The competition is very much severer in e-commerce as it takes only a few keystrokes to shop. For survival, the online businesses have to serve their present customer base in a better way, grow its customer base over time and be as much cost effective as possible. This has resulted in the popularity of the direct fulfillment process among all online businesses in the last decade. This is because when controlled properly direct fulfillment reduces the inventory costs that enhance the e-commerce growth and as a result, the profits are above industry trends.

Three things attract customers in online business: a wide variety of choices, competitive prices and product availability at time of purchase. Online retailers need to address these key customer drivers by:

• Arranging an optimum capital expenditure to buy and maintain the products inventory
• Attain operational expertise in order fulfillment
• Remain cost efficient to maintain competitive pricing

The direct fulfillment surges out to be an important business tool in such a scenario as it allows the retailers to offer wide variety of products and extinguish their demands in the most cost efficient manner. Through a well-designed direct fulfillment program, online retailers can speed up their new products marketing and retain its customer base loyalty through consistently providing wide range of products without worrying about investments and risks of inventory. Other benefits associated with direct fulfillment include:

• Activates key customer drivers through elimination of constraints poised by limited capital, space and logistics.
• Reduction of costs related to capital and operations involved in maintaining and buying inventory.
• Enhancement in operational productivity that is achieved by minimizing delivery costs.
• The return on investment on direct fulfillment is quicker than traditional supply chain systems.

With such benefits, there are also some drawbacks that need to be addressed before venturing into direct fulfillment. One of the major drawbacks is the loss of direct control by the retailer over the fulfillment process. This can serve hazardous to the retailer business in case the direct fulfillment ability to deliver is not synchronized with that of the promises made by the retailer to its customers. So proper policies should be formulated along with training of the individuals involved and should be closely administered for perfect integration of direct fulfillment into your business.

Order fulfillment process is defined as the process that starts from the point of sales inquiry by the customer and ends at the customer after the delivery of the product he ordered. Commonly it refers towards a distribution system maintained by various firms that responds to customer orders.

Order fulfillment process usually involves the following steps:

• Product Inquiry by Customer
  The order fulfillment process is initiated by the customer by inquiring about the various offers from the retailer i.e. requesting product catalog or visiting the retailer website.
• Sales Quotations
  The customer is provided with sales quotations, which includes information about the availability and prices of the product as per customer inquiry.
• Order Formation
  The product ordered is configured properly after selection of various options as per customer preferences.
• Order Booking
  Order booking includes the issuing of a purchase order by the customer i.e. placement of a formal order that closes the transaction deal.
• Confirmation of Order
  The purchase order received from the customer is confirmed by the provider, which includes the placement of order, the quantity and the specifications of the product.
• Billing the Customer
  The customer is billed according to the agreed price and a commercial invoice is issued to the customer.
• Order Sourcing
  The source or locations of the ordered products are determined and their shipment from that location is properly planned.
• Rectification in Order
  Any change in the order if requested by the customer after the placement of the order is implemented if received before the shipment is initiated.
• Order Processing
  This step is performed by the order fulfillment center which on the receipt of the order receive the ordered stock, pack it properly and ship it on to the customer’ address.
• Shipment of Products
  The products ordered are transported through the available means of transportation to the customer.
• Delivery of Products
  The products ordered are physically delivered at the premises of the customer or consignee and goods received note is issued by the customer acknowledging the receipt of the products.
• Order Settlement
  The customer finally pay for the goods or services delivered to him.

Products Returned
In case the products delivered are unacceptable by the customer, they are returned back to the supplier.