25th Anniversary Issue: We're Not 'Just the Back End' AnymoreDirect marketers have always been ahead of the pack on the marketing side, with sophisticated mail strategies, list segmentation, demographics and response analysis.
The concept of operations management, however, barely existed until the 1980s. And in only a few companies today could it be considered a strategic asset. But fulfillment and operations functions clearly are not "just the back end" anymore.
Service as a Strategy
I noticed the biggest change in the 1980s, when catalogs exploded and little things like phone skills and fulfillment time began to get attention. We learned that customers shopped in catalogs for convenience as much as or more than any other reason. Direct marketers began competing with each other not just on price or product, but on the level of service they could offer.
This created a focus on what we now call "operations and fulfillment" to figure out how to deliver this level of service yet remain efficient and profitable. It doesn't happen just by believing in it.
Stanley Fenvessy was a pioneer of the service revolution. He was the first and only consultant dedicated to operations and fulfillment in DM, and the first to get service recognized in the boardroom as a competitive strategy. For years, he wrote a column for DM News that really was the only resource for direct marketing operations. His firm worked with some of the catalogs that shaped the service image, such as L.L. Bean, The Sharper Image and Williams-Sonoma. It would be remiss not to mention that my partner, Bill Spaide, and I were privileged to be principals in Fenvessy Consulting until his death in 1994.
Perhaps the most important and satisfying change in fulfillment during the past 25 years, especially the past 10, is the increasing attention and commitment to the science of operations management. The qualities of a great manager are the same today as they were then, but the challenges seem more numerous and complex.
Ops managers today must chart their way proactively through demands such as rising costs, wildly seasonal volume fluctuation, complex and costly systems, limited and costly labor and rising service expectations. They must manage, not just supervise. It is not rocket science, but it requires strong management skills and tools.
Availability of Information
The biggest change I've seen is the availability and effect of information on every aspect of running a business as a result of computer systems. Until the mid- to late 1970s, there were no computer systems to speak of, other than for mailing lists, and no order management systems. Until the late 1980s, we either wrote our own systems or made extensive modifications to more generic packages from other industries.
Ironically, a main weakness continues to be inadequate systems. Many clients are reluctant to invest in systems or fail to realize how they can be used to break constraints and seize opportunities. A startling number of businesses use the same processes they did 20 years ago simply because they accept system limitations or lack the vision to push for the necessary support.
Call Centers and Distribution Centers
One big challenge has been the shift from mail orders to phone orders. I never will forget our order processing area, where a large, open room was filled with 40 tables. Clerks opened and sorted 10,000 mail orders daily, then sent them off to "data entry." Today, that same room - and another one twice the size - is the call center, and the $100 wooden table has been replaced with a $4,000 CSR station, equipped with PC, advanced phone and headset, ergonomic chair, modular sound-absorbing dividers and so on.
The call center is one of the hardest aspects of the business to manage. A live agent must answer an inbound phone call almost immediately. The agent must be extensively trained in phone skills and equipped with product and system knowledge. This requires complex staffing models with sophisticated call volume forecasting tools, great recruiting, extensive training programs and intuitive systems.
This evolution continues. The already tough task of managing the call center has been compounded by the influx of e-mail, online service and instant messaging. Today's call center is more aptly referred to as the customer contact center or the service center.
Though call centers were the first to blossom in terms of sophistication, distribution centers are where the most impressive developments are being made. The distribution process was inherently labor intensive 25 years ago. Facilities were notoriously dark, uninviting and inefficient. Most orders were picked using very manual
methods. Batch picking and zone picking were leading edge. There was virtually no systems support of distribution and very little process engineering. In general, we just threw labor at most challenges.
Rising labor costs and benefits, increasing volumes and the availability of systems fueled innovations to reduce handling and improve efficiency. Barcoding, real-time wireless data entry and better systems enabled process innovations that were never an option.
Companies increasingly realized that their greatest asset is the people who work there. It is now far less common, and painfully obvious, to find a firm that does not nurture its associates and foster a culture of sensitivity and fulfillment in the workplace. What a welcome change from the environments of the 1970s.
Note some other observations of changes in operations during the past 25 years:
Facilities: Call centers and distribution centers are far more pleasant and efficient environments. They are larger, well lit and more deliberately designed. Warehouses are larger, simpler one-level facilities with high ceilings and more dock-height doors. Aesthetics and ergonomics have become essential design factors.
Supply chain management: The fulfillment cycle has been vastly improved by a much higher degree of communication and cooperation with vendors. This includes conveniences such as standardized packaging, barcoding and product labeling as well as innovations such as advance shipping notifications and automatic vendor-managed inventory levels.
Barcoding: It is hard to find a box or product that isn't barcoded these days. The beauty of the barcode is the procedural innovations enabled by automatic data entry (scanning) versus manual key entry. Use of the barcode has improved inventory accuracy, productivity and fulfillment accuracy.
Shipping and transportation: It has become increasingly complex and costly to actually get packages to the customer. We have seen a huge shift from firms using mainly UPS or the U.S. Postal Service to using various carriers based on complex scenarios and rules. Consolidators, expeditors and new home delivery services from major freight companies such as FedEx and DHL offer potential cost savings, but make it more complicated to manage.
Offshore call centers: It is only my opinion, but they are wrong. I understand the cost motivation, but what a tragic course for local employment. Fortunately, not many DMers have gone this route - yet.
With the impressive level of service we have built into this industry, it is getting hard to exceed customers' expectations, and easy to let them down. Spiraling costs have forced us to be far more attentive to the details of managing performance and efficiency. But it sure makes it challenging and fulfilling to do it right.