Shopify Fulfillment: How to Choose the Best Solution for Your Business

With over 5.2 million stores worldwide, there’s no doubting Shopify’s dominance in ecommerce. What remains uncertain for some business owners, however, is which Shopify fulfillment is the best choice for their online store. The three main options – Shopify Fulfillment Network, third-party logistics (3PL) companies, and in-house fulfillment – each have benefits and drawbacks. You’ll want to weigh all potential ecommerce fulfillment solutions carefully before making a decision. 

Shopify inventory management is case-specific, and the system you put in place can make all the difference in customer satisfaction, operating costs, and ultimately, long-term business success. 

This Shopify fulfillment guide will help you fairly consider the pros, cons, and special considerations associated with the most popular Shopify fulfillment solutions available today. 

What Is Shopify Fulfillment?

Shopify fulfillment refers to the process of managing and executing orders placed through a Shopify-powered online store. It encompasses several key steps (which we’ll explain in detail later on): receiving inventory, storing products, processing orders, picking items from storage, packing them securely, and shipping them to customers. Fulfillment can be handled in various ways, including in-house by the merchant, through third-party logistics providers, or via Shopify's own fulfillment services. 

Why Is Fulfillment Important for Shopify Sellers?

As an ecommerce business owner, it’s easy to get swept away by the possibilities of Shopify’s accessible and user-friendly sales solutions. The company is a leader among online retail platforms because it has virtually everything one could need to attract, engage, and compel prospective customers to make purchases online. Sometimes, that causes people to forget about an equally important aspect of making money with an online store – fulfilling orders. 

After checkout, a long list of tasks must be completed to ensure buyers receive the products they paid for. The efficiency of the fulfillment system a company has in place for this process has the power to impact delivery timelines, order accuracy, customer satisfaction, repeat purchases, and more. 

Fulfillment centers can also affect internal operational expenses. If inventory levels aren’t managed properly, ecommerce sellers risk losing stock to spoilage, misplacement, and damage. The costs of chronic shrinkage pose a serious threat to profitability. Businesses may even experience a decline in sales as they’re forced to raise retail prices to compensate for ongoing inventory loss. 

How Shopify Fulfillment Works

Regardless of who sees the process through, Shopify fulfillment universally involves several fundamental phases. Understanding this workflow will give you the context you need to properly evaluate the fulfillment options for Shopify available to you. 

Receiving Shopify Orders

The process begins with processing orders, which can be done manually or automated. Manual fulfillment is the default setting for every Shopify store. With it enabled, order statuses are displayed as Unfulfilled until you manually open and confirm the completion of each one.

Automated fulfillment uses predetermined rules to process orders without direct intervention. This method is standard among ecommerce businesses that use fulfillment services. Under the framework, Shopify sends order information directly to the external service partner, who then immediately begins preparing the order for shipment. 

Shopify has guides explaining how to fulfill your own orders manually, fulfill your own orders automatically, and fulfill orders with a fulfillment service. That platform is relatively flexible with respect to inventory management, allowing the use of multiple locations and fulfillment apps in a single online store. Preferences for individual products can be set in the “Inventory will be stocked at” field, under “product details.”

Inventory Management

Effective inventory management is the backbone of a successful Shopify store – or any ecommerce store, for that matter. Inventory syncing with Shopify ensures that your online stock levels accurately reflect the products you or your fulfillment center have at any given time. In both self-managed and third-party fulfillment arrangements, warehouse management software plays a key role in keeping inventory records synchronized across all sales channels. This software integrates with your Shopify store, providing real-time updates on stock levels, order statuses, and product locations.

Inventory management becomes even more critical for businesses that sell on multiple ecommerce platforms and online marketplaces. One, consistently updated source of truth ensures changes in inventory are reflected across all channels. It's important to have a good inventory management system in place because it ensures consistency and prevents discrepancies that could lead to customer disappointment or lost sales. Real-time inventory updates across all channels also enable you to make data-driven decisions about restocking, promotions, and product offerings.

Shipping and Delivery

Shopify currently accommodates three different types of package acquisition: shipping, local delivery, and in-store pickup. Shipping is the most practical and widely used option for businesses that operate exclusively online. Sellers have the option to offer buyers free shipping or flat-rate shipping to incentivize larger orders through the Shopify Shipping system, which is connected to multiple major carriers, including USPS, FedEx, UPS, and DHL Express.

When you receive orders as a self-fulfilled seller, Shopify will generate a shipping label complete with the customer's address and order details. You can easily print it directly from the Shopify dashboard using a conventional printer or a dedicated label printer.

