Beware the new Trends in Fulfillment Services

Fulfillment Services – Trends

E-commerce has made an indelible mark on today’s marketplace. More and more consumers are embracing online shopping, and this change in their buying habits is having a significant impact on the face of retail nationwide.  It comes as no surprise, then, that this growth is affecting how companies go to market. In order to capture this market segment, many retailers are adding or expanding their online sales. At the same time, many web-only companies are expanding through retail channels. As a result, there is a distinct trend toward multi-channel retailing which offers customers a variety of ways to buy products such as in store, via catalog and online.

These changes in the retail environment are having a tremendous impact not only on shoppers’ experiences, but also on the supply chain as we know it. Companies are challenged to deliver the perfect order every time. They are also expected to provide a consistent brand experience from channel to channel — whether customers are shopping in a store, by phone or on a pc. Never has orderfulfillment services been such a critical business function. To accommodate growing complexity, the practice now requires sophisticated processes, state-of- the-art resources, and an in-depth understanding of the channels in play. From the moment the online order is placed to when it is picked, packed and shipped, every step in the process must be handled efficiently, consistently and cost-effectively.

Many companies that use fulfillment services use e-commerce, and many use other sales channels as well, including retail stores, direct to consumer, and catalogs, this helps to confirm multi-channel retailing as a growing trend. The majority of companies use more than one channel, and many actually use all three in addition to e-commerce.

WHILE MANUFACTURERS AND DISTRIBUTORS ALSO INCORPORATE FULFILLMENT SERVICES IN THEIR OPERATIONS, RETAILERS CLEARLY ARE LEVERAGING THE PRACTICE AS ANOTHER CHANNEL TO REACH THEIR CUSTOMERS. THEIR COMPANIES HANDLE A BROAD RANGE OF PRODUCTS, FROM APPAREL/TEXTILES TO GAMES/SPORTING GOODS/TOYS TO HEALTH AND PERSONAL CARE ARE JUST A FEW.  E-COMMERCE COMPANIES MOST OFTEN MARKET THEIR PRODUCTS TO CONSUMERS OR BUSINESSES AND CONSUMERS. JUST A FEW TARGET BUSINESSES EXCLUSIVELY.  THE MARKET IS FULL OF SMALLER COMPANIES. THE PREVALENCE OF SMALLER COMPANIES IS NOT SURPRISING. THE RELATIVELY LOW BARRIER TO ENTRY FOR E-COMMERCE MAKES THE CHANNEL ESPECIALLY APPEALING FOR ENTREPRENEURIAL ACTIVITY. MANY COMPANIES ARE JUST GETTING STARTED WITH E-FULFILLMENT SERVICES, WITH MANY HAVING THREE YEARS EXPERIENCE OR LESS.  MANY OF THESE COMPANIES THAT HAVE SIGNIFICANT EXPERIENCE IN INCORPORATING FULFILLMENTSERVICES IN THEIR OPERATIONS. THIS LEVEL OF SENIORITY INDICATES THAT E-COMMERCE IS A WELL-ESTABLISHED PRACTICE, EVEN THOUGH ITS VISIBILITY HAS ESCALATED IN JUST THE PAST FEW YEARS DUE TO RAPID GROWTH.

Sales channels used in addition to E-Commerce, in terms of order fulfillment services, is distinctly different from an exclusively e-commerce direct to consumer environment in a number of ways. Other variables include product attributes, order size, branding, customization, inventory practices, order tracking needs, transit times, returns, customer service and more.

Most companies report using a variety of fulfillment services. In addition to basic order fulfillment services, the top five services utilized include: e-commerce website development and hosting, returns processing, order processing systems integration, inventory management and replenishment, and call center/ customer service. The data points to the growing complexity of the order fulfillment services process.  Today, e-fulfillment services have evolved to a level of sophistication that requires carefully planned processes, scalable operations, state-of-the-art systems, efficient transportation and superior customer service.

