What's the big deal with e-fulfilment?, published in CRM magazine
What's the big deal with e-fulfilment? Should companies worry about this at all? Louis Fernandes explains why this paperless concept is important.
It is not difficult from a business point of view to understand the importance of automating paperwork, especially when it comes to order fulfilment. Any manager can tell you that cash in the bank is good. However, getting the cash there is not easy if there is no paperwork done first. It is this that e-fulfilment and other invoice processing systems try to address.
Putting in place a system that can track an order from start to finish (where cash has got to the bank) is not a simple one. There are bottlenecks all through the journey and each day saved makes a difference. Of course, there are also the many excuses that pop along the way, from: where is my order; invoice not received, or has been received but misplaced, to the need to fix problems. The ability to respond to these accurately and quickly helps.
What is e-fulfilment?
"Traditionally, e-fulfilment was the term used to support the processes and infrastructure required to support e-based retailers and distribution channels", says Bruce Whiting, senior manager, Supply Chain at Accenture, "I believe the definition should be extended to all orders generated electronically either in a B2C or B2B operating model". Echoes Neil Hawthorne, strategic solutions manager, J.D.Edwards Asia-Pacific, "E-fulfilment is the process that integrates and automates electronic purchasing with product catalogues, inventory, and invoicing and final delivery to the required destination".
Kerrie McGrath, manufacturing B2B manager, HP Consulting, has a slightly different view. She believes that e-fulfilment is the process of electronically offering services and products to customers, and fulfilling orders of these services and products once placed, to agreed service levels. "This can include providing an electronic catalogue, capturing orders, managing the supply chain to deliver on orders, verification of payment, correlation of actual orders against planned orders for a specific customer through to logistics for distribution of goods", she says. "Companies today who are able to offer this service are able to form longer-term relationships with their trading partners".
There are still other views of what exactly constitutes an e-fulfilment system. However, keeping to the simplest and broadest terms, it is the process by which a customer is able to examine the product offering and purchase it electronically. This process, of course, has many sections or parts, which are more conducive to electronic medium than others. "Companies today should be focussing their attention on the order integration aspects of e-fulfilment with their customers and suppliers", suggests Whiting. A delay in focussing on e-fulfilment strategy today may mean their competition will be in a better position in the future to take advantage of the benefits associated with e-fulfilment.
2B or 2C
Electronic processing of documents is not a new idea. Business-to-business document interchange is over 20 years old. It was only with the dotcom boom that order fulfilment systems became the flavour of the day. The business-to-consumer space appeared to be a perfect fit for paperless solutions because of profit volumes. Company needs around fulfilment for the B2B or B2C space differ based on the type and volume of product that they offer and whether they sell directly or through retail chains. Cost efficiency is definitely a focus for companies currently, and offering B2B solutions, which provide fast, accurate and efficient processing of orders, is a focus for many companies. "Providing convenient e-fulfilment services to consumers is becoming the normal mode of operation for companies such as CD, DVD and booksellers", says McGrath, "companies should always do a return on investment analysis to determine which market space, or what part of both spaces, will provide the shortest return. Part of this analysis needs to cover whether that market is ready to participate in e-fulfilment services".
One of the greatest challenges of the B2C model is the cost to distribute to consumers in their home location. "Many B2C models claim delivery costs are free but in fact the cost of delivery is incorporated in the sale price", says Whiting. Organisations using this model have attempted to consolidate to specific drop off points including service stations and post office locations. This assists in lowering the price to distribute to the home and also subsequent delivery costs when the consumer is not home to receive the order.
Another major challenge for the B2C model is the process changes required at the distribution centres to support B2B and B2C customers. Typically, B2C customer order in small, split case quantities which in many cases, very different to the B2B model that typically supports full case, pallet or truck load quantities.
In the B2B model order integration between customers and suppliers is an issue. Organisations are operating on non-standard legacy systems that require major reconfiguration or replacement in order to communicate with external parties.
Explains Mingming Huang, director, CRM Product Marketing, PeopleSoft, Asia/Pacific, "Typically, in a B2C environment, you have many orders, but the volumes are smaller per order. In a B2B environment you have less orders, but higher volumes. So these demand different fulfilment needs". A company needs to look at their business model and understand what their typical customer is like.
What are the benefits?
