In its second-largest acquisition, Amazon buys the company for $970 million.
A well-executed marketing campaign and a snazzy web site might initially draw shoppers to an online retailer’s site, and even convince them to buy. But whether customers make return visits may well depend on something more mundane: delivery of the right items in good condition and in a timely fashion. That’s what makes fulfillment so crucial to an online merchant’s success.“Companies realize they have to be able to serve their customers better, and that means that customers don’t want to wait for goods, and they want to have accurate information about costs, delivery dates and times,” says Beth Enslow, vice president of enterprise research for Aberdeen Group.Seeking better controlOver the years, online retailers’ fulfillment operations have evolved from the manual processing of orders to complex systems that use science and technology to build on traditional catalog fulfillment. “Companies need to have better control of being able to get goods faster and more efficiently to customers, and to provide them with related information,’ Enslow says. “Their traditional ways of doing it out of one location or having disconnected systems that are managing the process just don’t cut it anymore, because they drive up costs.”An emerging technology that Enslow encourages retailers to keep an eye on is distributed order management, a fulfillment process designed to help companies moving to multi-channel selling to cope with their increasingly divergent customer demands and broader geographic bases. In the past, multi-channel retailers built separate fulfillment facilities for Internet sales, store sales, and catalog sales, Enslow says. “They ended up with piles of redundant inventory to serve the different channels,” she says.With distributed order management, multi-channel merchants use systems that let them serve customers across the different channels out of the same facilities. As a result, they improve service levels and cut inventory costs, Enslow says.To convert to a distributed order management system doesn’t require merchants to rip out and replace their existing fulfillment systems, Enslow says. “The good thing is these systems can usually wrap around whatever systems they had in place,” she says.The conversion costs six figures or more, depending on how many bells and whistles retailers want and how many locations they need to integrate, according to Enslow.However, smaller retailers can obtain such systems from their existing warehouse or management enterprise resource planning system vendors at a much lower cost.Other new technology allows retailers’ fulfillment operations to better manage inventory. For example, some systems combine forward-looking information with historic and client information to generate forecasts of warehouse needs as far as 12 months in advance. Improved efficienciesWeb services-based IT infrastructures also are helping retailers improve the efficiency of their fulfillment operations. In the past, new applications were tied to the systems for which they were developed and their integration into retail IT infrastructure required time-consuming, expensive custom coding. However, web-based architecture allows the packaging of web applications as services that can be rapidly developed by fulfillment providers in response to retailers’ needs, and can be used across a variety of legacy systems retailers already have in place.Some large merchants are developing their own software to build efficiency into their fulfillment operations. Amazon.com Inc., for example, increased the capacity of its 19 fulfillment centers by 25% while cutting nearly in half its fulfillment costs as a percent of revenue using home-grown software. The software uses algorithms that factor in real-time order data and ship dates to develop optimal pick, pack and ship processes for Amazon and its retail partners.