The package must then be affixed with the printed shipping label in its top right corner. There are multiple ways to hand it off to a courier from there – small-scale sellers often drop batches off at their nearest post office, shipping center, or authorized drop-off location. For large order volumes, many carriers offer pickup services.

Outsourced fulfillment takes much of the above work and responsibility off of your shoulders. Inventory is stored in a third-party fulfillment center's warehouse, and they handle the picking, packing, and shipping processes. When you receive an order through Shopify, it's automatically routed to the fulfillment center for processing and shipment. This seamless integration ensures that orders are fulfilled quickly and accurately, without requiring your direct involvement in the day-to-day logistics.

Processing Returns

The Shopify Admin panel is a central repository for all of an online store’s return requests. It’s from where you’ll send your customer shipping instructions or return labels and communicate the refund they can expect to receive. In the case of in-house fulfillment, the shipping instructions will see that the package is sent to the owned or rented facility responsible for inspecting and restocking returned items. Shopify sellers using a third-party reverse logistics provider can have products sent to their partner’s fulfillment center.

Types of Shopify Fulfillment Solutions

With the responsibilities and potential pitfalls of Shopify fulfillment well-defined, let’s talk about solutions. Shopify store owners have a few options when it comes to order preparation and shipping. In the sections below, we identify each one and explain how these ecommerce fulfillment solutions differ in terms of factors like scope, control, and cost. 

In-House Fulfillment

In-house Shopify fulfillment means handling order processing and shipping on your own. It requires an owned or rented facility for inventory storage, as well as a team of warehouse staff dedicated to picking and packing products as they’re bought from your online store. 

Some companies prefer this approach because it gives them complete visibility over day-to-day operations. However, the benefits of immediate oversight and quality control create additional responsibilities and expenses. There comes a point for many ecommerce business owners where fulfillment is simply too cost-prohibitive to do in-house. 

Self-managed warehouses make the most sense for small-scale operations that deal with low order volumes or highly customized products. Shopify sellers with rapidly-expanding customer bases and high order volumes can only make it work by committing time and money to developing internal infrastructure. 

Dropshipping

Dropshipping is a Shopify fulfillment method in which a merchant doesn't stock the products it sells in an owned, rented, or outsourced warehouse but instead has third-party suppliers directly ship orders to customers. 

The model has become very popular for its low startup costs and limited overhead. There's no need to manage inventory or warehousing, as almost everything is handled by the supplier. Dropshipping is ideal for entrepreneurs looking to test new product ideas with minimal risk, businesses wanting to expand their product range without increased inventory costs, and online retailers seeking a hands-off approach to fulfillment. 

It’s important to remember, though, that hands-off isn’t the best move for everyone. It often means handing control over to a Shopify dropshipping fulfillment center you’ve never visited in person and forking more of your profit margin over to that service provider.

Third-Party Logistics (3PL)

Third-party logistics (3PL) refers to arrangements in which an ecommerce business outsources the core responsibilities of order fulfillment to an outside company. Specialized service providers manage warehousing, inventory, packing, and shipping on behalf of the retailer while keeping them abreast of operations through real-time data and analytics.

A Shopify 3PL, in particular, will have internal systems that integrate seamlessly with the Shopify platform to allow for real-time updates on stock levels, automatic order syncing, and seamless communication between the online store and fulfillment centers. 3PLs specializing in Shopify also offer expertise in handling platform-specific features, such as multi-channel selling and customized packaging options. This arrangement allows businesses to focus on their core competencies, such as product development and marketing, while leaving the logistics to experts.

The right time to outsource fulfillment often coincides with rapid growth, when order volumes become too large to manage in-house efficiently, or when expanding to new geographical areas. Shipfusion offers tailored solutions for ecommerce businesses facing either of these scenarios.

What Is the Shopify Fulfillment Network?

The Shopify Fulfillment Network (SFN) is a logistics solution designed to help Shopify merchants streamline their order fulfillment process. It takes care of the same core duties as independent third-party fulfillment companies, including storage, packing, and shipping. The main difference is that everything is integrated into Shopify’s ecosystem. Shopify doesn’t own or staff the warehouses – those are run by its partner Flexport. SFN is kind of like a halfway 3PL partnership where you aren’t managing fulfillment and the logistics company with your products doesn’t communicate with you directly. 

SFN makes the most sense for businesses that mainly or exclusively sell products on Shopify. If you're using other ecommerce platforms like Amazon or Pinterest, a fulfillment service capable of integrating with both Shopify and these other platforms is likely to be a better fit.

To give you a better idea of what Shopify Fulfillment Network does and doesn't offer, we've put together the following rundown of benefits, drawbacks, and pricing details. 

