HAVE A PLAN

A logistics and fulfillment plan lays out the chain of events from receipt of the customer’s order through delivery of the product to the post-sale processes. It should be a guide upon which all fulfillment decisions are based. A formal logistics and fulfillment plan will ensure that everyone considers, not only your e-commerce website’s requirements, goals and objectives, but also what each player can bring to the table. This will help to assure that everyone is on the “same page.”

You must craft a logistics and fulfillment plan that fits your e-commerce business’s specific needs. Thus there are questions that must be answered.

Product and Packaging:

  • What are the physical characteristics of the website’s products and how do they vary in size, weight, and packaging?
  • Does the website offer products that will require special handling and/or packaging (breakables that need repackaging, different size items in one box or a separate box per item, signature on delivery requirement, etc.)?
  • Will the website offer products that require a number of different components or accessories to be in the same box (a printer, printer cable and spare ink cartridge or a DSL Modem, a telephone cord, line filters, etc.)?
  • Do any of the products require sub-assembly?
  • Are any of the products “over sized” or “heavy weight” so that they may require a different carrier from the norm?
  • Are any of the products perishable or fragile, requiring a specific transportation mode?
  • Do any of the products require special licensing for transport (e.g. alcohol, pharmaceuticals, etc.)?

Average Order:

  • What is the size and value of the minimum, maximum, and average order?
  • What is the website’s current volume of orders?
  • What volume of orders is expected 6 months, 1 year, 2 years and 5 years from now?

Shipping:

  • What carriers do the website and its suppliers use and what system is in place to track shipments? Is the tracking system easily accessible to everyone, including the customers?
  • Will the website offer its customers online tracking and tracing?
  • Will the website offer its customers a choice of carriers? Online?
  • How will shipping rates be determined? Can the website accommodate customers who already have a specific carrier account number (e.g. UPS, FedEx, AirBorne) and want to be billed directly? Is COD an option?
  • Can customers ship to multiple addresses from a single order?
  • If the website does ship in branded packaging, will this external branding affect security as far as delivery is concerned (i.e. will it encourage theft)?
  • What is the back-up plan if notification is received that a shipment has been delayed/lost/damaged?
  • Is the website willing to absorb any of the shipping and handling costs? If so, under what conditions?
  • What is the acceptable level of shipping costs compared to the order value (from both the customer’s perspective and the website’s)?

Delivery Quality Control:

  • What is an acceptable time period to get products to the customer?
  • What are the criteria for on-time delivery, damaged claims, order accuracy, supply availability?
  • How will quality checks be performed?

Inventory:

  • How are orders for out-of-stock products handled? If the product is expected to be available shortly, does the website still take the order and risk having to upgrade the shipping to meet the promised delivery date?
  • How much inventory is needed to ensure product availability?
  • Can suppliers respond adequately to a sudden increase in orders?
  • How will replenishment be triggered once an item is picked from storage?

Returns:

  • What is the percentage of anticipated product returns?
  • How are returns to be handled (dispose of them, use a secondary market, refurbish and put back into inventory, return to supplier...)?
  • What are the arrangements with suppliers for returns?
  • How will customers return the products? Do they require authorization or special packaging/labels for return? Are there any return restrictions, and if so, does your website have the documentation posted to support that policy?
  • Who is responsible for inspection/valuation?
  • What information systems determine when ownership shifts to the customer or back to the supplier?
  • What records are required to keep track of potential tax write-offs or supplier credit?
  • How are tracking records integrated with inventory management and shipping records in order to produce necessary documentation?
  • What financial arrangements are in place with suppliers for return credit?
  • What documentation is required from the receiving department?

International Orders:

  • Will your website sell products for international shipment? If so, how will currency transactions be handled?
  • Who will fill out international documentation?
  • Who will be responsible for duties and taxes/customs clearance?
  • Will these costs be included in the shipping cost quotes?
  • Have you planned for the additional costs elemental to international shipping/transactions?

Seasonal Considerations:

If the website offers products that are seasonal, how will that affect the warehousing/inventory requirements?

Suppliers:

  • Are suppliers willing to ship directly to your customers upon request?
  • Can they ship daily, if necessary?
  • Are suppliers willing to change from a “pallet” or “bulk” shipment basis to a smaller count shipment? In other words, will the suppliers accept small orders?
  • Will the supplier be responsible for transportation costs to the fulfillment center?
  • If your website uses drop-shippers, are your suppliers willing to repackage their product in your branded boxes and use your branded labels, promotional material, etc.?
  • If your website uses drop-shippers will they insist on using any of their branded products? If so, what and how will it affect the website’s brand?

