Delivery to Your Doorstep
With orders clicking in 24/7/365, B2C and B2B e-fulfillment operations require speed, agility, and flexibility in picking and shipping.
By Tom Feare, Senior Editor -- Modern Materials Handling, 5/15/2001
With orders clicking in 24/7/365, B2C and B2B e-fulfillment operations require speed, agility, and flexibility in picking and shipping.
A sharp focus on customer satisfaction surely is one of the keys to succeeding in e-commerce, or any other business for that matter. And on both the B2C and B2B sides of the new economy, making customers happy means moving orders rapidly, accurately out to the warehouse dock door, onto a truck, and then delivering directly to the their doorstep.
Speed is essential: As soon as the click of an order is recorded, the clock starts running. Make the delivery within 24 to 48 hours and there's a very satisfied customer. Miss this window of opportunity once or twice – unless the customer agrees to a longer ship interval – and that business is lost.
The Internet "is a wonderful tool for creating the illusion," says Rich Sherman, president of Gold & Domas Research, "that movement of products to consumers can be achieved with the speed of light."
Obviously, filling orders takes time. But dot coms often must deal with meeting the consumer's needs for instant gratification, as Sherman suggests.
And just as important, that desire for instant gratification is not confined to the e-fulfillment world. It is now a fairly standard customer expectation whether there's a dot com in the company's business model or not. In other words, when it comes to filling orders the bar has been raised across the board with the e-fulfillment world setting the pace.
A typical e-fulfillment scenario
"The Internet never sleeps," observes Steve Johnson, Accenture partner and e-business consultant. Because it's a 24/7/365 world for incoming orders, he adds, that presents operational challenges to logistics. Beyond speed, the challenge is to become agile and flexible, if these attributes aren't already in the warehouse's arsenal of competitive weapons.
Finally, companies in e-business need to realize that their information assets are a key source of value, as Johnson maintains. No doubt those assets also are a major pathway to reaching greater competitiveness. The trick is to combine all of these qualities and capabilities and still create some economies of scale.
Many online order fulfillment operations function much like existing mail order or catalog order centers. Incoming pallet loads and cases are first staged/stored in an e-fulfillment center. Then they are broken down into thousands of individual items to be picked, packed, and shipped – with one or two items per order typically. Perhaps some value-added processing occurs before the items reach packing/shipping. Finally, a stream of packages emerges, all ready for trips to consumers' doors.
Generally, these items are destined for delivery by one of the express service carriers – Airborne Express, DHL, Emery Worldwide, FedEx, RPS, UPS, and USPS, are among the more commonly used ones.
If the consumer is willing to wait longer than an overnight or second-day delivery, ground services from the same or similar parcel shippers will be used.
These third-party carriers offer a high degree of specialization at costs hard to beat. Only when a dot com has most of its customers nearby does having its own, dedicated fleet of trucks start to make much sense.
Very briefly, that's a typical scenario for e-business, direct-to-consumer order filling.
For emerging B2B online operations, however, this scenario shifts slightly. Fewer small packages must ship. Instead, it's cases and palletized loads that need to be delivered to the business customer. In this fulfillment environment, things work much as they did in the old economy. But several handling and transportation strategies may come into play more prominently in B2B e-commerce. Included are crossdocking incoming loads directly over to shipping and using less-than-truckload carriers.
A solid set of information systems and electronic exchange of data by the Internet or related means such as electronic data interchange (EDI) are necessary to make these strategies and tactics work.
What can we order online?
What gets shipped through home delivery, direct-to-consumer channels? That's still very much an open question. And the answers shape the kind of distribution methods and equipment chosen, of course.
Profitability is one of the drivers in what gets sold online. AMR Research, a Boston-based business consulting firm, has studied various kinds of products and whether they fit into a home delivery B2C model (graphic).
