Satisfaction guaranteed?

E-fulfilment is the crucial aspect of online ordering upon which the success of an e-business is judged. Mark Vernon reports

E-fulfilment is the crucial aspect of online ordering upon which the success of an e-business is judged. Mark Vernon reports

The day of judgement looms for politicians as voters decide who to elect to government. Do MPs have good policies? How will the decisions they make affect the economy? Do they "look and feel" right? And perhaps more importantly, will they deliver?

Some might say that this will also be the year of judgement for many e-business initiatives. Do they have the right commercial policies - a business plan? How will they be affected by the hesitant economy? What about their Web site - the "look and feel" of their business? But above all, e-businesses like politicians, stand or fall on the same question: do they deliver?

To be more specific, this is about fulfilment, or rather e-fulfilment. The difference is that politicians might never deliver, but still get elected. If e-businesses don't, they won't survive.

This is why the thoughts of many in e-business are turning to e-fulfilment, for they realise that despite the continuing boom in awareness of the Internet, notably the trading possibilities it offers, few businesses have been able to maximise its potential because their strategic planning overlooks the key factor of fulfilment.

This opinion is summed up by IDC. The research firm points out that if anything inhibits e-business growth it will not be the product mix, pricing or customer access to the Web site, but the failure to generate customer satisfaction because of flawed e-fulfilment.

"The products and services that are sold to consumers by means of the Web today reflect, to a large extent, what is sold by bricks-and-mortar companies," says the report The Growing Role for E-fulfilment Specialists. "Yet, the delivery of these goods to Internet customers creates new challenges.

"One of the key success factors is the ability to meet, or preferably exceed, customer expectations in terms of immediate product availability, delivery timeslots, delivery reliability and after-sales customer service," the report adds.

It is here that they fail to deliver. The question is why? The answer lies in understanding how e-fulfilment is different. The first point to note, says Iain Gray of ufulfil.com, is that online customers are far more demanding. In both business-to-consumer (B2C) and business-to-business (B2B), service expectations increase and, too often, so does the gap between expectations and reality.

"The trick is to see that customers want products and services on their terms so e-fulfilment requires a totally different set of processes, a customer-led approach, not a sales-led one," says Gray. "Companies are dealing with a remote customer so they have to work harder. Customer expectations have to be managed individually: no longer are, for example, x% availability and y% errors valid targets. Either the customer gets the right product at the right time or they don't."

This last issue is compounded by the increasing complexity of online supply chains. As the number of events to be managed grows, the demands rise exponentially.

So, how can e-businesses increase fulfilment? Some insights can be gained by considering perhaps the most obvious element in the fulfilment puzzle - physical delivery.

Mark Slater, managing director of Online Express Parcels, explains how the situation is changing. For example, parcel carriers are traditionally geared to the B2B space, with drivers achieving 50 to 60 drops within normal working hours. But with e-business up to 40% of the market switches to home deliveries. This is a potential source of great inefficiency.

"Busy, modern customers are not at home during the day, so a high percentage of deliveries have to be brought back to the depot," says Slater. "The driver may have to return several times, adding to costs." The situation rapidly spirals out of control.

However, while modern technology has, in a sense, created the problem, the Web also provides the means to solve it.

"Modern technology enables people to order and track their parcels online," says Slater. "What is needed is the application of custom-built IT to provide a service tailored to e-commerce."

In Online Express' case it has developed a system whereby each drop is signed and accounted for on a scanner. This calculates the time taken for each drop. It can calculate forward to the driver's actual time of arrival at the drop-off point. The recipient can log on, tap in consignment information, and get the parcel's expected arrival time.

The analysis of Online Express Parcels is confirmed by BuyWineOnline - a user of courier services. Peter Bowman, one of the founders, knew from the start that the secret to a successful Web operation is fulfilment.

"Delivery is everything. If your courier lets you down it can spoil all the hard work it takes to get customers to order from you," says Bowman.

One frustration is that this is controlled by a third party. From experience he has found that using a cheaper company is a false economy, so going up-market and picking a reliable courier that has an effective online tracking system is key. Buy-WineOnline promises a five-day delivery service, but 80% of orders are delivered the next day.

However, Bowman also recognises that it is a problem when no-one is at home to receive the delivery. The courier then leaves a card and a pantomime of telephone exchanges can ensue. In the customer's mind the inconvenience reflects back on the supplier, putting paid to all the good work beforehand. Then more work has to be done to recover lost loyalty.

"One time the goods were dispatched but the parcel was lost in the system. We gave a refund thinking that it would not arrive but it did, the day after the refund was given. We told the customer to keep the wine as a gesture of goodwill as it had not been delivered on time," Bowman explains.

However, just having access to an online tracking system can help by allowing the supplier to stay on top of the situation. And so BuyWineOnline is now introducing the Collectpoint service as a delivery option. The customer has the option to pay an additional £2 on the standard £4.75 delivery charge to have their order delivered to a Collectpoint local to them or the recipient's address.

