Fast, reliable shipping can make or break your customer experience. More than 60% of online shoppers are more likely to buy when they see shipping speed estimates at checkout, and 40% say they’d stop ordering from a business after a late delivery.
Order fulfillment is essential to your customers’ experience, whether you run a small store or a large operation. But should you handle fulfillment in-house?
This guide helps you decide if in-house order fulfillment is right for your business and shows you how to get started.
What is in-house order fulfillment?
In-house order fulfillment means managing your entire order fulfillment process yourself. This includes:
- Receiving and storing inventory
- Tracking inventory levels
- Processing orders
- Picking and packing orders
- Shipping orders
- Tracking orders
- Processing returns
- Managing customer service
You can run shipping and delivery operations from a small office, garage, warehouse, or other space, depending on your business size and order volume.
Benefits of in-house order fulfillment
Managing your own fulfillment takes time and effort, but it gives you control over a crucial part of your customer experience. Here are the key benefits to consider:
Complete control over the fulfillment process
You control every step—from storing inventory to shipping orders. This control lets you offer faster shipping times, process orders more accurately, and create personalized packaging experiences for your customers. You can also handle products that need special care and respond quickly when issues arise.
Flexibility to adapt quickly
You can adjust your order fulfillment process any time based on your business needs. This flexibility is especially valuable when you’re just starting your business or have unique products with special shipping requirements. You’re free to test new packaging methods, adjust shipping options, and scale operations up or down as needed.
Potential cost savings
In-house fulfillment can cost less than using a third-party logistics (3PL) provider. Even after accounting for warehouse space, packaging materials, shipping costs, insurance, and basic equipment, many businesses find managing fulfillment themselves more cost-effective.
Challenges of in-house order fulfillment
While in-house order fulfillment gives ecommerce business owners complete inventory control, it can strain your supply chain management resources and daily operations. Here are the main challenges you’ll face:
Complex daily operations
Running your own fulfillment requires many moving parts. You’ll need to track inventory levels, coordinate picking and packing, and handle returns—all while maintaining accuracy. As your order volume grows, so does the risk of mistakes like shipping to wrong addresses or packing incorrect items.
Difficult to scale
Growing your fulfillment operation takes significant investment. You’ll need space, staff, and equipment to handle increased demand. These changes often create temporary bottlenecks that can slow down your existing operation. Each growth phase requires careful planning to maintain service quality.
Demands on time and resources
In-house fulfillment requires constant attention from you and your team. This commitment starts with initial setup and continues through daily operations. Time spent on fulfillment means less time for other core business activities, like marketing, sales, and product development.
Before choosing in-house fulfillment, consider the full investment needed. Calculate costs for equipment and software, packaging materials, local and international shipping, staff training, storage space, and insurance alongside your order volume.
How to implement in-house order fulfillment
- Set up your storage space
- Get your equipment ready
- Create your fulfillment strategy
- Design your workflow
- Build your team
- Set up shipping
- Monitor and optimize as needed
Ready to start fulfilling orders yourself? Here’s a step-by-step guide to start your operation:
1. Set up your storage space
Choose a dedicated space for managing inventory and processing orders. This could be your garage, office, storage unit, or warehouse. The space you need depends on your order volume and products—a candle shop needs less space than a furniture store.
2. Get your equipment ready
Stock your workspace with essential tools like shelving for organized storage, packing materials, and a shipping label printer. You might also want a barcode scanner and warehouse management software to track orders more efficiently.
3. Create your fulfillment strategy
Compare shipping carriers’ rates and calculate your costs for local, national, and international shipping. Then set your shipping prices and establish quality control measures. You’ll also need to define order cutoff times and create a clear returns policy for your customers.
4. Design your workflow
Map out every step of your fulfillment process:
- Receiving, storing, and inventory management
- Picking, packing, and shipping orders
- Returns and exchanges
Use pick lists to batch pick orders that you’re fulfilling across multiple orders. Pick lists can include quantities of each item to be picked, images of the items, and/or storage (bin) locations to help you locate them quickly. Batching and picking items strategically is helpful when you have a lot of items and don’t want to go back and forth to the same bin over and over. You just gather up all your items for multiple orders and then pick them all at once, go back to your packing station, and pack it all up.
Packing slips are another type of documentation that improve overall fulfillment accuracy. They include a list of all the items in a given order for your fulfillment team to cross-check. Once the order contains the right items and quantities, the packing skip is put into the shipping box with all of the items and sent out to the buyer.
Shopify lets you create and print packing slips directly from the Orders tab inside your admin. You can customize this template to include details that make picking easier for your team. At minimum, each slip should include:
- The order number and date
- An itemized list of products, including quantity and SKU number
- The customer’s contact information and shipping address
- Your business information, including returns policies and support methods
- The shipping carrier and fulfillment method
5. Build your team
Hire and train staff based on your order volume. Make sure everyone understands your fulfillment process, safety procedures, and customer service standards. Clear documentation and regular training help maintain quality as your team grows.
