Online sales creating order-fulfillment logjam

CAMBRIDGE, Mass. (Aug. 30, 1999) — As online orders from consumers and businesses soar past the $2 billion a year mark, companies are struggling to get the goods to customers.

A new study predicts that the demand for order fulfillment solutions will reshape the existing landscape as logistics suppliers evolve to serve the small-package, individual-oriented needs of commerce site operators.

Order fulfillment hasn’t been a serious e-commerce issue to date because most Net sellers have limited the number of products offered on their sites and executed fulfillment in-house, says a report from Forrester Research Inc.

But as online sales move past the experimental phase, three factors — an expanded selection of products sold online, the need to move a large volume of small parcels, and rising customer expectations — will combine to put new pressures on order fulfillment systems.

Less than half the businesses surveyed make a profit on each shipped package and most fail to accurately measure the total cost of fulfillment. And 85% still can’t fill international orders because of the complexities of shipping across borders. Of the globally incapacitated, 75% cite their systems’ inability to register international addresses accurately or price total delivery cost.

Firms that fail to attack order fulfillment with the same vigor as online selling will experience customer defection, funding attrition, and distribution nightmares, the report suggests.

Companies can meet the demands of online selling by developing a fulfillment system that delivers end-to-end logistics, which Forrester defines as: package visibility and service continuity from buy button to final destination. End-to-end logistics follows three clear imperatives — empower customers, focus on parcels, and deliver to the customer’s doorstep. Firms need to keep customers informed with up-to-date information about order arrival and empower them through self-service solutions that address common fulfillment problems. Meanwhile, manufacturers and distributors need to shift their focus from shipping pallets to stores to delivering packages to individual consumers. Finally, rising global demand requires that merchants and shippers alike prepare to handle any type of delivery in any geographic region.

Although a few fulfillment vendors like Fingerhut and Valley Media are geared up to service the largest e-commerce sites, most online sellers ship less than 400 orders a day — too small to get any help. But over the next two years, Forrester predicts that new outsourced services will evolve to deliver end-to-end solutions to smaller online players. These companies will offer improved drop-ship services and provide a range of residential delivery options.