Slater says many logistics people are afraid of technology and do not see it as a valuable tool. This is disappointing, particularly since he also points out that it is generally accepted in the delivery industry that there is no quality carrier around. However, flexible e-delivery is vital to the future of e-commerce.

So much for IT and delivery. Growing demands on fulfilment mean that a large amount of straightforward scaling-up of operations is required. This is why companies like iForce are expanding. It recently opened a new 65,000sq ft distribution facility in the UK, employing 200 staff.

The newly-commercialised Post Office, now Consignia, has also identified e-fulfilment as a key expansion opportunity. Matthew Peacock, group chief executive at iForce, explains that the market leaders are creating one-stop-shop services for outsourcing e-fulfilment - the entire process from "purchase-click to parcel drop". Services including consultancy, market analysis, stock management, warehousing, customer service, and logistics are all available.

E-fulfilment specialist m-box, is providing Superdrug, the pharmacy chain belonging to Kingfisher Group, with an entire process package. The firm recently launched a Web site that contains a range of home delivery options for customers who can choose from more than 2,500 products online at www.superdrug.com.

Tackling the problem this way means that in addition to two-day delivery, shoppers can choose to have their goods delivered within two hours of order if they are based within central London, in four hours if they are within the M25 or in the evening or on Saturday morning nationwide. Delivery charges vary between £2.50 and £7.50.

The outsourcing approach has worked well, as Steve Spall, senior vice-president of infrastructure at Kingfisher, explains, "We were able to select the component parts of m-box's business we required and deploy them easily into our existing infrastructure. Its experience and understanding of this sector has meant that we have been able to concentrate on developing other areas of our online proposition while leaving m-box to oversee the delivery process."

A different kind of e-fulfilment issue is demonstrated by the National Merchant Buying Society (NMBS). Here e-fulfilment is contributing substantially to improving the business opportunity. The society is a trading hub that negotiates bulk-buying price deals with construction suppliers for its community, the building trade. At the moment, NMBS is manually processing about 100,000 orders per month - no trivial fulfilment job, though not without some success, since it is generating a turnover of £300m a year.

However, by deploying Sterling Commerce's e-business integration platform, Steve Hayward believes NMBS will be in a position to scale operations dramatically.

"We will serve the entire community by integrating our back office systems with those of our members, to communicate directly via the Internet, improving business processes from order placement through to fulfilment. Consequently, we will also be able to dramatically increase our purchasing power to reflect the annual industry spend, which is in the region of £2.5bn. Ultimately, we will be negotiating bigger discounts," says Hayward.

And that means good e-business.

Why do companies find e-fulfilment difficult?

According to ufulfil.com a number of factors must be tackled:
  • Lack of customer service culture

  • Poor processes. Processes such as receiving, quality inspection, picking, packing and dispatching require detailed procedures that often barely exist

  • The value chain is not seen as a whole. So e-businesses enter new markets without thinking it through and testing

  • The total cost of e-fulfilment is underestimated. So e-businesses develop an unprofitable commercial model. For example, a typical product can cost around £8 to fulfil in total, including warehousing, pick, pack and delivery, and customer management

  • E-businesses suffer from few economies of scale and critical mass in the early stages, which compromises operational focus in e-fulfilment

  • "Over promising" on delivery when mechanisms are not yet proven

  • The virtual organisation can suffer because it has the wrong physical infrastructure. There is an inability to cope with growth, and take the peaks and troughs of demand.


When e-fulfilment goes wrong

Lack of communication
One Computer Weekly reader decided to trial a major UK operator's mobile service having seen offers of free handsets on its Web site. The handset arrived but when the reader saw it he didn't like it. He returned the handset and, he assumed, cancelled the account by the next post. However, at the end of the month a bill arrived. "I ignored it, thinking perhaps it was a mistake. But the next month another bill came, and the next month, and so on for six months," he says.
Perhaps our reader was a little blasé but since he had not used the phone he let things be. Until, that is, he received a letter from a debt recovery firm issuing threats.

He then complained and found the source of the problem was the company's fulfilment strategy. "Every part of its operation, from handset returns, to bill issuing, to bailiffs, was outsourced to companies that did not communicate with each other," he says.

Spirited away
Another story is told by a reader who took advantage of an offer from an online wine seller. The offer was for a case of wine, delivered to your home for £39.95. But the reader was not at home when his case was delivered.

"Rather than leaving contact details for me to arrange a redelivery, as I had requested, the box was left on my doorstep," he says. The reader lives on a busy London street and by the time he returned home, the wine was not there.

When the case seemed long overdue, he complained. The company agreed to deliver again, though not before demanding that he checked with all his neighbours to ensure they hadn't taken the box in for safe keeping.

Upon delivery of the second case, once again the reader was not at home. Once again the box was left outside, but this time it was left behind a hedge in the rain. "I did see the case upon my return - but by that time it was sodden, and when I picked it up the bottom fell out," he says.

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