MuseumCompany offered a money-back guarantee for on-time delivery
One retailer has only one shipping flavor, vanilla
Despite rampaging technology, getting merchandise to customers hasn’t changed much since Mr. Sears and Mr. Roebuck delivered packages themselves. The goal is still to get the package from here to there, and there is still a finite number of methods to achieve that result. Sure, we can track it better, we can pack it better, and we can move it a little more quickly, but at the end of the day someone still has to load the order on a truck and deliver it to the customer. ▪ Innovation, like the devil, seems to lie in the details. Retailers are concentrating on using technology to control their available shipping methods more closely. They are measuring every aspect of their operations and looking for ways to improve current procedures. They are seeking partners, whether software companies, shippers, or third-party operations, or even competitors, to help them be more efficient.
Companies generally seem to feel that the best way to improve shipping is to improve the processes leading up to order delivery. Conventional wisdom says that if you can pick up a day or two through the distribution center, you can save money or improve service or both on the delivery end. The technique differs depending on the size of the company, the scope of the services, and the type of product.
The MuseumCompany.com, based in Fairfield, NJ, uses technology to help managers understand all aspects of its business better, measuring how often, how many, when, and where orders go, to control every part of the order fulfillment process. The company has chosen to outsource its entire fulfillment operation to SubmitOrder.com, a third-party fulfillment provider with facilities in Ohio, Florida, and Memphis.
Ned Crosby, vice president of operations for MuseumCompany.com, knows how important it is to get the order right the first time and to maintain a close relationship with a third-party partner. Last Christmas, MuseumCompany, along with SubmitOrder, was able to offer a money-back guarantee for on-time delivery of all in-stock merchandise ordered right up to Dec. 20, without increasing delivery expenses. The company was able to make the offer by processing goods expeditiously through SubmitOrder’s facility rather than by using any additional premium shipping service.
Crosby also feels that there’s nothing worse than having a customer go through the entire purchasing process only to find out that the item is not available. “If we don’t have an item, we take it off our Internet store,” he says.
Right place, right time
Sometimes location is everything, quite literally. High-end online gift retailer RedEnvelope.com offers extraordinary delivery service by using a third-party fulfillment provider, 3PF.com, that is situated right at the airport in Wilmington, OH, adjacent to the Airborne Express overnight delivery facility. 3PF.com guarantees overnight delivery six days a week for any order received by 12 noon the day before. The unique location of the facility allows for exceptional service at an affordable price.
Electronics retailer Crutchfield, headquartered in Charlottesville, VA, also uses technology to evaluate everything from the type of loose fill to use in packing to box size and shipment weight to get the optimum dimensional measurement factor with the delivery agent. Because of the nature of the merchandise it sells, Crutchfield overpacks everything. Keith Goodwin, director of distribution, tries to consolidate the small package shipments and skip USPS zones whenever possible.
Big-ticket items that are too large for standard delivery pose an even more difficult challenge. Crutchfield has big-screen TVs that may need to be set up and assembled in addition to being delivered. A standard LTL drop delivery is not enough for these items; they require a delivery appointment — and the service is not cheap. There are no nationwide, big-ticket home delivery carriers anywhere near the size and scope of a UPS or FedEx. The only option is to use one of the many national and regional delivery companies that don’t own or lease equipment or trucks but use thousands of agents across the country to serve every area. Their service and tracking are spotty at best.
Crutchfield was able to circumvent this obstacle by using Home Direct USA, a division of Bekins and Eagle Global. Both of these carriers own many of the terminals used and have exclusive agreements with their agents. More important, they both have tracking systems that allow customers and clients to be linked electronically to track the status of the shipment.
Gerald Walsh, director of operations for Portland, OR-based outdoor apparel retailer Norm Thompson Outfitters, also uses regional consolidators in areas where the company doesn’t have enough volume to use a Bulk Mail Center. The closer Walsh can get to the final destination, the better in terms of service and cost. He works with Parcel Direct to piggyback his goods onto their trucks.
A division of Quad/Graphics, Parcel Direct transports a critical mass of catalogs, magazines, and other printed materials, and uses the remaining space in its trailers to deliver parcels for companies such as Norm Thompson to postal destinations nationwide on a consistent, timely basis.
On the West Coast, Home Shopping Network uses PFI to pre-sort its packages. PFI consolidates and pre-sorts the packages by five-digit zip codes and delivers them to the nearest USPS Destination Delivery Unit (DDU). This allows next-day delivery in 75% of the cases.
