Autumn 2009

Smart software suites are making the right connections

Integrating the different components of the fulfilment process together, from storefront to stockholding to despatch, can streamline deliveries, save costs and keep customers happier, says Marcia MacLeod, who describes some of the latest developments

Online sales grew by 16 per cent in the notoriously slow month of August compared with the previous year – a figure which must gladden the hearts of all retailers struggling in the current economic climate. But increased business means more orders to process and deliver; and the greater the volume of goods handled, the greater reliance on software to help ensure accurate, speedy fulfilment.

Increasingly, that software has to integrate front end web store with back end fulfilment functions such as order picking and carrier selection. Although a surprising number of retailers have still not connected the two ends of their business, some are finally recognising the need to provide a good service, which is simply not possible in a disjointed operation.

 

'People are waking up to the need to integrate storefront and back-end systems,' says Ronald Teijken, industry marketing manger for Sterling Commerce. 'They know they have to concentrate on fulfilment, and realise it is hard to get and share information when they are dealing with multiple systems. Without integration, they are not working in an optimum way.

'In addition, there are greater consumer demands – for information, for better and more flexible delivery, for easier ways to return goods, for higher order accuracy and for order tracking. None of these demands can be met easily without an integrated system.'

But effective integration remains the biggest technical challenge for retailers, which is one reason why it has taken so long for some retailers to see the light.

'In the past, we had customers that bought our fulfilment suite, but not our e-commerce solutions,' points out Neil Spektor, communications manager at Priam. 'Now they are adding the front end, because it is easier to integrate two products from the same supplier.'

Maginus, too, finds most customers taking both its web store and back office systems. As sales and marketing director Russell Dorset explains: 'Even when people come to us for fulfilment software, but have an existing web store, we talk to them about replacing their front end with a Maginus solution, because integrating two disparate systems can cost more than buying a new one!'

Integration challenge

One way round the integration dilemma is to employ a good order management system. 'This allows companies to keep their legacy system,' explains Teijken, 'but to take information out of the system and orchestrate it across the supply chain.'

Some form of integration or data sharing is essential to gain stock visibility – and to provide that visibility to consumers. 'Retailers now want a single view of stock – and that includes stock in stores, as well as warehouses,' comments Jim McGrath, product director at Sanderson Multi-Channel Solutions.

'Most companies keep a minimum stock level – sometimes for each channel – but if stock in one location is getting low, they want to see where an alternative supply might be, and that may possibly be in a store.

'The stock view may be across Europe, too, if the retailer operates in multiple countries. The company could then decide to ship stock between locations to fulfil an order or top up inventory. It can also see where an item is more popular, so it keeps higher stock levels in that location.

'If the e-retailer is selling goods on behalf of other retailers – in other words acting as a retail portal in the way Amazon does – it also needs a view of its partners' stock levels. We integrate with Channel Advisor to provide that capability.'

Coachwise, a specialist publisher and mail order, catalogue and online retailer working in the sports sector, has appointed Maginus to design and build no fewer than four new web sites. It says they will improve customer service, fulfilment and marketing.

The Maginus E-commerce suite is providing a single, integrated back office solution to support all the new web sites, which include sites run for the Rugby Football Union, the Football Association and the England Netball Association.

Sometimes retailers may gain a total view of stock holdings, but create a 'virtual' store for stock allocated to online or telephone sales. 'There can then be a shop-to-warehouse request, with the online channel acting like a bricks-and-mortar store,' explains Pierre D'Arbost, managing director of MNP Media.

'If the virtual store is out of stock of a requested item, it can tell the retailer it's out of stock, but that the item will be available in two days, because it knows it has a two-day lead time from a store back to the e-fulfilment warehouse. By the same token, store staff can order via an in-store kiosk to meet a customer request and have the goods sent to the store for collection, or delivered direct to the consumer's home.

'This type of stock management is growing in popularity as retailers realise they can gain greater control of stock and don't have to carry every colour and size of an item in every store. Instead of producing two reports – one for stores, one for the web – our customers now want one, to cover all channels.'

Maginus, too, is seeing a greater use of in-store kiosks, integrated with the single inventory system. 'This allows retailers to open their whole range of stock to shoppers in any of their stores,' Dorset points out.

Using this total view to locate stock does have its complexities, though. Dorset explains: 'If a retailer can't fill an order, but locates stock in, say, the Netherlands, it then has to decide if it's better to fulfil that order from Holland, considering the cost of shipment, lead time and so on, or go back to the supplier. Our job is to give them the information to make that decision.'

Carrier integration

To enhance the fulfilment process even further, some retailers integrate their system with that of their carrier or carriers. This not only allows carriers to access order information so they know what they have to collect and when, but also enables retailers to choose the best carrier for any job, dependent on location, service, expertise and cost, and to switch carriers as and when they desire.

'Software has to allow the retailer to identify the most efficient carrier for the job,' D'Arbost emphasises. 'But some retailers, like Lakeland, also allow the consumer to choose a preferred carrier. They can say, for example, please don't use X because we've had a bad experience with that carrier. The system only shows the carriers that can achieve the desired delivery service levels.'

Integration with the carrier is essential if the retailer wants to tell the consumer when their order has been shipped, allowing them to track their own goods. Sanderson and Skillweb both provide this service.

