfillment service in e-commerce logistics. The author has made an
attempt to indicate and define the main models of logistics processes connected with the fulfillment service in e-
commerce logistics, their strengths and weaknesses. An additional aim of this paper was to recognize development
directions of the market of fulfillment services.
Methods: For the needs of the paper research was conducted using the methods of direct observation and analysis of
primary and secondary sources. The primary materials included data obtained from companies providing fulfillment
services in Poland and abroad, and the secondary ones - reports, studies and Internet sources. In addition, in-depth
interviews were performed with representatives of companies that offer fulfillment services or those which are potential
bidders.
Results: The article characterizes the details of the fulfillment service, whose importance has been increasing in e-
commerce logistics. The author has described the division and characteristics of the fulfillment service models and
discussed the potential trends in the fulfillment service market.
Conclusions: The presented review and characteristics of various implementations of fulfillment services allows to
evaluate to what extent logistic processes should and could be delegated to specialized companies in order to focus on the
core competencies only. The usage of fulfillment service is useful especially at the phase of the rapid growth of the e-
company. It involves, however, also some disadvantages, such as relatively high fees, a lack of physical contact with the
goods, a partial loss of control over the process.
customers (by availability of goods, different one needs to consider hiring more people and
forms of delivery and a low shipping cost), but buying or renting warehouse space. Handling
also to retain those who have already placed an the so-called seasonal peaks becomes
order (by timeliness, compliance of the goods a problem [Żuchowski 2016]. The only
with the order, no damages). A few years ago, logistics process outsourced to external
efficient logistics in e-commerce was a source companies is the delivery of the product to the
of competitive advantage, today it is end customer. For this purpose, courier,
a prerequisite. Those who win, in turn, are express and postal services operators (CEP) are
companies that implement new logistics engaged [Dabidian, Clausen, Denecke 2016].
solutions tailored to the needs of the market
[Ramanathan, George, Ramanathan 2014]. In turn, dropshipping involves shipment of
One of these solutions is the fulfillment service goods directly from the warehouse of an
related to the processes run in warehouses by external entity (the manufacturer, the
external operators. distributor) to the client without the need to use
the vendor’s warehouse [Zając, 2014]. This
Despite the dynamic development of the service consists in storage of products, taking
fulfillment service in e-commerce practice, this orders and completing them, issuing sales
is still a relatively unknown issue in documents and shipping packages to
management theory. For this reason, the aim of customers. Medium-sized companies that do
this paper is to present and analyze the not want to take the risk of freezing their assets
fulfillment service in e-commerce logistics. in inventory, particularly when they increase
The author has made an attempt to indicate and the number of their product items, are usually
define the main models of logistics processes interested in this type of services. This model
connected with the fulfillment service in e- allows stores to focus on acquiring customers.
commerce logistics, their strengths and
weaknesses. An additional aim of this paper In e-commerce, there are two approaches
was to recognize development directions of the adopted by e-retailers in the field of
market of fulfillment services. dropshipping [Ayanso et al. 2006]:
− pure dropshipping, in which the online
store does not have a warehouse and is
LOGISTICS ORGANIZATION based on external firms implementing
FORMS IN E-COMMERCE order fulfillment processes.
− partial dropshipping, in which only
In e-commerce, there are four forms of selected products are stored in an outside
organization of logistics, which indicate the company’s warehouse.
scope of the processes performed by the e-
retailer [Kawa 2014]: Pure dropshipping works well if the offered
1. Insourcing logistics. products come from a single supplier that has
2. Dropshipping. a wide range of them. The problem, however,
3. Fulfillment service. lies in the realization of orders in which the
4. One stop e-commerce. goods originate from multiple suppliers. This
results in higher costs and can cause
Insourcing logistics in e-commerce is most communication problems. Product returns by
popular, especially on the Polish market. In customers are also troublesome. The use of
this model, stores conduct most of the logistics dropshipping, therefore, requires developing
processes on their own. This proves effective appropriate procedures for the flow of
for micro and small enterprises, whose scale of information, packaging, payments, returns
activity is still too small for the use of external [Khouja 2011].
logistics companies to be profitable. This
approach allows for better control of their In turn, the fulfillment service involves
business and independence from delegating part of the logistic processes to an
subcontractors. In this model, it is crucial to external provider. Due to the fact that the main
prepare for sudden development of the focus of this article is fulfillment, it is
company. As the number of orders increases, described in detail in the following chapters.
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Kawa A., 2017. Fulfillment service in e-commerce logistics. LogForum 13 (4), 429-438.
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Kawa A., 2017. Fulfillment service in e-commerce logistics. LogForum 13 (4), 429-438.
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Kawa A., 2017. Fulfillment service in e-commerce logistics. LogForum 13 (4), 429-438.
