When a DC goes bust

The former clients of third-party fulfillment provider iFulfill.com know firsthand the value of networking. Thanks to communication between online shopping cart provider UltraCart and fulfillment services provider Dart Warehouse, they were able to survive the sudden closure of Maumee, OH-based iFulfill.com in July.

When third-party fulfillment provider iFulfill.com abruptly shut operations on July 27, due to a lack of funds, it had 80-100 clients. Atlanta-based UltraCart, which also counted many of those companies as its own clients, told Los Angeles-based Dart about the situation. Within 48 hours, Dart’s trucks were rolling in. They were able to rescue the inventory before iFulfill’s landlord locked the facility.

Twelve trucks carried the goods in several caravans from iFulfill’s warehouse to Dart’s 721,000-sq.-ft. facility in Naperville, IL. “We do a lot of seasonal work,” says Dart Warehouse general manager Herb Duggan, “so we had the excess space available.” To facilitate the move, Dart hired five iFulfill employees on a temporary basis.

The closure proved nerve-wracking for iFulfill clients such as Asia Export, which sells online through Overstock.com; vitamin marketer Progressive Health; and books and videos marketer Millionaire Systems. IFulfill.com customers did not know when or how they would be able get their merchandise shipped to customers.

But within two weeks, the inventory had been received, staged, and put away, and all outstanding orders had been fulfilled. The biggest challenge, Duggan says, was sorting through the merchandise, assigning each item a unique purchase order number, and identifying each customer properly before loading the data into Dart’s warehouse management system.

A lack of growth and capital

After a seemingly promising start, iFulfill.com ran into crippling debt. Founder Paul Purdue opened the company in November 1998 and rapidly grew the business. At its height in late 2004, the company was shipping about 1,500-1,600 orders a day by from its 14,000-sq.-ft. distribution center. But iFulfill’s growth was also its demise.

“Overgrowth and undercapitalization were our downfall,” admits Purdue, who bankrolled the venture — and infrastructure improvements — with personal credit cards; his balances exceeded $150,000.

In November 2004, iFulfill.com optimistically took on a new lease, which tripled the pick space and quintupled the pallet space. This past February it installed a wireless inventory system. But instead of improving operations, the new system led to missed orders — and unhappy clients. As clients began leaving, the company’s debt became insurmountable.

Millionaire Systems, which had been with iFulfill for about 18 months, had $200,000 in inventory with the company, says Molly Brown, program manager for the Austin, TX-based marketer. A decline in customer service and an increase in errors were the first tip-offs that something was amiss with iFulfill, Brown says. Millionaire Systems experienced about a two-week business disruption when iFulfill went under.

Millionaire Systems is happy with Dart Warehouse so far, Brown says, but it’s still getting used to a new system. For example, the merchant can no longer check inventory status on a 24-hour basis the way it could with iFulfill.

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