'Retailers need to share consumer data with the carrier,' says Paul Ridden, Skillweb's managing director. 'We're working on integration – but it's not completely there yet. When it is, we will be able to create a web loop, so the consumer can receive a message via the web on his or her mobile phone to say a parcel has been sent out for delivery today. If the consumer won't be in, he can arrange a different delivery date, all via the mobile phone.

'But there is a reluctance on the part of some retailers to share this information because of concern over the Data Protection Act. They have to change their web site to obtain consumer agreement to the sharing of this data – and it takes time and effort to not only make these changes, but also make the resultant information available to the carrier.'

LUSH Cosmetics, a Poole-based manufacturer of handmade soaps, bath bombs, shampoos, moisturizers and other bath products, sells through hundreds of its own stores worldwide, and also online. A significant proportion of its direct turnover is now generated by web sales.

The company has chosen MNP to provide an order management system to help power the online sales and smooth the connection between orders, stock and manufacturing.

Skillweb is considering setting up an independent facility enabling retailers, carriers and consumers to communicate with each other. 'Consumers could select a delivery day and we'd act as a third-party middleman between them, the retailer and the carrier to facilitate delivery,' Ridden explains.

Industry figures suggest only 80 to 85 per cent of parcels are successfully delivered on the first attempt – and even that figure is suspect, since some carriers claim a successful first-time delivery if they leave the parcel on the doorstep or with a neighbour, or even if they leave a yellow card! Everyone complains about the difficulty of achieving first-time delivery, but few have yet taken up the most logical answer to this problem: let the consumer choose the delivery date.

'There is an opportunity for carriers to improve their efficiency by allowing consumers to choose the delivery day,' Ridden believes. But is it down to the carrier?

'Our software has been able to handle a variety of delivery options, including day-definite, for some time,' says D'Arbost. 'It's got nothing to do with the carrier. If a consumer says *I'm going away; can I have my order when I come back?', the retailer should be able to pick a date on the calendar and reserve the item for that consumer until the chosen date. The system can remind the retailer when to pick, pack and despatch by working backwards from the due date. A good system can also ship partial orders or hold an item until an order is complete.'

Probably the chief barrier to day-definite delivery is cost. 'People realise one size does not fit all,' points out Wayne Holgate, commercial director at Axida. 'Day-definite delivery has been common in two-man operations for a long time. But there is always the question of who's going to pay for it.'

More organisations are at least looking at providing a day-definite option. 'Most carriers are not unhappy if goods come a little late,' Ridden points out, 'so long as they know when they're coming.'

SE Marshall & Co, a specialist multi-channel retailer of perishable gardening products, has picked the Elucid multi-channel retail solution from Sanderson to support the expansion of its online business.

It says there have been gains in many functions, including warehouse management, pick, pack and despatch and back-order management, as well as improved stock visibility across its three primary product brands and strong database management.

Many retailers – and, more particularly, carriers – feel they can achieve better first-time success rates by emailing or texting consumers the day before and/or on the day of delivery to warn them of the impending drop. But, warns D-Arbrost, some consumers find this an invasion of privacy, and prefer to track their orders themselves.

Warehouse efficiency

Of course, delivery is only part of the fulfilment process. Orders have to be picked and packed before they can be despatched, and retailers and their fulfilment companies are as keen to improve efficiency in the warehouse as on the road. Fulfilment companies need to be able to handle numerous customers' goods in one warehouse, which means using software to ring-fence stock for a particular retailer.

'Fulfilment houses may carry the same stock for different retailers,' Dorset points out. 'The software has to be able to treat every client as a separate entity, but hold the data on one system. It segregates transactions and stock so the fulfilment house knows which orders for which customers need to be or have been picked, and knows how much stock is left for each retailer and can't pick retailer A's stock to fill retailer B's order. The company also has to be able to pick the same product for three separate clients, so it doesn't have to go back to the pick face three times, but ensure the right packaging and paperwork is used for each of the retailer's order.

'It takes a complex and sophisticated system to cope. We introduced blind checking early this year so warehouse staff can check that the customer's box, item and paperwork match up.'

'Customers may order different goods coming from different sources, too,' adds Allen Scott, managing director at Manhattan Associates. 'These have to be put together into one order and delivered at one time. Someone ordering food and non-food from Tesco, for example, doesn't want to wait in for two deliveries.'

Software also has to enable users to move things around the warehouse as required, creating a 'dynamic' warehouse model. Although many software providers already offer warehouse mapping, some go beyond that. Maginus produces 'heat maps', colour-coded to show how many times any location is visited. If a location sees a lot of traffic, it could show up red; if it is hardly visited, it could be identified in blue. If a busy location is at the back of the warehouse, it would be more efficient to move those products to the front.

Retailers and fulfilment houses must also be able to react quickly to demand. Fast-moving items need to be put at the front, and items that people often buy together should be stored together. And if there's a promotion planned – which, says McGrath, the fulfilment house is usually the last to know about – relevant stock should be stored in a prominent position. In fact, these days more retailers are using fulfilment houses only to cope with special promotions or peak periods.

Anything the retailer, and its service suppliers, can do to make the customer experience a good one has got to be beneficial, especially when everyone is tightening their belt. 'The recession has made retailers look at what they can do to avoid losing customers,' says Teijken. 'They want to do things better, but also more cheaply.'

And for that, they need better, more flexible software that allows them to automate business processes, leaving management more time to court customers.