Prior to 1999, every aspect of back-end support operations for the direct marketing industry was tailored to meet the needs of the typical cataloger. In the 1970s and 1980s, direct marketing was limited to the mailbox. Consumer catalog orders were generated over a 12-week selling season with some orders arriving one year after mailing. Inventory planning was based on historic patterns of sales and procurement with sufficient lead time to forecast needs, buy products, transport them to the fulfillment center and fulfill customer orders. Backorders, delayed shipping and high customer service call-to-order ratios were typical.
Merchandising on the Internet has changed the rules. E-commerce support operations learned some hard lessons in 1999 and were challenged to predict and accommodate the new demands placed on all aspects of operations. The direct marketing operations providers who developed their services to support catalog and DRTV businesses are now rethinking the process from order acquisition to package delivery.
Some e-commerce marketers are leading the way in creating new customer expectations by advising customers of the exact day that orders will arrive at their homes and consistently doing it. Internet marketers have the advantage of quickly changing product offerings to ensure rapid fulfillment of in-stock items. Online access to shipment status information increases customer interaction and confidence. Delivering what you say you will, when you promised it has become the most critical success factor in developing repeat customers.
Mature fulfillment operations with large-scale investments in automated storage, multi-item picking, packing and sortation systems are finding the state of the art for the catalog business is not as effective in meeting e-commerce customer demands. Traditional catalog fulfillment facilities are designed to accommodate an average order of 2.5 items from an inventory of up to 1,200 average SKUs per catalog. Products are purchased in bulk without packaging. Order picking and packaging systems are designed to combine multiple items in one shipment.
Inflexible systems, available dock doors, staging space, unloading-reloading capacity and material handling resources are all constraints to high-volume processing of prepackaged single-item orders. Fulfillment centers must create the flexibility to accommodate the extreme highs and lows of single-item, prepackaged customer orders. The challenge is to change from a multi-item, pick-pack warehousing operation to more of a cross-dock operation. Increased dock doors, unload/reload capacity, staging areas and high-volume material handling, labeling and shipping are essential.
Traditional methods of demand forecasting and inventory planning are not yet effective for Internet sales. Lack of sales history and new customer demographics/geographics are preventing accurate demand forecasting. True demand, including lost orders when out of stock or when an item is removed from the offering, is difficult to determine based on Internet activity.
Increased demands are being placed on product suppliers and carriers to perform in a much shorter procurement cycle. Online vendor inbound shipments tracking and advanced receipt processing will become a requirement.
Take a hard look at mature mainframe systems before investing in new development. Heavy investments in programming to keep up with the changing demands for processing and communications may not pay off if youre not creating a flexible, low-cost system able to take advantage of new programming technology and high-speed hardware.
Look at new systems development with the belief most of your accomplishments will be obsolete in a very short time. New programming technology and inexpensive, high-speed hardware are making it easier and easier to invest in throw-away applications designed to meet an immediate need followed by change. The challenge is to create an information management environment that allows for rapid, low-cost development of new applications with easy access for all.
Bill Wilson, president and founder of DM Transportation Management Services, has over 25 years experience in all facets of direct marketing operations. He has consulted and provided transportation management services to over 150 direct marketers and retailers nationwide. He can be reached at billw@dmtrans.com.
