July 1, 2010, 12:00 AM

Fulfillment

Retailers seek new ways to meet shopper demands

Lead Photo

The economic downturn forced many retailers to closely scrutinize their fulfillment processes. In fact, 96% of companies that rely on shipping said they made changes to the way they ship goods because of the recession, according to a recent survey of logistics professionals, executives and managers in industries such as retail, aerospace and electronics. Among those changes were switches to less expensive providers and changes to their carrier mix.

But retailers have to be careful about which corners they cut, particularly as consumers increasingly have come to expect to be able to track a package, as well as have fast and either free or cheap delivery, says Nikki Baird, managing partner at consulting firm Retail Systems Research LLC.

That means that the decisions retailers make relating to fulfillment are crucial, particularly as the economy recovers and e-commerce sales grow, she says. To help, retailers are looking to an ever-evolving array of new information technology tools and processes.

Those tools are particularly important as retailers diversify their shipping vendors. Surveys show most retailers use two or more shippers, and large retailers often work with several fulfillment providers.

Systems integration

Fulfillment systems, which can manage retailers' picking, packing and shipping processes, can provide retailers with an intelligent means of navigating what otherwise might be a difficult terrain, regardless of whether they sell only online or through multiple channels, says Baird.

For instance, a sophisticated system is crucial for one multichannel specialty housewares retailer, which Baird did not name, that has shifted its fulfillment process from a dedicated warehouse to its stores.

The retailer divided up its stores by their ability to fulfill orders. In each division the retailer designates one store to serve as the primary fulfillment center, and set aside space in back for the shipping materials needed to process cross-channel orders. If that store doesn't have the inventory required, its system redirects the order to a secondary fulfillment location, and if that store doesn't have it, the system moves on to a third location.

The system also offers consumers choices—they can pick up items in a store or have them shipped, and they can choose how fast they want it delivered, she says. "To me that's the ideal situation," says Baird.

Finding the right system is also important for retailers that take orders online and send them to suppliers that drop-ship to customers. Those retailers' inventory management systems need to interact with suppliers' warehouse management systems, she says. And suppliers must figure out how to provide information on when merchandise will be available, even when working with several retailers with disparate systems. "It's a real challenge," says Baird, "particularly for those retailers that have become a major enterprise."

International growth

A growing number of retailers are also facing the challenge of finding an efficient means of shipping to overseas customers.

To deal with those issues some retailers are working with fulfillment vendors that have overseas warehouses. Shipping from a European warehouse to a European address not only costs a fraction of the cost to shop from the U.S., it also gets items to shoppers more quickly.

Some retailers partner with a vendor that takes over international shipping, often at no cost to the retailer. These vendors provide international shoppers with a U.S. address they can provide to the U.S. retailers. The vendor then takes receipt of the merchandise at the U.S. location and ships it to the consumer, charging a fee to the shopper.

With new and sophisticated fulfillment technology, retailers have a real chance to improve the online shopping experience, says Baird. "A positive fulfillment experience can have real implications for future sales," she says.

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