Fulfilling Promises
By automating fulfillment, retailers can satisfy customers who are always demanding more
By Peter Lucas
Now that e-retailing has entered the mainstream, customers more than ever expect e-retailers to provide a seamless fulfillment process and ensure a satisfactory customer service experience. At the same time, competition dictates that e-retailers bring scalability and operating efficiencies to their fulfillment process and find ways to more effectively manage their warehouse space.
Retailers recognize falling down in any of these areas can quickly relegate them to also-ran status. With technology proving to be the great leveler of the playing field, many online merchants are putting more money behind technology to automate and create scalable fulfillment processes, industry observers say.
But retailers are not just arming pickers and packers with technology—such as voice units that guide them through the warehouse using the shortest route to accurately fill multiple orders—to improve workflow. They’re also integrating data around the fulfillment process to the back office so executives have a complete view of the fulfillment process from start to finish and a clear picture of their seasonal labor needs.
“The more automation in the fulfillment process and the better its integration across the business, the more benefits it brings to the retailer and the customer,” says Donald Cohen, managing partner at Tool King LLC, a multi-channel tool retailer.
In most cases, automating the fulfillment process requires fine-tuning as opposed to an overhaul, as there are many minor tasks in the fulfillment process merchants continue to perform manually. The more manual tasks performed, the greater the risk for errors and slowdowns.
Beyond bar codes
“Bar coding and automated batch and zone picking processes are basic requirements for fulfillment,” says Ian Hobkirk, senior analyst for logistics at market research firm Aberdeen Group Inc. “Retailers need fulfillment applications that go beyond core automation of the fulfillment process to improve productivity and fulfillment accuracy and control operating costs.”
A recent Aberdeen study on warehouse automation reveals one out of every 20 orders shipped by e-retailers is either late, incomplete or both. The same study reveals 20% of retailers experience picking errors in one out of every 10 orders. Picking errors include not only grabbing the wrong item but the wrong box size to package the item, which can lead to higher packing costs through the use of additional packing materials or stoppages in workflow as packers get the appropriate box.
While taking the guesswork out of selecting box size may seem like a minor improvement, it is exactly the depth of functionality e-retailers want in their fulfillment applications, experts say.
“Automating selection of a packing box based on dimensions of items ordered is a great way to control packing costs and ensure steady workflow, especially when you have a catalog with a lot of odd-sized items,” says Dan Vado, owner and president of SLG Publishing, which sells comics and graphic novels through its web store.
Pre-sizing a shipping container to dimensions of the order cuts down on waste, e-retailers say. If a box is too large, packers use unnecessary amounts of packing material to prevent movement and subsequent breakage during shipping. If a box is too small, packers may need to add a second box to hold the order. In either case, packing costs are raised through the use of extra material. Further, should the packer decide to avoid such waste by getting the appropriate box, it creates a hiccup in the packing process.
The package sizing feature used by SLG Publishing is part of a fulfillment application from CoreSense Inc. The application is linked to SLG’s order management system, which contains the dimensions of each item in SLG’s catalog. As an order is processed, the fulfillment system receives dimensions of the items ordered and calculates size of the required box. In addition to comics and books, SLG sells posters and T-shirts. The retailer has been running CoreSense’s application since January.
“I was somewhat skeptical about the accuracy of the feature at first,” Vado admits. “But it is dead-on when it comes to sizing and determining the number of boxes needed for packing an order.”
Beyond automating the packing process to reduce waste and improve workflow, e-retailers also are placing a premium on the ability to track the fulfillment process in the back office as opposed to just on the warehouse floor. Providing this level of detail enables executives to gauge productivity, staffing needs during the holiday season, and how long it takes to fill and ship an order.
“To meet customer service expectations, retailers need real-time updates on the fulfillment process,” says Bob Betke, vice president at consulting firm F. Curtis Barry & Co. “They need to stay on top of whether orders are aging, where the bottlenecks are in the fulfillment process, and staffing needs throughout the holiday buying season, which is becoming more compressed and placing greater demands on the warehouse.”
Warehouse wary
Tool King, which operates its own warehouse in Colorado and uses UPS Supply Chain Solutions to provide warehousing and fulfillment for orders shipped to the eastern United States, has linked the two facilities to its order management and inventory systems using a fulfillment application from Microsoft Great Plains Software. This capability enables Tool King, which operates one store in addition to ToolKing.com, to determine which warehouse will fulfill the order and track the fulfillment process simply by entering the invoice number of each order.
