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Three common order fulfillment methods explained

Three common order fulfillment methods explained

Here are the three most common order fulfillment models. 

Order fulfillment  




Drop Shipping 

An order placed on the merchant’s online store is forwarded directly to the manufacturer who produces, stores, packages and ships the product to the customers.   

The merchant never holds the products they sell in their online store. 

  • Easy to start as the drop shipper provides the products and does the shipping. 
  • Enable expansion of your product catalogue. 
  • Lowers overhead 
  • Enables testing the viability of new products and markets before committing. 
  • Difficult to customize products 
  • Lower quality control  
  • Difficult to establish a unique brand as the production, quality control, and shipping is handled by the drop shipper 
  • Low barriers to entry make it difficult to sustain competitive advantage  

In-house (Self-Fulfillment) 


The entire picking, packing, and shipping process is handled by the merchant without the help of a drop shipper or third-party logistics (3PL) provider. 

Suits small business with fewer SKUs and small order volumes and Large companies that have resources and more extensive facilities 

  • 100% control of inventory, pick, pack, and ship process. 
  • Easy and low cost if you have the time and space to store products, labels, and packing resources. 


  • Time-consuming for small businesses. 
  • As business grows, it requires significant investment in warehouse space, equipment, staffing, overheads, and order fulfillment software 


Outsource (Third-party logistic = 3PL) 


A 3PL company handles the entire fulfillment process from receiving inventory picking, packing, shipping, and restocking returned products. 

  • Frees up time to focus on growing the business  
  • Affords bulk inventory purchases improving margins. 
  • No need to invest in warehouse space, equipment, staffing, overheads, and order fulfillment software 
  • Savings from better shipping rates and efficiencies 
  • Easy to scale up geographic footprint with multiple fulfillment centers 
  • Less control 
  • The quality of service can be compromised as the fulfillment process is handled entirely by a third-party logistics  (3PL) company 


Hybrid Fulfillment 


A company that uses a mix of the above order fulfillment options is using a hybrid fulfillment model. For instance, a company may process some orders in-house, such as custom items or items that must be assembled before shipping, while also using drop shipping services for non-custom items. Some companies choose to use dropshipping for infrequently purchased items or those that don’t want to store in-house, such as large or expensive items. This method is ideal for companies that need more flexibility or if they are undergoing rapid expansion. 





No one fulfillment process works for every business. Whether you choose to dropship, self-fulfilloutsource to a third-party logistics (3PL) company or use a hybrid fulfillment model, it is crucial to find the proper process that meets your company’s needs and the expectations of your customers. The objective is to streamline your fulfillment processes that delight your customers and support your bottom line.

About the author

Aziz Memon
Aziz is a career brand and omnichannel marketing professional. He has helped B2B, B2C and D2C marketers in Canada and across Asia understand and engage their customers, build brands, generate leads, build loyalty and achieve revenue goals.