Keeping Promises

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.

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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.

The introduction of web technology has made it possible to integrate and streamline its entire fulfillment system, from orders taken through its home-grown order-entry system to the pick-orders handled by warehouse workers and the shipping forms given to carriers.

Quill built its own order-entry system about 12 years ago, basing it on what Morse calls a “heavy iron mainframe” that relied on a lot of manual data entry and didn’t offer much in the way of multiple application integration or ease of access to information. A few years later it switched to a Microsoft NT platform with an NT SQL server, then began incorporating web-based technology that made it possible for managers and customer service reps to quickly check inventory, such as which ink toners were available for particular types of printers.

Web technology, including XML and other parts of web services, also enabled the order-entry system to integrate with Quill’s warehouse management system, so that the warehouse system prints out pick-to-order documents for warehouse workers. “It provides the information pick workers need on where to go in the warehouse and what to pick,” Morse says. Quill uses the PKMS warehouse management system from Manhattan Associates.

It’s about time

Quill’s integrated systems make it possible to shorten the entire cycle time from order to ship, a key metric of performance, Morse says. “It’s all about cycle time, and what helps that is information,” he says.

Operating on a corporate intranet that allows universal browser access to information about orders, inventory and even warehouse staffing levels, the system lets Quill managers better respond to changes in order volume. By analyzing order history and comparing that to daily order flow, Quill can better prepare for each day’s order activity, Morse says. “If we get most orders between 3:30 and 6 p.m. and we get real-time information on order flow, we can see how many orders we’ve had at any given time and how many more we’re expecting,” he says.

The Quill order and fulfillment system uses a form of distributed order management, which fulfills orders based on the most efficient means available through a network of distribution centers and other sources. It is designed with mathematical algorithms and business rules that combine with information on each distribution center’s inventory availability to automatically determine how each order should be fulfilled. “The system does a lot of sorts,” Morse says. “A lot of algorithms pick the right DC and carrier for the right order.”

The system may determine, for example, that of 10 items in a single order, eight should get fulfilled from one distribution center, but two from another to produce the shortest and fastest delivery times between distribution center and destination. “If we get an order from California, the order will get routed to the right DC for that area, then routed to the carrier we’ve chosen for that part of the country,” Morse says, adding that Quill is also integrated with some Staples fulfillment facilities for inventory back-up.

Before XML and other forms of web services technology provided for automated data integration between the order entry system and warehouse management, Quill’s order-management employees would manually review orders and decide how to route them to distribution centers and carriers—a process that could take a full day, Morse says. “Now the system does it instantaneously and well within an hour or even within minutes, a pick order is printed on a loading dock,” he says.

Drilling down

The system also drills down to the best order-picking routes within each distribution center, saving pick workers time by showing the best route within a distribution center to locate each item in an order. “It gives workers the information they need, where to go and what to pick in the most efficient way,” Morse says.

With all the help web technology has provided, Quill has not become overly reliant on technology, Morse says. “We’re not into robots or pick-to-light systems,” he says. “We’re not looking to invest in technology for technology’s sake.”

Indeed, Quill still relies on teamwork and manual oversight to provide assurance that orders are properly fulfilled. Every item that’s picked is double checked by a second person, and another employee checks that boxes are properly and neatly packed. “It works well for us,” Morse says.

The mixture of employee processes and web-based technology, he adds, gives Quill the edge it needs to compete in its market by fulfilling orders according to today’s customer expectations. All that matters, however, is that customers know they can place orders and get quick, accurate deliveries, he says.

“Our customers don’t care about our fulfillment technology,” Morse says. “All they care about is their ability to order something today and get it tomorrow.”

paul@verticalwebmedia.com