Most e-merchants want customers to be able to track shipments as accurately as possible. The more customers know about where their order is, the more content they tend to be. UPS spokesman Steve Holmes says that it’s possible to control customer service by applying available technologies properly. Shippers like UPS and FedEx are able to give real-time delivery information to customer service reps and to display that information on their Web sites so that customers don’t even have to use the phone to get an update on their shipment.
Other e-merchants don’t seem to mind the lack of control that the less-expensive U. S. Postal Service offers. One executive says that his company is more than willing to pay for, say, ten thousand dollars of lost re-deliveries each year if it saves a hundred thousand dollars in delivery expenses annually. The question is, how many lost customers does that ten thousand dollars equal?
Traditional brick-and-mortar retailers who also offer catalog and Internet sales deal with a totally different set of delivery circumstances. They can segregate the catalog and Internet business and perhaps farm it out to third-party professionals, or they can combine it with their retail deliveries.
One upscale, multichannel hardline retailer in the Northeast claims to offer just one flavor of shipping, vanilla. Every order is picked and shipped through its distribution centers regardless of whether it was a special order sold in a store to be shipped to a customer, a catalog or online sale, or an order to be picked up in a store. No particular priority is given to any of these areas. First in, first out. The company feels that there is no need to make this process magical. “Our customers are used to our delivery standards, regardless of where they purchase the goods, and they’re comfortable with our level of service,” a spokesperson says.
On the other hand, for large companies such as Williams-Sonoma, which has six catalog operations, sells online, and operates 380 stores in 39 states, controlling shipping costs is critical. A shipping assessment last year led to the conclusion that the company needed to increase its peak capacity. Working with shipping software developer ShipNow, Williams-Sonoma devised a system that links with its home-grown WMS and feeds orders directly to the ShipNow application. Next, the company worked out business rules to encourage speed. Carrier selection was based on criteria such as delivery commitment, distance, negotiated rates, time for service availability, seasonal rates, and new service areas.
Mega-retailer Home Depot has a rather interesting delivery program for online orders. First, only items that are able to be shipped via UPS are presently offered on the Web site. Online orders are transmitted to one of the eight stores around the country that are designated to pick and deliver the merchandise. A customer can also go directly to one of those stores and pick up an order.
Challenges continue to grow as e-tailers and catalogers become more global and face the complexities of logistics overseas. Japan is one of the quickest growth areas for Watsonville, CA-based boating supplies retailer Western Marine. Transportation director Pat Foley has been cutting up to two delivery days to Japan by initially shipping the packages on pallets. When the pallets reach Japan, they are sorted and delivered by FedEx or by local Japanese delivery agents. The whole process takes two to four days from point of order to point of delivery.
Al Cheli’s 25 years of retail, distribution, and fulfillment transportation experience includes senior distribution positions at Crate & Barrel, Conrans, Pierre Deux, and Gilbert Home Delivery. Cheli is a partner in Logipros LLC, a global boutique search firm for fulfillment, logistics, and transportation. He can be contacted by phone at (800) 300-7609 or by e-mail at firstname.lastname@example.org.
More Cargo for the Hold
- Outsource, outsource, outsource In product fulfillment, as in all segments of business, technology is difficult and costly to upgrade. The best way to manage this is to have someone else handle your fulfillment, particularly if you are just starting out or are not yet a big player. Find a good third-party provider with whom you can partner.
- Insource, insource, insource OK, so you’re a control freak and you’re not comfortable with anyone else doing your fulfillment. Take your new-found expertise and turn yourself into your own 3PL. It will help defray some of the costs of keeping up with technological advances. If you get really good at it, you can turn the fulfillment department into a profit center. Companies such as Fingerhut (Federated), Keystone (Hanover Direct) and JC Penney have been successful setting up separate fulfillment businesses.
- Ship directly from the vendor Save time and money by shipping products from the vendor to your customer whenever possible, particularly with larger items.
- Reduce returns Burgeoning customer returns have created an industry of “reverse logistics.” Get it right in the beginning both to save money and keep customers.
- Think globally You know you are going to have to ship everywhere soon. Be prepared.
- Provide accurate shipping information Don’t tell the customer that it’s going to be there in two days when you know it won’t get there in four.
- Supply tracking information online Doing this will save money in customer service and, more important, make the customer part of the process.