May 31, 2006, 12:00 AM

Keeping Promises

Squeezed among the giants of the retail office supplies industry, Quill Corp. has used the web to master the fundamentals.

Squeezed among the giants of the retail office supplies industry, Quill Corp., one of the oldest names in the business, has evolved along with drastic, web-driven changes while keeping its eye on the fundamentals of retailing: getting customers what they want, when they want it. “The business has to be all about serving customers,” says president Larry Morse. “Everything else is about how I get there.”

Quill, which focuses on companies with up to 40 employees, and other office supplies retailers have evolved at Internet speed over the past several years. The category’s leaders have migrated much of their sales to the web, deployed web technology in their stores to improve customer service through kiosks and web-enabled POS terminals, and leveraged web-enabled supply chains to get the right inventory in stock regardless of which channel customers shop.

New pressures

Consumers have responded to the new technology-driven service, thrusting office supplies retailers Office Depot Inc.; Quill’s parent, Staples Inc.; OfficeMax Inc. and CDW Corp. into the top 10 largest online retailers, according to the 2006 edition of the Internet Retailer Top 500 Guide to Retail Web Sites.

But all that web-enhanced business has also added pressures to one of the biggest challenges facing retailers: processing and fulfilling orders-a challenge that Quill has addressed by re-building its order-taking and fulfillment system and continuously updating it over the last several years with web technology.

Just a decade ago, Quill and its competitors could keep customers happy by promising to ship orders within two days, says Morse, who joined Quill as director of distribution in 1998, then became president a year later, following Quill’s acquisition by Staples. “Years ago, we could say we’d ship within 32 hours, but office supplies retailers can’t afford to do that anymore,” he says. Most orders today are shipped for next-day delivery, he adds.

While consumers and b2b customers have adopted online ordering while continuing to buy through stores and catalogs, they’ve presented retailers with the enormous chore of processing large volumes of orders from multiple channels, organizing them in warehouses and fulfillment centers and shipping them on time.

Indeed, fulfillment has emerged for multi-channel retailers in general as one of the keys to overall success. In a study of retail fulfillment practices last year by Aberdeen Group, more than 70% of retailers said they considered it “very or extremely important” to meet customer expectations for multi-channel purchasing and delivery options.

But while order fulfillment has become front and center among the concerns of many retailers-a far cry from the early days of the Internet-its cost for many merchants is rising. Aberdeen found that 46% of retailers expect order fulfillment costs to rise over the next two years, 29% expect no change and only 25% expect their fulfillment costs to decrease.

The pressure to keep up with fulfillment demands can be especially tough when a retailer or manufacturer is expanding its number of selling channels, as many have done in recent years by creating web stores. “Everybody wants to go direct-to-consumer these days, and with the Internet they feel they have a better shot of getting repeat customers,” says Caroline Lacsamana, sales and marketing manager at Imagine Fulfillment Services, provider of web-based fulfillment applications that earlier this year doubled the size of its Torrance, Calif., warehouse to meet rising demand for its outsourced inventory management and fulfillment services.

Steady improvement

For Quill, which has evolved over the years from a catalog-only retailer to having a major presence on the web at Quill.com, where it now processes the majority of its orders, the challenge of keeping up with fulfillment demands has required a steady improvement of its order-entry system integrated with inventory and warehouse management systems, a process that has leveraged developments in Internet technology at various steps along the way, Morse says.

Like many catalog companies, Quill started as a home-grown business, launching in the mid-1950s out of borrowed space in one of the owners’ basements. Building its reputation on fast, personal service, it steadily improved its ability to quickly fulfill orders. But competition-and customer expectations-also grew. “In the late 1980s and early ‘90s, we told customers, ‘If you get your order in today, we’ll ship within eight to 32 hours,” Morse says.

Then the goal became to ship every order the same day it came in and shoot for next-day delivery. But it was a goal to be reached only gradually over several years, as improvements tried to keep up with rising customer demand for fast fulfillment.

“Further into the ‘90s, it became harder and harder to meet customer expectations,” Morse says. “So we said, order by 4 p.m., we’ll ship it out the same day and you’ll most likely get it tomorrow.’ Then it was, order by 6 p.m., ship that same day and most likely get it tomorrow.”

When Quill started offering next-day delivery in the first half of the ‘90s, it actually delivered the next day only about 20% of time, at best, Morse says. “Back then, no one minded, but today the world has changed,” he says “Today, we ship the same day as the order for next-day delivery 99% of the time. Our business is all about speed and accuracy and the next-day delivery of products has become very important.”

Tweaking the system

In some ways, fulfillment and distribution gets down to a simple business, Morse says. “We build warehouses with the promise of keeping customer inventory warm, dry and fairly close to customers,” he says. “So we can get orders in and get them out to customers in the shortest amount of time.”

To come through on that promise, Quill has modernized and expanded the way it accepts and processes orders, organizes them to get the most productivity out of its pick, pack and ship teams, and routes them to the most appropriate distribution centers and carriers.

Over the years, Lincolnshire, Ill.-based Quill has built a network of 13 distribution centers strategically located throughout the U.S., from Massachusetts and Georgia to California and Oregon. It has also developed a strong relationship with UPS as its primary carrier, though it works with other carriers as necessary to provide optimal delivery services.

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