Pros

• Seamless integration: SFN is compatible with various sales channels that are already integrated with your Shopify store, including Facebook, Google, Instagram, and Walmart Marketplace.
• Simplified pricing: SFN has a relatively simple pricing system that outlines respective costs for accepting, storing, and fulfilling inventory.
• Fast Delivery: Most SFN shipments in the United States are delivered to customers within three business days.

Cons

• Limited experience: Having launched in 2019, SFN hasn’t been around long enough to prove the consistency and quality of its services.
• Eligibility restrictions: Not all Shopify merchants are eligible to use SFN.
• Order volume limitations: There are restrictions on the number of orders that can be fulfilled through SFN.
• SKU limitations: SFN can only handle a limited quantity of unique SKUs per merchant.
• Product restrictions: Beauty products, medical products, regulated items, and perishable goods are not eligible for SFN.
• No lot tracking: SFN does not offer lot tracking capabilities, which may be necessary for certain types of products.
• Stringent Packaging Requirements: All products stored and fulfilled by Shopify’s partner Flexport must be self-contained, easy to receive, and pass a drop test.
• Geographic limitations: SFN is only available to businesses located in the United States and Canada. Merchants must sell products to customers in the U.S. in order to qualify for fulfillment services. 

Pricing

SFN employs a straightforward pricing model that applies single fees for core fulfillment activities like shipping, packing, and receiving. The cost for domestic fulfillment is calculated based on the billable weight of the SKUs being shipped. 

Common Challenges with Shopify Fulfillment

As with every other sales channel, Shopify shipping and fulfillment comes with challenges. Some pitfalls are avoidable, while other issues can only be mitigated through planning. Keep the following considerations in mind when laying out your fulfillment strategy for Shopify – some may make the difference between in-house and third-party fulfillment. 

Limited Cash Flow

Limited cash flow can make it challenging to maintain adequate inventory levels, invest in efficient shipping processes, or upgrade your fulfillment technology. Chronic constraints may lead to stockouts, delayed shipments, and suboptimal customer experiences. 

There are things ecommerce businesses can do to prevent this, like using just-in-time inventory management to reduce upfront costs. Flexible payment terms with suppliers and shipping partners and pre-orders for popular items can also help generate and maintain cash reserves before incurring inventory costs.

It’s ultimately a question of whether you want to take these steps yourself or delegate them to a third party.

Low Daily Order Volume

A limited daily order volume can pose unique challenges for Shopify merchants. With fewer orders, it's harder to negotiate bulk shipping rates or justify investing in advanced fulfillment software. This can result in higher per-order shipping costs and less efficient operations. To address this issue, explore partnering with other small businesses to aggregate shipping volumes and qualify for better rates. Utilize Shopify's native fulfillment features to streamline your processes without significant investment. 

There are two ways to solve this. The first – and easiest – solution is outsourcing. Third-party Shopify service providers operate at a scale large enough to cost-effectively secure industry-leading shipping rates. The technology they use to process orders is much more advanced than what the average in-house fulfillment center has. 

If you must handle fulfillment on your own, offering incentives for larger orders and bundling products are other, more work-intensive ways to increase Average Order Values (AOVs).

Highly Specialized Needs

Having highly specialized needs, such as specific product storage requirements or custom packaging, can complicate your Shopify fulfillment process. Unique requirements often lead to increased costs. They also require teams with the training, tools, and capacity to assemble complex orders at scale. 

In order to maintain order accuracy for your Shopify customers, you'll need to either invest in a strong in-house team or work with a specialized 3PL provider. The latter option is best for Shopify merchants who want to scale their business without compromising on quality or customer satisfaction. Specialized 3PL providers are equipped to handle complex fulfillment needs while maintaining efficiency and cost-effectiveness.

How to Choose a Shopify Fulfillment Solution

The stakes for choosing a Shopify fulfillment solution are high. With the right system, you can streamline operations, reduce costs, and delight customers. Manage things poorly, and you risk late deliveries, inventory headaches, and unhappy shoppers. In this section, we'll explore key factors to consider during the planning process. 

Integration with Your Shopify Store

The first thing to look for in a Shopify fulfillment partner is, of course, integration with Shopify. Most providers out there today have developed plug-ins that facilitate real-time inventory syncing, automatic order importing, and shipping status updates between their facilities and your Shopify dashboard. Set-up requires minimal technical expertise and can typically be completed in a matter of hours. 

But with that being said, the process can be made easier or more difficult by the quality of customer support provided by the fulfillment partner. Look for providers that offer dedicated account managers or responsive support teams to guide you through the integration process and troubleshoot any issues that may arise.

