March 18, 2003, 12:00 AM

Fulfillment gets a starring role--but making it perform is challenging

Fulfillment is the centerpiece of a customer’s experience, AMR Research says. But retailers are finding a challenge in implementing cross-channel order fulfillment and consistent customer experience.

Retailers are finding a challenge in implementing cross-channel order fulfillment and consistent customer experience, says a new report from AMR Research Inc. "90% of users still have not achieved the ultimate goal of unifying the customer fulfillment process," says AMR’s new report "Consolidated Order Management--ERP Alone Doesn’t Deliver."

Fulfillment once was considered the last step in the order process, the culmination of marketing, online presentation, and order-taking. Today, fulfillment is the centerpiece of a customer’s experience, AMR says. "It’s a strategic imperative," says Rod Johnson, AMR vice president of customer management strategies and author of the report. "It’s about understanding the customer, what the customer wants and being able to fulfill directly to the customer."

Effective fulfillment requires visibility into the supply chain, inventory, marketing programs, merchandising and just about every other aspect of a direct marketer’s operation. "Fulfilling the order is the pulse of an organization," says Stephen Olds, general manager of R.R. Donnelley’s Merchandise Management Services Division, which provides fulfillment services. "It sets the tone and dictates how the inventory flows in, how it is positioned and how the shipping gets executed."

But even as retailers recognize the importance of integrated order management, few are investing sufficiently to ensure a first-rate customer experience, AMR says. At 23% of annual IT budgets, retailing’s rate of investment in new technology and enhancements is slightly higher than the cross-industry average of 19%. But at $2.8 million, retailers’ average annual order management budget is about half of all other industries’ $5.5 million. And retail systems are older and more custom-coded than those in other industries. "They’ve spent years trying to piece together different systems and maintaining their legacy systems," Johnson says.

"20% is not enough and will only enable IT organizations to maintain status quo with many short-term fixes to address business challenges or opportunities," AMR concludes.


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