Automated Order Routing: How Smart Fulfillment Drives Real Savings and Customer Satisfaction

With the proliferation of channels in which brands and retailers sell products, it is essential for brands to automate pre-fulfillment checks. Multichannel selling requires real-time visibility of incoming orders, a centralized inventory view, and intelligent allocation across fulfillment locations—including stores, warehouses, and third-party logistics (3PL) facilities. Doing this manually is tedious, error prone and time consuming. Automating this process is a key step in ensuring efficiency and achieving good key performance indicators (KPI) that can be the difference between a successful e-commerce operation and failure. These KPIs include parameters such as order accuracy, cost per order, order-to-shipping time and order-to-delivery time.

Among the key functions automated by an efficient OMS such as Vin OMS, are verifying order validity, ensuring efficient fulfillment, routing orders to the ideal fulfillment locations, and effectively managing fulfillment constraints. Figure 1 shows the four critical automation steps in the order management process:

1. Validation rules
2. Allocation rules
3. Routing rules
4. Shipping rules

Figure 1. Vin OMS automation rules

We will now cover each of these key functions in more detail.

Step 1: Order validation

Order validation is the first step in order consolidation before orders are routed to the appropriate location to be fulfilled. The validation process encompasses the following steps:

1. Verify if the order is complete and accurate (delivery address is correct, payment is received correctly)
2. Verify if there is sufficient inventory for the quantity required (checking inventory across available locations)
3. Add tags to assist in automated routing. Examples include putting orders on hold and setting rules for order consolidation.
   • Orders may be put on hold if the available inventory is reserved for orders that come from premium customers, or when fulfillment is deferred, pending inflow of additional inventory.
   • Orders could be consolidated for fulfillment to ensure picking can be consolidated in a warehouse or fulfillment of orders can be optimized and efficiently fulfilled.

Common order tags include the following:

• An order tag can help you easily filter through orders based on a specific category. Categories can relate to a customer that must be prioritized, product that must be fulfilled first, or the sequence in which an order needs to be fulfilled.
• Other common order tags used by online stores are high-priority, fragile items, backorders, those that require insurance, and fraud risk.
• Order tags to specify which orders contain items that are backordered or out of stock.

Step 2: Order allocation

Orders can be allocated automatically to a fulfillment location. This helps in automatically assigning orders that contain a certain inventory type to a particular warehouse or storage location.

• For example, orders received by a particular channel (say Amazon) can be assigned to an FBA (Fulfilled by Amazon) storage location.
• Similarly, temperature-sensitive items like frozen items, are automatically routed to cold storage facilities, as traditional warehouses lack the necessary infrastructure to handle them.

Allocation can be configurable using multiple parameters (illustrated in Figure 2) such as

• order type,
• order date, and
• inventory type as shown in Figure 2 below.

Figure 2. Order allocation parameters.

Additional considerations include:

Inventory availability: Certain locations are prioritized over others even when inventory is available in multiple locations. Some of the considerations in the decision-making process could be related to quicker replenishment of inventory in certain warehouses, ease of picking and packing in certain automated warehouses or the fulfillment location being closer to a certain warehouse.

Location capacity: Warehouse activities include pick, pack, and ship, and even distribution of workload ensures that no one warehouse is overloaded. By considering the location capacity, it is possible to ensure fulfillments are optimized.

Step 3: Order routing process

Orders are routed according to predefined logic and rules, which are activated by factors such as whether the ordered quantity exceeds the quantity available at a preferred location, or if it exceeds the stock available at one or all the locations. Scenarios include:

Complete fulfillment: When the preferred fulfillment location has sufficient inventory to fulfill the entire order.

Split fulfillment: When the preferred fulfillment location has partial inventory, the order is split into one or more orders and routed across multiple fulfillment locations.

Backorder scenario: When the available inventory is insufficient, the order is split into order or orders that can be partially fulfilled using the available stock and an order that will be fulfilled when backordered stock becomes available.

This section covers the scenarios associated with this process shown in the picture shown below. Figure 3 covers the different order routing workflow, showing Order A split into Order A1, Order A2 and Order A3 when split orders are required. Figure 3 also shows order hopping, a mechanism where the orders are routed to a second fulfillment location if the primary fulfillment location does not accept the order to be fulfilled in a timely fashion.

Figure 3. Order routing, splitting, and hopping process.

Order Routing: Order Routing refers to routing orders to an optimal warehouse based on considerations such as nearest location, inventory available, lowest delivery cost, city, region, priority, etc.

Order Splitting: Order splitting becomes necessary when the ordered quantity exceeds the available stock at the routed location, requiring a second location for fulfillment; or when the ordered quantity exceeds the available quantity, requiring the order to be split into multiple orders and a backorder for any remaining quantity. Backorders will be fulfilled using options convenient to the customer.

Order Hopping: Order hopping occurs when the assigned fulfillment location does not accept the order within the time assigned, causing the software to route the order to the next fulfillment location according to the pre-assigned fulfillment location in the preset priority order.

Step 4: Shipping Rules

Shipping rules can be set up for preferred logistics partners depending on the type of order and the timeliness of delivery required. These rules can be set up for various scenarios such as stock transfer, store orders, and outbound orders.

Fulfillment can be based on parameters such as SKU being shipped, fulfillment location, and the speed of delivery requested. Additional considerations include the contractual rates that can optimize the shipping costs and delivery time.

Using shipping company APIs (application program interface), Vin OMS automatically retrieves real-time carrier and determines the optimal shipping partner for routing based on business rules such as order characteristics, the fulfillment location and the destination requirements. Vin OMS continuously monitors the carrier performance in terms of delivery rates, cost efficiency and service quality.

Benefits of automated order routing

Automated order management, through routing of the orders to the appropriate fulfillment location, can eliminate manual errors and inefficient use of inventory available across all the storage locations. This ensures that orders are fulfilled in an efficient and cost-effective manner, thereby optimizing the use of resources and time. The key benefits of automation include:

• Enhanced order accuracy: Automated validation eliminates manual errors, reducing correction costs and returns by 3-6%.
• Optimal routing ensures reduction in delivery times by 8-12% leading to higher customer satisfaction and repeat purchases.
• Reduced shipping costs by assigning a cost-effective shipping partner and optimized routing resulting in logistics cost reduction of 10-15%.
• Efficient use of inventory by using inventory at an optimal storage location resulting in reduction of 8-15% inventory carrying cost.
• Increased customer satisfaction by a 5-10% increase in NPS(net promoter score)/CSAT(customer satisfaction score)

Ready to optimize your fulfillment operations?

Vin OMS provides comprehensive automation for order validation, order allocation, order routing and shipping partners optimization. Our proven platform can help brands, retailers, and online sellers to achieve measurable improvements in efficiency, cost reduction and customer satisfaction.

Next Steps:

• Assess your current fulfillment challenges.
• Identify opportunities to automate functions.
• Calculate potential ROI based on metrics above.
• Schedule a personalized demo of Vin OMS today.