System Strength and Resilience

The Shopify fulfillment system you put in place today should be ready to handle whatever challenges tomorrow brings. Even if you feel you’re on strong footing today, external factors will impact operations at some point in the future. Supply chain resilience is about being able to pivot in the face of unforeseen circumstances. Fulfillment systems can enable agility or hinder it depending on how they're designed and implemented.

For instance, a robust fulfillment network connected to multiple warehouse locations across the country will be better positioned to adjust should one facility shut down than a system relying on a single centralized warehouse. When individual shipping carriers experience service disruptions, it's the fulfillment centers with more connections that get orders out the door sooner.

Imagining all of the things that could go wrong isn't a negative mindset but rather a proactive approach to building resilience. You'll want plenty of that preparedness if you plan on keeping Shopify customers' orders flowing smoothly 365 days a year.

Scalability and Adaptability of Operations

Preparing for the worst can only partly guarantee long-term Shopify fulfillment success. Readiness for the best-case scenario is another often underappreciated aspect of proper planning. Say your online store takes off and sees a sudden surge in orders. Will your fulfillment system be able to scale up quickly to meet the increased demand? A Shopify fulfillment center should have the capacity to handle rapid growth without causing major disruptions or delays in order processing. 

Be sure to also consider flexibility; if you decide to expand into wholesale and B2B sales, fulfillment operations will need to accommodate these new channels without requiring a complete overhaul. Remember, the goal is not just to meet current needs but to build a foundation that can evolve with your business. 

Ecommerce Specialization and Industry Experience

It's no secret that the ecommerce ecosystem is broad and diverse. Different product categories come with unique challenges and requirements when it comes to storage, handling, and shipping. A fulfillment partner that specializes in ecommerce and has experience in your specific industry can make a world of difference. They may be able to suggest more efficient packaging methods, recommend cost-effective shipping options, or provide guidance on inventory management strategies tailored to your product line and sales patterns. 

Inventory Management Capabilities

Successful fulfillment isn’t just about picking and packing orders in a timely manner. Upstream from those tasks, inventory must be managed effectively to ensure the right products are available at the right time. 

In-house, this necessitates a dedicated employee. Your warehouse manager will oversee inflows and outflows, monitor inventory levels, conduct audits, and decide how much new inventory should be ordered and when. 

A good Shopify fulfillment partner does the same things, only their expertise is outsourced and technology-enabled. Robust inventory management tools can give you enhanced visibility into stock levels, automate reorder points, and provide detailed reporting on inventory turnover and forecasting in real-time. The value is especially pertinent for ecommerce businesses that sell Consumer Packaged Goods (CPG) requiring large-scale cycle counting, batch tracking, and expiration date management.

Returns Management Solutions

Reverse logistics is a fundamental part of Shopify fulfillment, yet it’s often overlooked for forward-moving processes like order packing and shipping. Every ecommerce business owner must recognize the reality that customers will want to return items from time to time. 

Accommodating their wishes calls for two things: a well-written ecommerce returns policy and a returns management system. In order to be effective, the latter must have staff and resources dedicated to receiving returned items, inspecting products for damage or wear, determining if they can be resold, updating inventory records, and processing any necessary refunds or exchanges. 

A robust returns management system should also provide transparency to both the merchant and the customer throughout this process, allowing for real-time tracking of return status and timely communication about the outcome of each return. This is difficult for many ecommerce sellers to commit to in-house – not just from a cost perspective, but also timewise.

A reputable Shopify fulfillment partner will have the infrastructure and expertise to handle returns efficiently and cost-effectively. They can offer a seamless returns process that integrates with your Shopify store, allowing customers to initiate returns easily and track their progress. This not only saves you time and resources but also enhances the customer experience, potentially turning a negative (a return) into a positive (excellent customer service).

Customer Service

Segueing into our next uncompromisable criteria for a Shopify fulfillment system, customer service quality is paramount. Customers often reach out for support when things aren't going as planned – a late delivery, a damaged product, or confusion about an order. How these situations are handled can make or break brand reputation and customer loyalty.

When evaluating potential fulfillment options, consider response times, communication channels, and capacity. In-house fulfillment teams can score well in all three respects, and most ecommerce business owners who have tried multiple types of customer service arrangements will tell you that internal employees are best poised for the job. Their understanding of brand voice, product offerings, and policies allows for nuanced care and personalized attention that's hard to match.

However, in-house customer service teams still need information to do their jobs effectively. Whether you manage fulfillment on your own or work with an external service provider, warehouses need to provide accurate, real-time information about order status, inventory levels, and shipping details.

