July 30, 2003, 12:00 AM

Fulfillment Solutions

Best-practice fulfillment extends beyond simply getting the order there on time.

Gone are the days when buying something online was an adventure in the unknown, when shoppers might be willing to take the risk of an unsatisfactorily fulfilled order for the chance to try something, well, adventurous. Consumers today expect more: Not only do they want assurance that they’ll get what they ordered, in good condition and in a timely fashion, but they expect an e-mail confirmation and the ability to track their shipment online. And if they change their mind after receiving their order, they want an easy way to send it back.

In other words, online customers want to realize one of the early promises of web shopping: an experience that’s as good as-or better than-buying in a store. “Years ago, the issue was ‘Where’s my order?’” when consumers could only wonder when or if their catalog or online order would arrive, says Michael Shelton, executive vice president of NewRoads Inc., a Greenwich, Conn.-based provider of outsourced fulfillment services. “But as multi-channel retailers go forward, consumers are the most important aspect of their business, and they need to secure a relationship with each customer. So they need to be as proactive as they can in informing customers about their order.”

Moreover, shipping directly to consumers, instead of just to stores, means that retailers have far more fulfillment destinations to manage.

Following Dell

But figuring out the best fulfillment strategy can be challenging for multi-channel retailers, particularly as they move toward new ways of serving customers in each channel. Although Dell Computer Corp. is widely recognized as an industry leader in online computer sales, its success is largely based on its ability to provide a fulfillment strategy that works for custom online orders. To accommodate fulfillment of custom orders, it has modified its supply chain to delay final steps in manufacturing, such as adding a DVD drive, until an order is placed.

Now one major multi-channel consumer electronics retailer, Best Buy Co. Inc., is planning on offering its online customers the same kind of custom-ordered personal computers, using a method similar to Dell’s. But for that to work at a multi-channel retailer, its fulfillment systems will need to accommodate both custom online orders as well as the replenishment of complete systems shipped to stores-a process that if not thought through could become a logistical nightmare.

Providing retail customers new ways to shop and receive products is important at a time when shoppers are looking for both diversity in product selection and flexibility in how they receive products. But retailers run the risk of alienating customers if they offer new ways to buy without backing them up with effective fulfillment, says Paula Rosenblum, retail analyst with AMR Research Inc. “The customer is very intolerant,” she says. “The Internet has made the customer incredibly empowered and she’s taking full advantage of the fact she has more choices than ever before.”

Rosenblum notes that a recent AMR study found that one of the main reasons that 18% of people who shopped on the web were disappointed and wouldn’t return to the same web site was unmet fulfillment expectations.

Multiple ways to please

But with the available new technology and processes for fulfilling orders, retailers have at their disposal multiple ways of satisfying their customers. NewRoads, for example, is rolling out an order-notice system that retailers can use to send automated alerts to customers’ e-mail inboxes, handheld PDAs, cell phones or other communication devices. “Consumers can decide how they want to be notified,” Shelton says. They can also access a NewRoads web page to check their order status, he adds.

Rosenblum notes that Target Corp. is using a new web-based distributed order management system that, regardless of the channel through which a customer places an order, automatically finds the best inventory location for processing the shipment-whether it’s from in-store inventory, a distribution center or the vendor’s warehouse. She also cites the fulfillment practices of Best Buy, which enables in-store customers to access web-based kiosks to check the availability of products in other regional Best Buy stores. “Leading retailers are raising the fulfillment performance bar,” she says.

Sears, Roebuck and Co. is following up on online orders of oversized products, such as pool tables, with an e-mail confirmation that alerts the shopper to expect a computerized call within 48 hours regarding a delivery schedule. The shopper is asked to press the “1” key to confirm that a responsible adult will be home at a given time to accept the order. If the shopper is not home or cannot confirm that someone can personally accept the order, the call itself is automatically rescheduled. If necessary, the shopper can refer to the confirmation e-mail and call an 800 customer service number for Sears.com, or a separate number for a regional warehouse, to request a specific delivery time or arrange a pick-up instead of waiting for delivery. Such automation, of course, helps to keep customer service and fulfillment costs down.

New technology applications are also helping to streamline fulfillment operations in picking and packing. U.K.-based apparel retailer FigLeaves.com, for instance, is using radio frequency identification, or RFID, technology to track totes used in picking orders at its warehouse. FigLeaves, noting that RFID helps it get maximum use of its warehouse, says it plans to also use RFID to better manage the placement of product bins on warehouse shelves. This will help the retailer operate its fulfillment operation more efficiently, keeping operating costs low while expediting shipments to customers, says Daniel Nabarro, chairman and founder.

The spread of RFID

RFID technology is expected to become more common over the next few years as industry leaders Wal-Mart Stores Inc. and Procter & Gamble Co. begin to require their trading partners to use RFID to track the movement of goods throughout their supply chains.

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