Christmas cheer or New Year blues?

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Manufacturer may be linked to retailer customers via EDI, with methods of communication well-honed over time. A much greater number of increasingly computer-literate customers want to deal direct with the supplier. And they expect real-time information and visibility on the progress of their order. The supplier needs a systems architecture to deal with this.

Products despatched individually, rather than as part of a case, pallet or roll-cage, require extra packaging while other additional or value-added services required at warehouse stage include more labelling and the inclusion of catalogues, promotional material or other marketing collateral.

Viable option

If buying online is an increasingly viable and attractive alternative, the e-shopping option is especially appealing at Christmas. After all, who wants to engage in the battle of the high street in the desperate search for the right gifts when this can be achieved more easily with the aid of an armchair, a glass of wine and a mouse?

The additional volume pressure this creates is exacerbated by the fixed date by which the customer must receive the goods ordered. At any other time of the year, late deliveries are an irritant; at Christmas they are a disaster. Returns caused by unwanted substitutions for out-of-stock products can typically run at 50%, with higher volumes putting increased pressure on customer service departments.

For most companies, online trading is still a small part of their business. As a result, they adopt ‘sealing wax and string’ solutions which, though seemingly adequate for normal levels of business, become badly exposed when faced with a major seasonal upswing and can give rise to failure.

It may not be able to show out of stocks or process payments online; if there is no tracking facility, customer service can similarly be severely compromised.

To manage the anticipated Christmas surge in demand, it is essential that there is sufficient warehouse capacity – space, resources and staff – to accommodate the increased volume. Equally critical is the need to ensure that supply chain partners can cope with volume changes.

Distribution can be problematic as delivery capacity is relatively fixed and typically stretched to its limits at this time of year.

Planning will be based on an analysis of previous years’ trading, but in this new area forecasting is more difficult as there is little track record to fall back on, either in terms of seasonal uplift or year-on-year growth. A business must monitor current activity more closely and be able to respond to more immediate changes in volumes.

System requirements

“A company can either manage its online business in-house or it can outsource,” says Hughes. “For an existing business, establishing a set of manual systems and processes on a trial or prototype basis may well be a sound option at the outset,” he continues. “It is critical, however, to ensure that any e-fulfilment activity is treated as an integrated process, with the customer’s requirements and expectations kept front of mind throughout.”

Online orders could be handled as exceptional items and each stage of the process dealt with manually – from taking the order on the Web and processing the credit payment to picking and distribution. Such a system would be “clunky” and result in higher labour costs, yet it would be straightforward, relatively easy to manage and may well be the most cost-effective option as the business assesses the potential for e-trading going forward.

The biggest issue with managing such development in-house – from creating a fully transactional website to incorporating e-fulfilment processes within an existing ERP system – revolves around how big a system is required.

Online volumes may well double year-on-year but it is likely that a lower investment will be made – presenting a convincing case to the Board about the huge growth potential can be tough!

For all but the most far-sighted of businesses this could become a treadmill in which further investment must be sought almost annually With volumes racing ahead of investment, strains will become apparent in a company’s ability to manage its e-fulfilment processes, and the resulting quality and consistency of the customer’s experience.

According to Martin Palmer, Amethyst Logistics’ development director, the key to success is for a company to get the best system it can for the money it can afford. For many businesses this may be achieved by partnering with a specialist organisation that can provide the robustness, flexibility and capacity to cope with unprecedented volume swings, both on an on-going and seasonal basis.

He says: “The most suitable response, requiring little upfront investment, may be to outsource a flexible, end-to-end package from a specialist provider which includes: an online catalogue enabling browsing, product selection and out-of-stocks, payment processing; rapid order completion and, ideally, same day packing; tracking through to dispatch and delivery; and supported by quality customer service capabilities via call centres or on-line with intelligent knowledge management support.”

Alternatively, companies determining areas of vulnerability within their existing systems may want to ‘plug the gaps’ by incorporating relevant third party elements. Even the more customer-centric retailers are better at focusing on product supply than identifying customer demand and so customer confidence will benefit from stock visibility on the website, and the e-tailer from specialist analytics to improve forecasting.

Customer reaction

For many consumers, online shopping is still new and requires a degree of trust and confidence. They want full usability – from initial Web-search to receipt of goods and returns – and failure at any stage means the purchaser will not return. And research shows that customers are voting with their fingers faster than with their feet.

A company’s online offering can no longer be viewed in isolation from the rest of the business. “Make sure you get it right, ” Hughes says, “for consumer reaction, whether positive or negative, is likely to have a direct knock-on effect on your established off-line business.”

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