To that end, a good third-party logistics company's existing reporting tools and high communication standards can actually enhance your customer service capabilities. Many 3PLs offer integrated customer service portals that allow your team to quickly access order information, track shipments, and resolve issues efficiently. This can lead to faster response times and more satisfactory resolutions for your customers.

Customization Options

Shopify accommodates a wide range of business models and products, from subscription packages with custom shipping boxes to perishable goods and large, bulky items. Your fulfillment system should be able to accommodate these diverse needs at scale. 

It makes the most sense to rely on support from an outside fulfillment service provider - specifically one with specialized solutions that can handle your unique product requirements. This could include packaging for fragile items, temperature-controlled storage for perishables, and value-added services such as kitting, assembly, or personalization. This can be done in-house, but there comes a point for most businesses where outsourcing becomes more cost-effective and efficient. Keep potential partners' breadth of services in mind, even if you currently only need basic picking, packing, and shipping.

Consider future scenarios: Will you be expanding into international markets? Launching a subscription service? Offering customized products? If the fulfillment partner you choose today can't support the special needs of a growing business, it will only be a matter of time before you have to start this search all over again. 

Cost and Pricing Structure

Lastly comes the all-critical consideration of pricing. While cost-effectiveness is important, it shouldn’t override all of the considerations we’ve already gone over. Budget fulfillment solutions serve a short-term need for smaller businesses without much capital to spare. However, over the long term, cheap services often end up costing much more than they’re worth.

It's worth considering the value added by higher-priced services. A slightly higher cost may be justified if the provider offers improved customer service and money-saving features like automated returns processing, multi-channel fulfillment capabilities, and advanced inventory management tools. 

Larger providers also often offer volume discounts and are better positioned to negotiate favorable shipping rates for their clients. So, while that small local fulfillment center might seem like the most cost-effective option at first glance, larger providers often offer economies of scale that can result in lower overall costs as your business grows.

In any case, look beyond the base fulfillment fees. Consider the total cost of ownership, including storage fees, shipping rates, and any additional charges for special services or peak season handling. Some fulfillment partners offer tiered pricing based on order volume, while others charge flat rates. A provider that offers competitive rates while meeting all your operational needs and growth expectations is likely to be the best long-term partner for your Shopify business.

Improve Your Shopify Fulfillment with Shipfusion

It doesn’t matter whether you’re a well-established Shopify seller or social commerce maverick – no business can afford to compromise on fulfillment. The value of a reliable logistics partner only increases as order volumes do. Why not work with a third-party logistics company capable of scaling with you? 

Shipfusion is the best 3PL for ecommerce brands that want to grow without limits. Our tech-enabled infrastructure provides complete visibility and control over Shopify inventory. We can accommodate products in a wide range of categories, from health and wellness to food and beverages to pet care. 

When you entrust Shipfusion with Shopify fulfillment, you’re getting the kind of performance that only a seasoned team can provide. Not to mention an offering of services that few 3PLs can match. 

Enjoy SLA-exceeding performance, 99.9% order accuracy, and 99.9% on-time shipments while using us for: 

Order Fulfillment

The second an order comes into your Shopify store is the second our team springs into action. We pick, pack, and ship your products with meticulous care, adhering to your brand's packaging standards.

Lot Tracking

Lot tracking proves invaluable for Shopify merchants with perishable goods, consumables, or items with expiration dates. We meticulously track and manage product batches using the First In, First Out (FIFO) method. That means fewer expired products sitting on shelves and swift recalls if ever necessary.

Inventory Management

Sell on multiple channels? No problem. Shipfusion's inventory management system can synchronize product data on Shopify, Amazon, Facebook Shop, and more. Maintain your reputation for reliability across the board, no matter where your customers are shopping. 

Returns Processing

Our team handles ecommerce returns with the same level of diligence as outgoing orders. We inspect returned items, update inventory, and process refunds or exchanges according to your policies, minimizing the hassle for both you and your customers.

Kitting and Assembly

For products that require assembly or special packaging, our skilled warehouse projects team is at your service. We can create custom kits, gift sets, or promotional bundles, adding value to your offerings and enhancing the unboxing experience for your customers.

A Shopify Integration Makes It All Seamless

The best part? Shipfusion’s Shopify integration ensures a smooth, automated flow of information between your store and our fulfillment centers. Once connected, orders are automatically sent to us for processing, while inventory levels are updated in real-time on your Shopify dashboard. This seamless integration eliminates manual data entry, reduces errors, and provides you with up-to-the-minute visibility into your operations. It's just one of many ways we leverage technology to deliver a superior fulfillment experience for Shopify merchants.

Learn how Shipfusion can improve your Shopify fulfillment process by contacting our fulfillment experts today.