May 2, 2008, 12:00 AM

Gaining a competitive edge with fulfillment

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As online sales become a larger part of their business, retailers are looking for new ways to automate their fulfillment systems to reduce operating costs without increasing delivery times, have more control over their carrier network, and provide greater visibility into the fulfillment process to enhance the shopping experience.

“Fulfillment has evolved from a tactical function of picking, packing and shipping to a competitive advantage,” says Brian Hodgson, vice president of marketing and business development for Marlboro, Mass.-based Kewill Systems Plc, provider of enterprise shipping applications. “The new generation of applications enables retailers to better leverage changes in carrier services, rates and requirements, more effectively manage returns, and improve customer service.”

One driver behind this evolution is a growing emphasis on controlling shipping costs while delivering items in the time frame expected by the customer. Zone shipping, the process by which retailers ship pallets of packages destined for the same ZIP Code via freight to a carrier’s hub near that ZIP Code, is one solution. Once the merchandise is at the hub, the carrier delivers it to the final destination, which is less expensive than if each package were shipped through them directly to the customer.

Gaining efficiencies

“Instructing the fulfillment system to identify when there is sufficient volume to zone ship and automatically initiate that process can generate a lot of cost savings while keeping within the stated delivery time,” Hodgson says.

Retailers can gain additional efficiencies by integrating business rules that instruct the shipping system to shop rates for carrier services on such criteria as time-in-transit, arrival, international compliance and documentation, and then passing that information to the customer.

For example, the system can notify retailers when a delivery service will take a longer time to deliver to a remote address. Integrating the shipping application with the shopping cart allows retailers to notify shoppers of the increased delivery time and present alternatives for speedier delivery, such as overnight delivery, and what those options cost.

“The last mile in the delivery process can be tough and retailers need a solution that keeps them abreast of when these events occur and that can convey delivery options to the customer to ensure a satisfactory shopping experience,” Hodgson says.

Streamlining international shipments is another focus for retailers as international orders surge in the wake of the dollar’s declining value against major foreign currencies. To meet the demand, retailers need fulfillment applications that automatically generate documentation needed for exports to ensure compliance with international trade regulations. This capability includes screening for shipments to restricted or denied parties and embargoed countries.

“As global sales opportunities for retailers increase, they need a fulfillment system that provides more control over validating compliance with international shipping requirements,” Hodgson says. Kewill’s applications automatically create global compliance documentation for international orders, which streamlines cross-border shipments and minimizes unexpected costs.

Managing returns

As online sales grows, so too does the number of returned items. About 30% of items purchased online are returned, Kewill estimates, which means retailers need a fulfillment system that helps them manage the incoming volume and maintain high customer service levels.

Integrating the fulfillment system into the e-commerce site to allow customers to initiate a return and print a mailing label provides retailers with greater visibility into the number of items coming back, as opposed to including a return label with each outgoing shipment. Retailers can also tie into third-party systems, such as a FedEx Kinko’s, that retailers can use as drop off points for customers to initiate a return. Doing so reduces the retailer’s costs by arranging for returns to be shipped in bulk.

“Shipping is no longer a tactical warehouse function; it is a process that directly impacts customer satisfaction, which is why retailers must pay closer attention to enhancing it through automation,” Hodgson says.

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