At the center of every fulfillment operation — the process of storing, picking, packing, and shipping products — is none other than your inventory. While it may be the source of your revenue, it’s also a source of huge risk for your online store. It’s your biggest investment — you spend a bunch on inventory to sell, and the longer it sits on the shelves, the longer your cash is tied up in it.
Why not just get rid of all that? That’s the essence of just-in-time (JIT) fulfillment, a model that’s closely related to in-house fulfillment.
The gist of it is simple: an e-retailer packs and ships an order to the customer, but doesn’t pick it — they do not store any of the inventory they’re selling. When a customer makes an order, the e-retailer instead immediately purchases the product from their supplier, never before.
No inventory is involved with JIT. A merchant only purchases product when an order for it is made, which they then fulfill on their own. And because you’re still shipping the product, you have a bit of control that yields some positives.
Shipping orders yourself via JIT means no relying on a third-party — like a logistics provider or dropshipper — that might put quality control at risk. You or your employees are shipping the product; you control how an order’s shipped and don’t need to worry about another service messing it up.
That control gives you the power to brand, something that fulfillment models like outsourced fulfillment and dropshipping don’t guarantee. Choose to brand your orders as you please with custom-branded materials — package the order in logo-emblazoned boxes or add thank you notes to shipments. It’s all in your power.
As a growing amount of consumers head online to buy, returns are becoming a bigger and bigger pain point for e-retailers. Control over shipping reduces many of the complications related to returns management.
If you were working with an outsourced fulfillment model — a model that involves paying a third party to store and ship orders — an unwanted product would be sent back to them instead of you since they’re the ones storing and shipping the product, complicating the returns process.
As an e-retailer, direct communication with the customer is ideal, and JIT offers it. Feedback on returns is crucial to judging your operation; learning about why the return occurred provides you with valuable insight on what went wrong in your process.
Perhaps the consumer misunderstood one of your product descriptions. Or maybe a single digit in their address was incorrect and the shipping carrier misdelivered it. Either way, it’s an opportunity to improve that may have fallen through the cracks if a third party existed between you and the customer.
Another major perk to JIT is product experimentation. Purchasing and storing inventory is a big investment — you’re buying up product, betting that you’ll be able to sell it eventually for more money. With JIT, you don’t need to worry about that.
Because you’re purchasing product only when an order is made, your inventory is non-existent, making it much easier to test new products from other suppliers. It’s only a matter of adding them to your catalog, marketing them, and seeing if they perform well.
There’s a reason JIT isn’t too common, though. It’s operational overload. A fulfillment workflow that works like clockwork is ideal, but it’s difficult to achieve through JIT because buying product becomes yet another step in the fulfillment process that’s extremely reliant on your suppliers.
Lack of Control
Your relationship with suppliers is important in any fulfillment model, but it’s critical with JIT. When it comes to your product, it’s just-in-time, not in advance. The assumption here is that your vendors are available upon demand — they’ll always have a supply of products to meet your demand in a reliable time. You’re relying entirely upon them to quickly sell and ship you the product that you’ll then send to the customer.
And because you’re waiting to receive product before you can actually ship it to customers, delivery time — a factor that’s hugely influential on a consumer’s decision to purchase — tends to be longer. That can become a major deterrent to making online sales, and it’s caused by your reliance on the supplier.
To make matters worse, suppliers are most likely selling product to other businesses that might be purchasing larger quantities of product at a time. That potentially threatens your access to product when you’re in need of it, and the supplier definitely cares far more about their business than yours.
All of this goes to show that your supply-side relationship is important. You must find a supplier that fits your needs. Here are some questions to keep in mind as you pick them:
- Are there multiple ways to reach this vendor? Are they communicative and easy to contact?
- Does this vendor ship orders quickly and reliably? Can I count on them to deliver on time?
- Are they transparent with their product volume, so I can prepare for them being unable to meet my demand?
- Is a Service Level Agreement (contract of service expectations between two parties) negotiable?
Vetting suppliers also means giving their websites, pricing, reviews, even their facilities a look if possiblep.
The JIT fulfillment model is straightforward enough, but its key difference from other models is the fact that product is purchased later in the process, not at the start. Here’s how it works.
Find yourself some suppliers carrying products you want to sell. Check them and vet them.
Make a sale
Because you’re a branding and online marketing genius, an order is placed on your website.
Now you must purchase the products in that order and have them shipped your way.
Fulfill the order
Once they’ve arrived, take those products, package them for the order, and ship it off to the customer.