What is Order Routing and Why It’s Important for Your Business
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As the ecommerce sector expands and customer demands continue to evolve, optimizing order routing is key to maintaining a competitive edge. Misrouted orders and delayed shipments weaken customer trust and inflate costs, challenging even the most successful online retailers.
Order routing ensures prompt deliveries and minimizes errors by sending each order directly from the best-equipped fulfillment center to the customer via the most efficient route.
This article explores order routing—explaining what it is, how it streamlines fulfillment, and outlining the benefits and best practices for ecommerce brands.
What is Order Routing?
Order routing is a process that selects the best path from the warehouse to your customer’s doorstep, ensuring products reach them swiftly and efficiently. Modern order management systems (OMS) now use automatic order routing to assess factors like shipping costs, inventory levels, and delivery speed.
With automatic order routing, businesses can lower shipping expenses and reduce delivery times, ultimately speeding up order processing.
How Order Routing Works?
The order routing process starts as soon as a customer places an order. Automated systems then make a series of decisions that guide the order from placement to delivery.
Here’s how it unfolds:
- Order Validation and Processing
- The order is added to an order management system to start processing and verifying shipping addresses and payment details.
- Check for any special handling or custom packaging requirements.
- Inventory Assessment
- OMS checks product availability, including variants like size and color.
- Smart inventory management ensures sufficient stock levels and coordinates incoming shipments to optimize the distribution of limited stock across various sales channels.
- Routing Decision
- Determines optimal shipping routes by calculating mileage, fuel expenses, and any additional toll or handling fees.
- Considers promised delivery windows, prioritizing faster routes or expedited services for urgent orders.
- Using predefined rules and algorithms, your OMS will select the appropriate fulfillment center by evaluating inventory levels, customer location, and transportation costs to ensure efficient delivery.
- Shipping and Tracking
- Prepare the order for shipment with secure packaging and label creation.
- Generate and share a unique tracking number.
- The shipping carrier transports the package from the fulfillment center to the customer’s location, followed by final delivery.
Order Routing Rules and Benefits
Most order management systems will automatically apply order routing rules to select the best fulfillment option when an order comes in. Typically, these rules default to fulfilling orders from the nearest location within the destination market that has the entire order in stock.
However, routing rules can be customized to match your specific order fulfillment strategy. Here are some common rules and their associated benefits:
- Ship from the closest location
What it is: This rule uses proximity-based decision-making to calculate the shortest possible delivery route by considering multiple fulfillment centers within a specific radius and prioritizing locations in the same destination market as the shipping address.
How it benefits: Fulfilling orders from the nearest distribution center reduces shipping time and expenses, leading to faster delivery and happier customers. For example, an ecommerce platform serving Southeast Asian markets can achieve faster delivery and better service quality by fulfilling orders from a strategically positioned warehouse in Shenzhen, rather than using a warehouse in Beijing that is farther from its key customer clusters.
- Stock distribution
What it is: This rule sets minimum stock thresholds for each fulfillment center and balances inventory distribution to prevent stockouts while minimizing split order fulfillments by prioritizing locations that have all items in stock.
How it benefits: By fulfilling orders from centers with the necessary inventory, ecommerce businesses can avoid delays, backorders, and stockouts, making the best use of available stock across various sales channels.
- Cost efficiency
What it is: This rule balances delivery speed with overall cost considerations by automatically selecting fulfillment options that minimize the processing and delivery expenses associated with each order.
How it benefits: Lower shipping, operational, and handling costs can help boost profit margins, enabling reinvestment or competitive pricing while reducing fulfillment times. This is especially valuable for ecommerce businesses with multiple warehouses, as it streamlines logistics without sacrificing service levels.
- Resource optimization
What it is: This rule distributes orders based on facility capabilities, adjusts routing during peak periods, and plans for capacity constraints.
How it benefits: Allocating orders according to each facility’s workload and resources helps prevent bottlenecks and delays, ensuring efficient operations and consistent service quality. For example, an ecommerce business with warehouses in Hong Kong and Shenzhen can route orders to the less busy center during peak times to avoid processing delays.
Order Routing Best Practices for Ecommerce Businesses
Intelligent order routing goes beyond simply directing orders—it’s about optimizing your entire fulfillment process to deliver exceptional customer experiences.
Here are some best practices for improving your order routing and fulfillment processes:
- Predictive analytics for demand planning and forecasting
Ecommerce businesses can use advanced analytics through comprehensive order management platforms that provide accurate real-time data about sales, orders, and inventory.
With a single source of truth providing precise data, the system can then automatically adjust order routing parameters, ensuring inventory is allocated to the right fulfillment centers. This integration helps prevent capacity issues during peak periods or demand surges.
- Real-time order and inventory synchronization
This capability will ensure that any change in your inventory or order status is instantly reflected across all sales channels and internal systems. When an order comes in—whether from your website, Lazada, or a physical store—the order routing system uses accurate, real-time data to direct it to the right fulfillment center.
If one location runs out, orders are automatically rerouted to a center with available inventory, ensuring efficient operations while customers always see accurate product availability.
- Multi-channel order processing
Consolidating orders from your website, marketplaces, social media, and physical stores into one streamlined system can help speed up fulfillment and reduce operational costs.
This unified order management approach allows order routing rules and algorithms to efficiently coordinate orders from all channels, ensuring each order is matched with the right fulfillment center based on real-time inventory and proximity.
Conclusion
In an increasingly competitive ecommerce space, many brands are facing the challenge of managing high order volumes while keeping costs low and delivery times short. Optimizing your order routing process isn’t just a technical upgrade—it’s a strategic move that can transform your entire fulfillment operation.
Intelligent order routing plays a crucial role by ensuring that every order is directed from the right fulfillment center to the customer as efficiently as possible. It factors in key elements such as inventory levels, customer location, and shipping costs to determine the best fulfillment option.
By integrating technology and cutting-edge SaaS solutions, you can enhance your order routing process for better fulfillment operations. A reliable OMS is at the heart of this transformation for ecommerce businesses.
Take Anchanto Order Management, for example. Its comprehensive features improves order routing by automating order processing across multiple channels while providing real-time inventory visibility. Explore the result of these features through Everbest Group’s experience with Anchanto Order Management, where they reduced order fulfillment time from 6 hours to 30 minutes and saw an average sales growth of 50% year over year.
For fast-growing ecommerce businesses, this means a future where your fulfillment operations are seamless and agile, letting you focus on expanding your market reach and driving growth.
To learn more about the key aspects to consider when implementing a new order management system, check out our detailed guide.
Or get in touch with our experts today and discover how Anchanto’s innovative software solutions can take your ecommerce operations to the next level.
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