UPS Supply Chain Solutions usually warehouses and ships large, heavy items because UPS warehouses, fulfills and restocks these types of items more efficiently than Tool King can itself, Cohen says. “Integrated systems are critical to managing workflow when orders are split between two facilities because otherwise it can lead to costly mistakes,” he says.
Among the most costly mistakes retailers can endure is a delay in shipping. In the case of Tool King, many customers are tradesmen who order an item for use at a job site, which is why the retailer ships 98% of orders same-day. If the order ships late, there is a high risk it will be refused when it is delivered because the customer has likely bought it elsewhere because of an immediate need.
“When something like that happens it wakes you up to the potential problems that can occur by not fully integrating all aspects of the fulfillment process,” Cohen says. “Retailers have to be more thoughtful about connecting all the pieces when building their fulfillment systems.”
Another advantage to outsourcing part of its fulfillment to UPS is Tool King can better manage space in its own warehouse. “Our warehouse space is fixed and outsourcing allows us to better leverage how we warehouse inventory while giving us a cost model that is scalable to our activity in the outsourcing facility,” explains Cohen. “We can get the right product mix between the two facilities to better service our customers and manage our fulfillment costs.”
Closer to home
Splitting inventory also reduces freight costs, as each facility services a specific portion of the country. As a result, freight moves through fewer shipping zones. “The closer inventory gets to the customer, the more cost effective and timely the fulfillment,” says Aberdeen’s Hobkirk.
One of the easiest pieces to overlook when integrating a fulfillment application with the back office is compatibility with an existing hardware platform. That was an issue for SLG Publishing, which uses an Apple Inc. Macintosh in its back office and a Linux platform to take orders at book shows, and runs its e-commerce site on a Microsoft Windows server platform. The maze of hardware platforms greatly slowed the data flowing into the warehouse and opened the gate for viruses to enter its back-office systems through e-mail correspondence with customers.
“We not only had a lot of I.T. and database corruption problems, but the cost of addressing them over time was more than purchasing and installing a fulfillment application,” SLG’s Vado recalls. “We also needed an application that was more compatible with our hardware platforms, which we weren’t inclined to change.”
SLG found the solution by opting for a hardware-agnostic hosted application from CoreSense. The new application links fulfillment data to its online customer service center, which has enabled SLG to provide customers with real-time tracking through the web store once an item has shipped.
“Order tracking not only cuts down on customer service calls about order status, it makes it easier to meet customer expectations of the self-service shopping experience,” Vado says.
Cutting costs
SLG Publishing also can use its fulfillment application to run reports that break out the carriers it uses to ship packages—whether the package is sent on a priority basis, second-day delivery, etc.—and what type of customer placed the order, such as book reviewer, retailer or consumer. SLG uses that information to provide more insight into controlling shipping costs.
Another place retailers are tying customer service and fulfillment together is in the returns process. GreenHouse International LLC, a direct consumer sales company that generates 35% of its total sales through the web, is working with Moulton Logistics Management to enable customers to initiate returns via the GreenHouse web site. The first step is to send an e-mail to customers requesting a replacement item notifying them when it has shipped.
“Consumers like as much information about the delivery process as possible,” says Chris Lundin, CEO of Greenhouse International.
Ultimately, retailers can leverage returns initiated through their web store to aide in restocking and fulfillment of new orders, according to Aberdeen’s Hobkirk. Fast turnover requires retailers immediately put back into inventory returned, undamaged items—i.e., those that did not fit or were the wrong color—and in some cases straight into the fulfillment bin.
“Sometimes returned items need to be picked and shipped as soon as they are received,” Hobkirk says. “To do that, retailers need full visibility of what is being returned and what has sold across all channels.”
The growing use of automation within the fulfillment process and the integration of data around it to provide better customer service is a clear sign fulfillment is no longer an afterthought in retailers’ strategic plans.
For many retailers, upgrading their fulfillment process to meet changing customer needs requires little more than automating time-tested concepts embedded deeper in the fulfillment process. “E-retailing is not a cash-and-carry business; it requires a fulfillment system that brings the sale to a positive conclusion,” says Tool King’s Cohen. “Retailers can’t afford to over-promise and under-deliver on fulfillment.”
Peter Lucas is a Highland Park, Ill.-based freelance business writer.
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