When it comes to fulfillment services, most companies have a single distribution center. Company size, geographic reach and sales channels can influence the choice of a multi- or single-node strategy. Companies shipping internationally are somewhat more likely than those shipping nationally to have a single distribution center or fulfillment services. Likewise, large retailers who are shipping pallet-loads of product, and paying the freight , may prefer a single distribution point to take advantage of efficiencies for inbound international freight. Smaller retailers and companies shipping directly to consumers, on the other hand, are more likely to seek out multiple points of distribution to keep product inventory closer to the customer, thereby reducing transit time and cost. It is important to find the optimal arrangement that fits a company’s average order size, inventory levels, and delivery time frame.

Finding Value in outsourcing in order to manage their fulfillment services operations effectively and to remain focused on their own core competencies, many companies turn to third-party providers. In fact, many outsource some or all of their fulfillment services operations. Overall, many companies who outsource are quite satisfied with their third-party fulfillment provider rating them 4 or 5 on a five-point scale. From this level of satisfaction, it is clear that fulfillment services outsourcing provides value. The most widely agreed advantages are alternative to investment in overhead/ infrastructure and opportunities for cost savings.  In fact, a number of distinct advantages were mentioned such as outsourcing minimizing overhead/infrastructure, and conveniently located state-of-the-art facilities which are essential for fulfillment services operations.

A fulfillment services facilities size is essential and an alternative to overhead investment.   For many of the companies all of their for fulfillment services operations created some opportunities for cost savings. For fulfillment services function, many companies appreciate the their respondents who outsource some or all of the fulfillment services that meet special requirements

Reducing costs is also important whether it is through process-related related improvements, enhanced automation, or controlled warehousing and transportationcontrolled improvements, enhanced automation, or costs. Improving service levels, warehousing and transportation costs, outsourcing outsourcing can help companies to realize cost.   Advanced systems capabilities can help companies to realize cost savings. Outsourcing causes focus on core competency.  For many companies, e-fulfillment services requires an intensity of focus that distracts from their commitment to core competencies.

Ability to “right size” the ebb and flow of business, seasonal products, and other considerations can be a challenge in terms of staffing and space. Third parties have the resources and experience to take such fluctuations in stride and grow along with their business.  For companies, flexibility is a clear advantage to outsourcing. Advanced technology, robust and flexible systems are essential for effective fulfillment services, and companies say that third-party providers are valued resources in this area. They often offer more sophisticated systems and extensive expertise. For added convenience, some providers offer pre-integrated shopping cart solutions to minimize or eliminate programming.

As a result of this increased complexity and high expectations for consistently error-free orders, achieving effective order fulfillment services can be challenging for many companies.  Processing time for outbound orders can be a problem along with system integration issues, and upholding service standards.  All of these areas head the list of challenges. Clearly, efficiency is top of mind for all companies.  One of the biggest E-Fulfillment services Challenges is that their customers have come to expect extremely efficient turnaround of their orders. Delivery within upholding standards for service in two to three days, if not overnight, is the standard. Need for customization is also important.  There is and expectation for consumers, but getting products to Quality requirements market quickly is also important for brick-and-mortar  processing.

Customization is also required to ship individual consumer orders instead of pallet loads of product from a fulfillment service. E-commerce companies may be taxed by compliance issues and struggle with large order sizes when selling to major retailers. Moving into a new channel typically requires a new perspective. Retail and consumer sales are very different animals. What works well in one environment may not translate effectively to the other. It is important to understand the unique needs of each environment.

To meet expectations for service excellence, order processing fulfillment services and transportation functions is  a must.  Automated processes and System integration systems play a critical role in Returns.  Those functions, however, along with a state-of-the art technology Processing time for outbound orders, requires a substantial overhead investment, but not for fulfillment services.

Processing time is also crucial in receiving in fulfillment services. Expansion into new channels can be particularly challenging as well. Retailers must learn the fine points of online customer service.

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