Online fulfilment
December 1st 2006

Online retail is easily the most healthy and vibrant part of the retail economy but it is absolutely dependent on the quality of the fulfilment services, says Mark Hewitt, chief executive officer of e-fulfilment and reverse logistics services provider iForce

In recent years, there has been an accelerating trend for organisations to contract out great swathes of non-core activities. Because warehousing, distribution and the total logistics function are activities that many retailers see as peripheral to their main operation, most have chosen to outsource to experts and, as a result, the third party logistics market has become well established.

However, the explosion in online retailing has caused many leading retailers to rethink their approach to the supply chain.

Processing orders for goods sold online and delivering them to customers requires a different set of skills from 'traditional' distribution and, as a result, more and more retailers are turning to e-fulfilment companies, rather than their traditional third party logistics partners.

"Retailers are looking to maximise the opportunities that the boom in internet shopping presents and are aware that the need to fulfil orders and get products to customers efficiently is paramount," says Mark Hewitt, chief executive officer of efulfilment and reverse logistics services provider iForce.

One of the best reasons for contracting out to an e-fulfilment specialist is the specialised knowledge, flexibility and added value that such companies can provide, These specialist distribution service providers have the technology and skills to share information between a retailer's website and the warehouse. They have the experience to pick and configure parcels to be sent directly to individual customers' homes rather than just processing pallet loads of goods to stores and, in addition, they have the ability to handle returned goods, which are a significant aspect of the online retail business.

"Online retail is easily the most healthy and vibrant part of the retail economy but it is absolutely dependent on the quality of the fulfilment services," says Hewitt. "Managing growth is extremely difficult, but having a fulfilment partner with the right infrastructure, allows retailers to cope with expansion comfortably."

Making it work There are many challenges to making a fulfilment contract work and determining whether the retailer's partnership with its fulfilment provider will be a success or failure Hewitt advises that it is always essential to have a well thought out contract and scope of work. These documents should clearly define the tasks involved for both organisations, including a concise statement of the nature of the operation, which tasks are to be performed and the level of service to be achieved. All the people who will be doing the job on both sides need to be involved at an early stage.

From the outset it is essential to ensure that the prospective partner possesses the structure and know-how within their organisation to get the job done; a commitment to continuous improvement and a vision of business that can be adapted and made fully compatible with the retailer's own vision; the ability to meticulously fine tune, integrate and take over a client's efulfilment function and make it their own; and the personnel and financial resources necessary to fully integrate with a client's own organisation and establish fully compatible working arrangements based on continuous improvement in all areas.

IT - The key driver? At the centre of any successful e-fulfilment operation is the IT system driving the process. "The flow of information between the fulfilment provider and the client is arguably the biggest single driver in the success or otherwise of an e-fulfilment operation," Mark Hewitt. "The fulfilment company has to be able to feed the client's website with up-to-date stock availability data while the client's web solution should create the data necessary for the e-fulfilment company to pick, pack and deliver the order." Ideally, this exchange of information should be as straightforward as possible and should work effectively day in, day out, no matter what software the client uses.

"At iForce we design all of our systems inhouse," explains Mark Hewitt. "This means we are not beholden to a particular software package that can channel a company into working in a way that fits the software's design rather than the company's business.

Our view is that the software should be doing what's required by the operations team – not the other way round." Once an order has been processed, picked and packed it is equally important that information about it's progress – for example, where it is on the road and if it has been delivered – should be made available to the retailer and its customer.

Typically the greatest cost in e-fulfilment is the call centre and if the retailer communicates what's going on to the customer –whether it's good (the parcel is on its way) or bad (it's been misrouted by the carrier) – the amount of calls made to the call centre are reduced.

In a way this point seems to encapsulate the golden rule to the whole e-fulfilment process; that is by using simple, frequent and good communication, the cost of efulfilment per order will fall dramatically and, at the same time, the contentment of the online consumer will grow.

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