Infrastructure:

  • How will your website send order information to the fulfillment service provider, how often (real-time, hourly or daily)? Separately or in batches?
  • How will your website handle package tracking and provide the information to your customers?
  • How are your website’s order entry systems integrated with the fulfillment, inventory management, returns management and shipping systems?
  • Do some orders get priority over others, if so, what are the criteria?
  • How are your website’s financial systems integrated with its inbound shipping, inventory management, orders entry, delivery and returns information systems?
  • Can suppliers, order entry folks, inventory management personnel, fulfillment workers, accounting personnel, shipping department employees, and carriers all “talk to each other” to trigger coordinated action?
  • What online “alert” systems exist for replenishment, delivery delays, order inaccuracies, erroneous shipping addresses, incoming returns, etc.?
  • What system is in place to track all products as they move from supplier to customer (item by item, not just by order)? Options might include bar coding, infrared tags, radio frequency tags. How does the shopping-cart technology link with the warehousing/distribution operation?

Warehousing and Fulfillment Centers:

  • What are the warehousing requirements, i.e. the area needed for inventory, supplies and shipping prep, docks, fork lifts, racking and sorting bins, conveyors, pick-and-pack systems, radio transmitted bar coding, software, shipping and labeling equipment, etc.?
  • Is the inventory storage area designed for easy and efficient order picking?
  • What are the preferred geographic locations of the fulfillment center(s)?
  • Is a dedicated facility needed or are the products to be put into a warehouse/distribution operation used by other companies as well as yours?
  • Are sophisticated services and space needed or would a direct mail company or public warehousing space be satisfactory?
  • How well does the distribution facility accommodate multiple carriers for inbound/outbound shipments? Who will handle scheduling?
  • What is the financial trade off between outsourcing your order processing and logistics versus operating your own warehouse and distribution facility?

Insurance:

  • What is the website’s policy regarding insurance coverage for loss, damage, and theft? What is the carrier’s and what is the customer’s responsibility?
  • Is insurance information clearly posted on your website? Once the answers are in hand, use them as the starting point in the design of a good logistics and fulfillment system that will efficiently serve you and your customers’ needs.

Exceptions

Just as in the traditional sales channel, there is the need for handling exceptions. If your website uses the drop-ship model (explained later in this chapter under “Fulfillment Models”), what do you do when an individual customer order includes products from multiple suppliers and one of the products ordered is out of stock or backordered? Or perhaps you handle your own shipping and inventory and you are out of stock and you don’t know when it will be replenished.

How will your website handle a partial shipment? Hold the shipment for all the items, ship all ordered items that are available and cancel the rest? Do you request a customer’s input prior to making the decision? Do you hold the order until you receive a reply from the customer?

One solution is to have the order fulfillment system include event-based triggers that are modeled on specific business rules. To implement such a rules-based system requires that you sit down with the appropriate personnel, suppliers and, if necessary, the fulfillment provider, and correlate the business rules.

Management of Suppliers and Channels

Most websites will have multiple suppliers providing a wide array of products. Again, the drop-ship model (although in some instances it is the most efficient) poses the most problems to the web-based business. However, unexpected situations can arise with any fulfillment model, and web-based businesses should have the ability to accommodate customer orders that include products from a variety of suppliers. The website must be able to apportion each order appropriately and to track it through each supplier, and at the same time give each customer a seamless view of their order’s shipping data. If a supplier messes up in product delivery, your customers will hold your website responsible, not the suppliers. Thus you must keep on top of your entire supply chain.

Back-end Integration Issues

An e-commerce business must have a clearly defined process for moving an order from its website to its fulfillment center, whether it is in-house or outsourced. This process ties the order to its payment and fulfillment processes — this is where integration with your back-end systems becomes critical. The large and enterprise websites will also find it necessary to tie into back-end applications, such as enterprise resource planning (ERP), inventory management, and financial applications.

A brick-and-mortar that is making its move to the Web may already have pieces of the fulfillment process in place, but the in-house operations may not be familiar with the one- and two-item shipments that will, in all likelihood, become the norm for its web operation. This business group will be tempted to build out their existing “bulk” distribution center to handle the new website’s fulfillment needs. While not always a good idea, depending on the legacy infrastructure, this method could provide low ongoing costs with optimal operational control, easy stock status information, and higher product availability. On the downside, there may be a risk of confusion to current operations. Also, the ability for existing personnel to adapt to change should be a consideration. Furthermore, the transition could generate a long period of inefficiencies due to the necessity of building a complex system of individual software components that require integration, customization, and management in order to merge the web-based business with the traditional business’s systems.

An alternative solution is to find a fulfillment provider to handle the your website’s logistical processes. The decision should be based upon scalability — does the brick-and-mortar (and its website) have the budget and the time necessary to build and maintain its own customized solution? Or can a fulfillment provider more effectively furnish a solution to fit either or both its e-commerce and traditional channel needs?

All web-based businesses will find integration with their back-end systems (content management, customer management, customer service, order fulfillment, inventory management, financial, etc.) to be a costly challenge. Still, such integration is absolutely necessary if you are to avoid fulfillment chaos.



The Complete E-Commerce Book. Design, Build & Maintain a Successful Web-based Business
The Complete E-Commerce Book, Second Edition: Design, Build & Maintain a Successful Web-based Business
ISBN: B001KVZJWC
EAN: N/A
Year: 2004
Pages: 159

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