December 26, 2000, 9:55 AM

Shape up, ship out

E-retailers have learned the hard way about the importance of keeping up with consumer demand for their products. Fulfillment problems during the 1999 holiday season meant everything from stockouts and late orders to a high-profile lawsuit filed against Toys “R” Us by a customer angry about its failure to ship hers and hundreds of other Christmas orders on time. “Last year, the focus was on the Web storefront,” says Gene Alvarez, e-business program director at the Meta Group, a technology consulting firm based in Stamford, Conn. “Toys “R” is a great example of needing to focus on technology at the back end. The rules of retail are fulfill, fulfill, fulfill.”

Many online merchants have learned their lesson painfully and have been under pressure to install real-time inventory systems that allow them to keep tabs on the supply of their goods. The options range from software and services from companies such as OrderTrust, PeopleSoft and Yantra to outsourcing offered by SubmitOrder.com, Marketing Out of the Box and other companies. Real-time inventory also helps reassure customers when they place their orders, letting them know that the merchandise is available and ready for shipping or out of stock and back-ordered.

This year Internet retailers such as KBkids.com and Amazon.com announced major deals with fulfillment houses and logistics software firms to help them increase efficiencies in their back-office inventory, order fulfillment, shipment and product tracking. This spring, Amazon.com contracted with software maker Manugistics for new software to automate its supply-chain processes, a complement to the series of warehouses the company has built in the past year. Without taking such steps, Alvarez says, e-retailers are feeding into perceptions that Internet shopping is risky. “It leads to the pooh-poohing you see about the Net.”

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