Hitting the mark

Supply chains may be becoming more complex, but that need not mean that the goal of e-fulfilment will be harder to attain. Mark...

Supply chains may be becoming more complex, but that need not mean that the goal of e-fulfilment will be harder to attain. Mark Vernon spies some winners

E-fulfilment is a simple word for a complex challenge - the struggle to realign, expand and integrate the complex set of processes that are required to ensure fulfilment as a result of deep connectivity across the online supply chain. The key word here is integration. Most organisations have not achieved the level of integration in logistics that is necessary for good e-fulfilment.

E-business has radically altered the logistics landscape. Now, companies have to deliver items to many locations, not just a well-known few. This demands a different kind of warehouse operation. Inventory control is one thing, with tighter delivery times and the need to be more flexible in e-business, but logistics should be a chance to add value for the customer, whether by offering premium delivery schedules and allocated delivery times, or by including such services as gift-wrapping or customised invoicing procedures.

Paul Brooks, managing director of ufulfil.com, explains that at the heart of the complexity is the lack of a defined delivery structure in online operations. Traditionally, companies have had substantial control over delivery mechanisms, being able to define when, where and to whom goods can be sent. With e-fulfilment that old, grid-like pattern of processes becomes far more complicated, turning into an apparently confused web of relationships and channels right up and down the value chain.

"The complexity is demonstrated by the electronic marketplace Hearth and Home fulfilment services built on our technology," says Brooks. "When retailers order a fireplace they have to order several component parts from suppliers in different parts of the country. All of these items have to be shipped separately and arrive at the retailer at different times. This means that the customer has to wait before fitting can be arranged - and that is assuming there are no delayed, damaged or wrong parts."

Hearth and Home's fulfilment service consolidates supply chain activity by focusing on the date the customer has chosen for delivery. The various parts of the order are managed automatically by the system, and any exceptions that arise are dealt with online too so that the delivery date is adhered to.

Another area concerns returns. Online suppliers and retailers are finding that the returns behaviour of customers is significantly different online. People are far more likely to return items - whether because they are "click-happy" or simply wanted to look at a product, causing major headaches in fulfilment. Even a small percentage increase in returns can seriously affect the margins on which a company operates since the exceptions handling, management and revenue tied-up in the goods themselves represent major costs.

"Take the case of a catalogue company," Brooks says. "When catalogues were paper-based perhaps the customer got a better feel for the products and so did not return them so often. But when online returns go up, if that company has opened up the online channel and is using its telephone-oriented fulfilment function, it is going to find it severely stretched." Again, a system geared up for the tougher online environment is necessary if profits are not to be hit, to say nothing of controlling customer frustration.

A further factor in the equation concerns third-parties involved in the fulfilment chain, over which suppliers have little control. The obvious example here is postal services. When, for example, Royal Mail workers went on strike earlier last year, it could have caused substantial problems for Wellbeing. com, the online delivery service from Boots. Unless the company had an alternative to Royal Mail for delivery, customers would not have received their goods according to the promise on the company Web site. Moreover, they would be unlikely to blame Royal Mail, instead passing the ill-will back to Wellbeing.com.

However, as Mark Knowles, head of fulfilment at Wellbeing.com explains, deliveries were not hindered. The company's fulfilment partner, MetaPack, was able to automatically re-route all affected orders via alternative carriers. Even where customer orders had been placed before the dispute got under way but were then dispatched to affected areas, MetaPack was able to identify these packages and make alternative arrangements.

New technologies lie behind many of the services that are coming online for fulfilment. For example, radio frequency data communications (RFDC) is increasingly deployed to monitor the movement of inventory: typically stock is checked in and out using barcodes and the information is sent to a central database. The wireless element in RFDC means that such checking can be carried out as easily in a van as a warehouse.

Network-based methodologies are improving services too. Efficient consumer response (ECR) is one, a logistics discipline involving the synchronisation of suppliers' and retailers' supply chains to reduce stocks. The point is that if stocks are cut then supply chains must be able to respond more efficiently to changes in consumer demand, that is they must make an "efficient consumer response".

Apart from the implementation of discrete technologies to manage various parts of the supply chain, and integrating them together, it is also vital to be able to run systems in a way that is friendly to the people on the warehouse floor. Ufulfil.com has recognised this issue in a product it calls the Logistics Network Console. From one interface all activity within a multi-tier supply and demand network is visible and accessible. The use of Web integrated business process tools means that client systems and other technologies can be added to the interface. In other words the product can be customised to suit different operating scenarios.

But given that technologies are available, many companies conclude that the best way to access them is by outsourcing the fulfilment function. "We had reached the conclusion that we would - reluctantly - have to create our own infrastructure to support the business," says Neil Appleton, managing director of business-to-business spectacle distributor lens-online. com. But a lot was at stake since it would be on account of fulfilment that this new venture would succeed or fail. Having assessed the field, Appleton turned to the joint partnership of Manhattan Associates, for the online back-end systems, and Tibbett & Britten, known as Track One in their e-commerce guise, for the shifting of stock. "The Tibbett & Britten model goes far beyond anything we have seen elsewhere in the logistics sector. Most still operate by pallets and boxes, not individual items," says Appleton. The physical side of distribution - of course no less important than systems - is located at Tibbett & Britten's 11,800sqm Telford distribution centre, the hub of which is the DataMart database. When an optician orders a pair of spectacles, availability is immediately checked so they can know immediately whether they will receive the right glasses by the next morning. "This is a new service level for opticians," Appleton says - and as result his venture is doing well.
This was last published in March 2002

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