6. Set up shipping
Connect your store to shipping software for streamlined label printing and tracking. Consider your packaging materials strategy carefully—if shipping costs are calculated by weight, test lightweight alternatives to heavy materials. For example, bubble mailers might work better than corrugated cardboard for some products.
Add default packages that your store uses often via the Shipping settings in your Shopify admin. This allows staff to quickly select a relevant package during the shipping label buying process, ultimately speeding up the fulfillment process.
Many shipping carriers offer predetermined box sixes with flat-rate shipping. Identify which products your customers often buy together and find the smallest suitable box size for these combinations. This planning helps reduce shipping costs and speeds up fulfillment, since your team will know exactly which box to use.
With Shopify Shipping, you can access discounted carrier rates and fulfill directly through your store’s admin, without extra apps or fees.
7. Monitor and optimize as needed
Monitor your order accuracy, shipping times, inventory turnover, and customer feedback regularly. Use these key performance indicators (KPIs) to optimize your process and reduce costs over time. Regular assessment helps you identify bottlenecks and opportunities for improvement.
Returns management in order fulfillment
Returns are an inevitable part of running an online store. With 80% of shoppers saying they won’t buy again after a poor returns experience, getting this process right is crucial for customer retention and cost control.
Shopify’s built-in returns management tools let you handle the entire process from your store admin:
- Create a self-serve returns portal for shipping labels
- Send automated tracking notifications
- Process refunds to original payment methods
- Offer store credit options
- Manage exchanges
- Update inventory automatically
“Shopify’s customer self-serve returns save me so much time,” says Saheed Akhtar, director at Phenom Boxing. “I no longer need to respond to requests via email and ask for missing order details. I also have visibility into all open returns at various stages.”
How to streamline picking and packing
Use these strategies to improve accuracy and speed in your fulfillment process:
Prioritize expedited shipping
Put rush orders first to meet delivery promises. Use your order management system to filter orders by shipping speed.
Optimize your warehouse layout
Store bestselling items closest to picking stations and group similar products together. A well-organized warehouse reduces time spent searching for products.
Use efficient picking methods
Batched order picking lets you gather multiple orders in one trip, reducing travel times.
For higher volumes, consider wave picking—dividing your team into groups to reduce congestion. Morning waves might handle next-day delivery orders, for example.
Use barcodes and RFID tags
Barcodes are a combination of black and white lines that encode product information. Attach barcodes to your product labels. That way, when you point a barcode scanner at the tag, you can retrieve the product’s name, quantities, and storage location on the device.
RFID technology works in a way similar to barcodes but doesn’t need direct line of sight. Handheld RFID scanners can quickly locate items and update inventory levels throughout your warehouse.
Integrating order fulfillment with your ecommerce platform
The in-house order fulfillment process has many moving parts. Each order needs to go through several stages before it arrives in your customer’s hands. With so many opportunities for things to go wrong, it’s crucial to have complete visibility into your processes. That’s possible with order fulfillment technology that integrates with your ecommerce platform.
Shopify’s Orders tab gives you one central dashboard for orders from every sales channel—whether they’re from your online store, Facebook Shop, or retail location. All your orders come together in one place, making it easier to manage in-house fulfillment.
From your Shopify dashboard, you can:
- View and change fulfillment status (unfulfilled, awaiting shipment, partially fulfilled)
- Update inventory levels when orders are fulfilled
- Buy discounted shipping labels through Shopify Shipping
- Add tracking data for post-purchase emails
- Manage customer returns
In-house order fulfillment FAQ
What are the different types of order fulfillment?
There are three main approaches:
- In-house fulfillment (also called merchant fulfillment), where you manage orders yourself
- Dropshipping, where manufacturers ship products directly to customers
- Third-party logistics (3PL), where you outsource to a fulfillment specialist
Is a 3PL fulfillment company worth it?
It depends on your business needs. In-house fulfillment gives you more control and can be more cost-effective for some stores. Others find that outsourcing fulfillment services to a 3PL is worth the cost for the operational bandwidth they gain.
What cost savings come with in-house fulfillment?
Managing fulfillment yourself lets you control costs at every step. You can choose the most cost-effective packing materials and shipping rates. You can also use dedicated software or automation to reduce labor costs and improve efficiency.
What are the disadvantages of in-house fulfillment?
The main challenges are initial setup costs, operational complexity, and difficulty scaling. These factors can affect order accuracy and delivery times, which directly impact customer experience.
What activities are involved in order fulfillment?
- Receiving inventory
- Storing inventory
- Order picking
- Packing
- Shipping
- Tracking
- Delivery
- Returns management
