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Outsource to a 3PL

Hot spots in e-Fulfullment

-- Modern Materials Handling, 5/15/2002

To avoid making large capital investments initially, startup e-fulfillment operations often turn to third-party logistics (3PL) distribution firms. A 3PL provides fulfillment expertise, while startup personnel manage the Web site, marketing efforts and other front end functions.

But there are many variations upon this basic formula. Grocery Gateway is one example. It began as an on-line grocery serving Toronto-area customers in 1999. When this pure-play strategy fell short of corporate growth goals, however, the company added a 3PL capability. As a 3PL (see sidebar - Grocery Gateway is much more than groceries ) it now fulfills orders for furniture, file cabinets and other office products for Staples Business Depot.

Reliance upon 3PLs isn't just limited to startups, to be sure. Large, older businesses outsource as needed. And sometimes they do so with others in their field. Booksellers Amazon.com and Borders operate a co-branded Website with Amazon doing the order fulfillment.

Royal Appliance Mfg. Company's Dirt Devil subsidiary has outsourced e-fulfillment and customer relationship management for its new product launches to Fulfillment Plus (see sidebar below - A 3PL for floor scrubbers and finding family roots).

Elsewhere, Canadian Tire has distribution and inventory systems to replenish 440 stores with pallets and cases. But these systems 'weren't set up to ship individual items to consumers,' says Bruce Johnson, vice president, distribution and express auto parts.

So Canadian Tire uses a two-step process. First, its DCs pick inventory needed for fulfilling on-line orders. Then that inventory is shipped to a second facility managed by 3PL provider, Kuehne & Nagel. It fills the on-line orders, making the final shipments to customers by parcel delivery carriers.

 Click on MMH - Grocery Gateway


Click here to read the sidebar on Grocery Gateway


Grocery Gateway Video Clip

Click here to view the Video Clip of Grocery Gateway's distribution center in Toronoto.


 

 

A 3PL for floor scrubbers and finding family roots

Fulfillment Plus (FFP), based in Waltham, Mass., is a third-party logistics provider (3PL) of fulfillment services and more. With just 65,000 square feet of warehousing space, FFP is not a high-volume operation, observes Bill Zwemke, vice president of strategic initiatives. But on a busy day it has shipped as many as 25,000 items to customers for clients of FFP (877-337-7587, www.fulfillmentplus.com).

Those clients include companies implementing e-commerce initiatives. 'We're a niche player,' Zwemke says. FFP also specializes in 3PL services 'where human intervention is necessary. We add a high level of the human touch.'

Roughly 75% of the orders shipped by this 3PL come from the Web, he adds. There's a wide range of clients, moreover.

Client needs are as diverse as the businesses of just these two firms using FFP's services over the last year or so: The Dirt Devil subsidiary of Royal Appliance Mfg. Co. and the Ellis Island Foundation. FFP provides fulfillment for Dirt Devil new product launches, such as the Spot Scrubber. Meantime, FFP also fills orders for the Foundation's customers for computer and multimedia technology and related materials for those searching their family roots.

'No two of our clients,' emphasizes Jim Compton, warehouse manager, 'require the same services from FFP.'

To manage these complexities, FFP has a powerful and scaleable order management system (OMS) in front of and integrated with its warehouse management system (WMS). The OMS, says Compton, enables him to track product by unique order types. He also can preview incoming orders and manipulate their release so that they can be processed in the most efficient manner.

'We have customization from the OMS,' says Compton, 'and automation from the WMS.' Radio frequency scanners tracking bar-coded products throughout this pick/pack/ship operation and linked to the WMS add to productivity.

But why use FFP's 3PL capabilities when you're already established and shipping products in retail channels? Companies may not have their existing distribution system set up for direct-to-consumer shipments from Web orders, as Zwemke points out. They may wish to test markets and establish pricing levels for new products. And do so before asking for shelf space in retail stores.

For Dirt Devil's Spot Scrubber product, this kind of strategic approach has worked very well. The company credits FFP for helping generate a 38% increase in Web sales. FFP processed all Web orders and also handled all telephone calls and Internet queries about the product.

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