Outward Bound

Every April, it’s travel time for the editors of Operations & Fulfillment. That’s when we scurry around the country visiting five trade shows in four weeks, taking notes on everything au courant in direct-to-customer operations. And every October, it’s sourcebook time – time to take a closer look at the industries that supply and serve the vast warehousing, shipping, and logistics business, and assess the extent to which the number and composition of these service providers have changed.

The numbers don’t reveal any surprises this year. Look beyond the percentages, though, and you’ll spot more subtle influences that will eventually shape the fulfillment business in significant ways. The third-party fulfillment services category is far larger than in previous years, reflecting a national trend: logistics outsourcing growth of 18%-22% annually, according to the Warehousing & Education Research Council. According to some estimates, the logistics outsourcing market totals about $90 billion, roughly 10% of the $898 billion that U. S. businesses spend on logistics-related activities. Of course, e-merchants are partly responsible for the resurgence of third-party fulfillment services; one directory lists 104 companies that meet the needs of online retailers exclusively. (A noteworthy offshoot of the outsourcing boom is that catalog companies are taking advantage of their well-established material handling infrastructure to move into third-party fulfillment.)

An increase in corporate alliances and relationships is another pattern to watch. The new fulfillment partnerships often involve offering “suites” of services – in many cases, a company with long-standing expertise in, say, distribution facility planning and construction might team up with an e-commerce software provider and a retail technology consultant to serve up a full menu of conventional and online fulfillment options, enabled by alliances with a plethora of parcel shippers and freight forwarders. The customer, now the centerpiece of almost all commercial transactions, is no less of a kingpin in the fulfillment services business. Formerly laid-back vendors, no longer confident in their dominance of various sectors, are revamping products and services and fighting fiercely with competitors to woo customers.

Speaking of customers, if there’s only one thing you can accomplish with your 2001 operational budget, make it customer service improvement. A new GartnerGroup report says that Web merchants who don’t meet shoppers’ expectations could go out of business by the second quarter of 2001. The number one customer turn-off? You guessed it: lack of product fulfillment.