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aware of worse time positioning of their offer only a few logistics operators can now be
in the search engine. As part of the fulfillment indicated that followed trends and enriched
services, the biggest sellers using the services their offer with solutions dedicated to online
of Amazon, however, receive support from merchants. In most cases this experience was
a consultant who does a number of activities, gathered at projects completed for a lot of
e.g. translation of descriptions into other customers, often as a complement to other
languages. services already rendered to the given
company. Accordingly, logistics providers are
The Amazon's model, and consequently unlikely to support small and medium-sized e-
FBA, consists of several elements [FBA 2017]: retailers.
− Create great customer experience –
a customer dissatisfied with a purchase at It is worth noting that the fulfillment for
a given online store is not going to return logistics companies is synergistic with the
to it. It is therefore necessary to offer the existing logistics (e.g. the same storage system,
best possible service, delivery, use of space in the lower racking composition).
information standards, not to be limited to Specific instrumentation is only required (e.g.
the minimum services. handheld scanners, mezzanines), as well as
− FreeShipping – for the customer, a cheap training for employees on knowledge of
and convenient form of delivery is the customer goods.
basis. Sending parcels by sellers on their
own is not beneficial for the client. In the first place, logistics service providers
− Amazon Delivery Promise – with its are responsible for receipt of goods from
reputation and organization of all suppliers – usually from manufacturers or
warehouse processes Amazon guarantees intermediary distributors. Then, processes are
that if an item is shown on the website as implemented which include control of the
available, it will be sent in the guaranteed delivery, introduction of all collected products
time and will definitely be of good to the system and their placement at the storage
quality. location. The next process is acceptance of an
order for a particular product in the online
Many companies in Poland, but also in the store. Then the employees of the logistics
world, copy the proven business model of service operator obtain information about the
Amazon and are based on it. An example is order, receive a complete package, pack it and
Allegro, which is changing from the auction ship it (in Poland mainly via couriers, parcel
platform into a shopping gallery. It offers lockers of InPost and services of the Polish
brokerage services (sendit.pl) in the field of Post Office). After-sales service is equally
courier services. With time, it will probably important – in online stores primarily
also begin to provide fulfillment services to its associated with the service of returns, taking
customers. complaints. More and more operators offer
additional services, including: completing sets,
Fulfillment offered by logistics service gift packaging, refreshing products,
providers maintenance, management of the e-shop
archive, sending sales reports, sales and
A few years ago e-commerce in Poland was inventory planning.
treated marginally by representatives of the
logistics industry. Service of e-retailers (but Among the major logistics service
only in the field of distribution) was dealt with providers in e-commerce the following can be
by the CEP operators, but their adaptation to distinguished: Rhenus Logistics, Raben and
the specifics of e-commerce took a long time. Fiege. There are also CEP operators, such as:
Large logistics operators were not at all DHL, GLS, DPD and the Polish Post Office.
interested in handling online stores because of However, interviews with representatives of
fragmentation, small amounts of inventory to these companies show that they do not provide
be stored and distribution that could be this type of services. It seems, though, that it is
prepared only by the CEP operators. Therefore, only a matter of time and these companies will
start to offer fulfillment services in Poland.
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Kawa A., 2017. Fulfillment service in e-commerce logistics. LogForum 13 (4), 429-438.
http://dx.doi.org/10.17270/J.LOG.2017.4.4
It will be a natural supplement to the which it entered into with courier companies,
distribution services which are used by all the Polish Post Office, InPost, monitoring of
fulfillment companies anyway. The CEP the incoming COD (cash on delivery) and
operators will gain even more, because the quick returns of cash on delivery. An added
broker that imposes a margin on their services value is also the fact that it is possible to
will be eliminated. include a ready base of goods being in OSDW
Azymut’s distribution in the offer of a given
Fulfillment offered by other market players online store [Azymut 2017].
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Kawa A., 2017. Fulfillment service in e-commerce logistics. LogForum 13 (4), 429-438.
http://dx.doi.org/10.17270/J.LOG.2017.4.4
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Kawa A., 2017. Fulfillment service in e-commerce logistics. LogForum 13 (4), 429-438.
http://dx.doi.org/10.17270/J.LOG.2017.4.4
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ACKNOWLEDGEMENTS Investigation of Behavioural and Structural
Characteristics of CEP Service Providers
This paper has been written with financial and Freight Demand Considering E-
support of the National Center of Science commerce in Germany, Transportation
[Narodowe Centrum Nauki] – grant number Research Procedia, 14, 2795-2804.
DEC-2015/19/B/HS4/02287. http://dx.doi.org/10.1016/j.trpro.2016.05.47
3
Del Ser J., Bilbao M.N., Perfecto C., Salcedo-
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Arkadiusz Kawa
Poznan University of Economics and Business,
Al.Niepodległości 10
61-875 Poznań, Poland
e-mail: [email protected]
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