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"In order to be profitable, companies need to offer enough products with high delivery (profit) margins," says Chris Newton, AMR senior analyst. "Yet, in order to be competitive, companies also need to offer a mix of products that may include some lower margin items to attract a broader audience to their site."
Logistics issues also impact this profitability dilemma. And before the design of an e-fulfillment center goes too far, the expected mix of products and their velocities through to the shipping dock all need to be carefully worked out. Will the center have to have conveyors suitable for flea collar boxes and big dog food sacks? Forklifts for large appliances and home furniture? Or light-duty belt conveyor for music CDs, motion picture DVDs?
Information is key
Whatever the mix of SKUs (stockkeeping units) that results from this profitability/logistics exercise, information systems need to be in place for the processing of large volumes of individual orders in online B2C. Picking, packing need to be as efficient and as low in labor hours as possible. Software systems not only take the paperwork out of picking, packing, and shipping, but they also increase productivity at each of these steps. And that's vital in this fast-paced and changing environment.
Scanning bar code labeled items each step of the way is important too in managing inventory and order processing until items are shipped. Moreover, the tracking capabilities of bar codes when tied into a software system are crucial in e-fulfillment. The reason: The consumer's growing interest in tracking delivery status – knowing by day and by hour how far an order has proceeded to its ultimate destination.
"It's now possible," says Rick Bushnell, president, Quad II, "to pass information along with the movement of goods through the entire delivery channel. At each step we can see the handoffs of information and physical products by bar coding. We know, inexpensively, where products are. And we know with 100% accuracy."
By making Internet inquiries on the online retailer's site or that of the shipping carrier, the customer receives tracking information on those products and their whereabouts. Software within the e-fulfillment center has to support this tracking capability. Many dot-com Web sites facilitate the tracking process through e-mail messages that announce, "we shipped your items today." Then the sites provide a tracking number (linked back to bar codes on the shipping package and even on the items) and a procedure to follow for tracking.
Web sites of many online retailers, moreover, offer the potential buyer the ability to determine stocking levels of items. Again, this information must be 100% accurate. So it is best derived from a software system managing the fulfillment center's inventory and with the reliability that only scanning bar codes from picking to shipping will ensure, says Bushnell.
A warehouse management system (WMS) as well as a transportation management system (TMS) – even if at the outset the latter is not much more complex than a parcel manifest system – are among the information tools an e-fulfillment center requires. These systems speed orders while maintaining high accuracy in tracking and managing inventory. And they do so in real time, preferably, aided by technology such as radio frequency data communications.
WMS vendors offer versions of their basic software packages that enable new online retailers to get up to speed in their electronic marketplace quickly. Yet the software must deliver both the speed and accuracy in order processing the dot coms require to remain viable as a business.
Pick-to-light technology furthers the e-business's goal of high order processing productivity and accuracy. These systems promise a quantum leap forward over paper pick tickets. Here's another productivity booster: Determine the proper slotting of stock keeping units (SKUs) in staging/storing systems so that pickers travel less to pull the hottest selling items.
Packing for B2C fulfillment needs to be geared toward putting many orders of several items only in parcel-sized packages. A manifest system or a more robust transportation management system then searches for the best rates and carrier availability. Finally, all those packages are outbound. And then the next day (next shift?) the process starts all over again.
In the end, e-business needs to be very customer centric to make the deliveries – not to mention agile, flexible, and profitable. Sounds simple. It's not.
Part of what complicates achieving high levels of customer satisfaction is the high degree of unpredictability of e-business. Most remaining pure player dot coms have had only a few years of order history. Online gorilla, Amazon.com, still is working at making a profit, getting its distribution right-sized.
Even many bricks-and-clicks companies still struggle to find the right mix of fulfillment capability as they become a multichannel seller through retail stores, catalogs, and online sales. By all indications, the "e" in e-commerce will stand for "exciting" for a few more years until more companies get it right. By the way, one Webster's definition for "excite" is to "stir up."
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