In the wake of the '99 holiday season, Internet shoppers and the media have identified fulfillment and on-time delivery as critical factors for the success of the Web as a viable shopping medium. Consumers complained about orders arriving weeks after Christmas eve, about backorders and unavailable product, about cumbersome and costly returns processes — all of which discouraged reorders and the acceptability of the Web as an alternative to the neighborhood mall.
But “fulfillment and delivery” aren't the real issues. What's really worth analyzing in anticipation of the '00 holiday season is how to achieve “the perfect order” — one that arrives at the right place, and time, and is the right item and makes the customer feel good about the selection and keeps him or her coming back again.
To the customer, that relationship is built on the experience of coming to the site, seeing the products beautifully merchandised, being able to ask questions and get instantaneous answers 24 hours a day, being reassured that every item of the order is available for delivery within 24 hours, and then actually receiving that order (with all of its parts) within the time promised. In the world of the Web, there are no geographic or time boundaries.
Customers from France and night owls ordering at 10:30 p.m. on New Years Eve expect the same service as customers ordering at 10 a.m.
The Road to Nirvana
To achieve this “perfect order” nirvana, Web merchants must go far back into the supply chain, examining all aspects of the order process. Fulfillment, the act of putting physical product in a box and preparing it for shipping, is just the tip of the iceberg. Web merchants also need to take a look at every stop along the way to the consumer, and then how the consumer is affected by and connected with that journey.
It means that customers can check the status of their order, product availability, and arrange returns online and in real time. That state is achievable only if all products are on the shelf and ready to ship, with all the items ordered arriving at the same time in the same box.
It means suppliers have to be cooperative and constantly on guard to automatically replenish stock; that packing materials and shipping labels are on hand; customer call centers are operating 24 hours a day; and that delivery can be scheduled for businesses or homes.
For Web companies, this synchronization of supply with demand requires sophisticated supply chain management, coupled with real-time technology to track product from the racks of the supplier through to the customer's doorstep and back again in the case of returns.
The Myth of “Virtual Inventory”
In the early days of Web commerce (say two years ago for argument's sake), there was a myth that inventory was an obsolete concept; that suppliers would bear the responsibility for product quality and availability, delivery and customer service. Instead, Web merchants would operate virtually, avoiding the costly proposition of building warehouses and maintaining inventory.
In reality, Web merchants who adopted this business model found themselves at the mercy of their suppliers. Customers with larger orders and easier fulfillment (usually in the form of pallet or truckload shipments) got priority over the labor-intensive and often small volumes of the start-up Web entrepreneur, especially during the holiday season. Multiple item shipments meant multiplied shipping costs and multiple delivery times. Order accuracy problems, damage, slow fulfillment and shipping delays weren't discovered until the customer complained. By then, the Web merchant was repairing the
customer relationship, not building it.
Investing in the Supply Chain
To protect the relationship with customers and build for the future, smart Web merchants are taking control of their supply chains by providing:
*Adequate logistics infrastructure, including distribution points close to customers.
*Safety stock inventory, to ensure product availability especially during holiday seasons.
*Online technology systems that provide product tracking, order tracking, inventory availability, delivery management (both inbound and outbound), inventory status, and returns management. These systems must be integrated into financial systems (for crediting and order processing), warehouse management systems, call centers (so that customer service can advise on product availability, delivery times, returns processing, international shipment regulations, and other vital information related to logistics), suppliers and customer data bases.
*Returns Management Processes, to ensure that returns (typically 10 percent -20 percent) are convenient for customers and that merchandise can be advantageously processed, either to secondary markets, refurbished so that it is returned to available inventory stocks, or disposed of properly.
Does this approach require “bricks and mortar” investment? Not necessarily. Third-parties can be hired to manage all or part of the supply chain to tap into an established global infrastructure. Typical outsourced functions include warehousing and inventory management,transportation, supply chain IT integration, and fulfillment.
The real investment is in the relationship with customers. An efficient supply chain enables the possibility of “the perfect order” that leads to a long-term relationship with customers and future growth for the Web merchant.