Magazine Article | May 1, 2003

Are You Content With Your Fulfillment?

Source: Innovative Retail Technologies

The real challenge of e-commerce is competitive fulfillment. Outsourcing can put you on a par with the Web superstores.

Integrated Solutions For Retailers, May 2003

Consumer demand. It's about more than the products your customers want. It's about the service they demand, as well. Many a retailer that has ventured into e-commerce with a solid reputation for customer service has emerged from their foray tarnished and beaten. Why? More often than not, their fulfillment infrastructures weren't up to the job. It's one thing to have a slick, fast, user-friendly site. It's quite another to back up the site with slick, fast fulfillment.

E-Commerce Grows
Brick-and-mortar retailers that steered clear of the Internet in the mid 90's and shrugged off the .com bust might think they had the last laugh. While the .bomb joke is old, the Internet's impact on retail sales is not, and it's something all retailers had better be taking into account. Mark Layton, CEO of fulfillment company PFSweb, Inc., predicts that in the not-so-far future retail will evolve to the point where 20% to 25% of total commerce is done via the Internet. "If you're not thinking about this - about the way that consumers want to do business with retailers in your 5 to 10 year plan - you're going to be sorry," he warns. But Layton explains that retailers should not fall into the same pattern of new market disillusionment that led to so many .bombs in the past. "This isn't all new market growth that magically appeared when consumers were given a new buying tool," he says. "New markets might be identified to some extent, but more likely, market share will move around when consumers are given control to drive how they shop." But as retailers learn the importance of this empowerment, they realize the need for a comprehensive e-business infrastructure. Many don't have the infrastructure necessary to maintain high levels of customer satisfaction when introducing a consumer-direct business model like that of the Internet. Even when retailers realize high sales volumes coming from Web-commerce, it's difficult for many to compete with fulfillment capabilities of the Internet superstores. "Considerations like small order sizes, 24/7 customer contact requirements, Web hosting, monitoring, reverse logistics and returns processing, and package tracking and package carrier relationships are often not developed and maintained at world-class standards," says Layton.

In truth, most Internet retailers still live and die by their bricks and their mortar. The Internet and its direct-to-consumer fulfillment model is still relatively new territory. These retailers have for years been devoted to doing one thing and doing it well: marketing their stores. Outsourcing the customer fulfillment operations of their e-commerce initiatives allows them to continue doing just that. A fulfillment company not only dedicates itself to logistics and serving your newfound (or regurgitated) e-market, it also stays abreast of the dynamics of things like shipping and import regulations, and the technologies that make fulfillment work. And, it can do so relatively inexpensively. "Outsourced fulfillment takes advantage of the economies of scale. What we're doing for one retailer, we're doing for many others," says Layton.

Understand Your Fulfillment Needs First
Understanding the needs of your customers is easy. They want quick online access to merchandise, they want to punch in their card number and buy it, and they want it on their doorstep shortly after. If they must return merchandise, they want the return and the ensuing credit to happen quickly and easily. Giving customers what they want - in terms of products and services - will ensure they keep coming back. But before you convey your customers' objectives to an outsourced fulfillment company, you must first understand your business needs. UPS Supply Chain Solutions (SCS) representative Lynette McIntire makes these suggestions in "do and don't" form to help you prepare to outsource fulfillment:

  • Do clearly understand your objectives. Lowest cost and enhanced customer service, for example, can be contradictory.
  • Do clearly understand the expectations of your customers so that the fulfillment operation is a sales generator, not just a cost center.
  • Do accurately project the cost of IT integration. Inventory and order management, finance, sales and marketing, customer interfaces, transportation, and import/export operations, for example, must all be working in synch to achieve fulfillment efficiency.
  • Do establish performance metrics, such as inventory reduction and cost of fulfillment goals, early on. Base these metrics on accurate information about inventory and order volumes, current costs of fulfillment across the entire supply chain (not limited to individual departments), and customer requirements. You won't know you've reached an objective if you haven't set one.

On the other hand;

  • Don't outsource to simply pass your problems on to a third party. If you do, be honest about those problems with your outsourced partner.
  • Don't assume that software alone will optimize fulfillment. It takes efficient business practices and sound operations, as well.
  • Don't just change your own fulfillment model - change your supply chain. This includes inbound and outbound transportation, supplier reliability, and inventory replenishment.

Find A Value-Added Fulfillment Provider
Imagine a retail environment where your employees don't have to worry about things like handling and receiving costs, product delivery logistics, complicated branding and packaging considerations, and small or custom item shipments. For example, major European guitar manufacturer/retailer Fender calls on UPS SCS not only to fill orders, but to tune the guitars prior to their arrival on the showroom floor. For, the company handles small shipments of specialty and collector items, relieving the sporting goods giant of the need for a separate fulfillment line from their mass orders.

Done correctly, your fulfillment operations can increase sales, improve customer service, and aid in customer problem solving. Leaving the direct-to-consumer product procurement and delivery to a qualified third-party professional might ensure that it's done right.