One of the biggest advantages of putting in place a complete system is that it enhances the business opportunities. Being able to state with certainty when a shipment will be made is paramount. Dell Computers runs it business entirely because of the streamline process it has in place. Good systems allow for just in time (JIT) manufacture, which means lower inventory costs. These costs mean savings for the company. Further, it also allows the company to offer multiple price options based on delivery and payment methods selected. The lead-time on order processing is cut down. Bottlenecks and surpluses can quickly be identified-leading to better resource management.
Terry Gatward, e-business manager, Fuji Xerox
The company's customers expect and receive next-day delivery, which is guaranteed. "If a delivery hasn't arrived for some reason, they can contact someone to see what's happened", states Gatward, "the human backup is key. If people have a problem, they need to speak to someone".
What are the problems?
The critical factor of most buy and sell transactions and partner relationships is communication-not just fulfilment of inventory but fulfilment of expectations. The biggest challenges of fulfilment is getting the customers order correctly, managing that order for changes and returns, allocation of inventory or promised delivery dates to that order, and reconciliation of the order with customer option to how they pay the bill. "All of these points to one thing, customer service and loyalty" says Huang, "Finding the weakness in the fulfilment process is what hinders capturing and keeping customers".
Finding the right mix of technology, where the customer still has contact with a 'body' when required is important. "Despite growing use of electronic data interchange (EDI) and Internet (B2Bi), many companies still communicate via phone, fax and email. These methods are slow and fail to keep people on both sides of the equation informed well-enough to build trust in the data", says Hawthorne, "Instead, buyers and partners wonder if the shipment will arrive on time and complete, sellers wonder what last minute changes will wreak havoc on their production and warehousing operations".
Finding a solution
An ideal e-fulfilment solution should be linked to CRM, ERP and APS applications. E-fulfilment without integration will sub-optimise your business and not deliver shareholder value. This is the product of just three business drivers - revenue growth, profitability and asset utilisation.
"I do not believe there is a single solution that can handle order taking and supply chain management functions together. Typically, point solutions are developed and integrated together to provide the complete solution," says Whiting. "Where possible, a single vendor that knows and can integrate the functions performed by your customers and your suppliers", says Huang, "The process needs to go forward form the customer perspective allowing them to get what they want when they want it without promising fulfilment or completion in unachievable timeframes. The whole cycle needs to be seamless and fully integrated to other back office functions like billing etc".
"You should evaluate which space, B2B or B2C, is consistent with your business strategy in terms of delivering the greatest returns whilst avoiding any possible channel conflict in bypassing traditional distributor or retailer relationships", suggests Hawthorne, "Only then can you consider various combinations of B2B or B2C sales channels".
According to McGrath, a few things a company should bear in mind when shopping for a solution, are:
Ability of the solution to scale for large volumes of transactions and increased functionality
Ability of the solution to work within the company's environment, potentially integrated with other electronic systems that are used today
Cost of the system in terms of initial outlay, maintenance charges and cost to deploy the solution
Support of the system from the vendor once it's in place
Reliability of the system and its infrastructure so that it is available to customers when required.
Whiting suggests that the company should look at what capabilities the customers need from the system; pricing model used when costing the solution; solution credentials or past implementations; and finally, the implementation time and effort, including internal and external assistance.
A good place for a company to start is with a thorough analysis of their current fulfilment process. "You must revisit all processes involved in service and order fulfilment to determine your level of performance and quality", states
There are many vendors offering services in this market. The types of solutions and services that are needed by customers over the life of these projects can include:
Business consulting on supply chain management, analysis of business processes and to help determine effective return on investment models
Change management to help a company change the way people perform their jobs and/or the way the company is structured to fulfil orders
IT services for developing an architecture that can scale with increasing fulfilment needs
IT solutions for infrastructure, catalogue provision and management, integration of legacy systems, payment processing and credit verification, inventory tracking and replenishment.
"Companies need to work with a trusted partner to help them select the best-fit technologies and solution partners based on their cost and functionality requirements", advises McGrath, "Vendors such as Microsoft, BEA and Web Methods can provide technology foundations to help with many of the IT solutions required, for example integration to existing legacy systems that manage a company's inventory. Specialist vendors such as PTC provide specific technology to solve IT issues such as catalogue management and product life-cycle management".
Gatward points out that when shopping for a solution, reliability is more important than cost. "Our challenge was to think about how we could make the fulfilment experience even better for our web customers", says he, "We thought that our customers would find ordering on our web site more efficient and easier than by fax of phone. Using the web site they can be sure of what they have ordered, what the price is and that the order is actually in our system without any keying errors. They also have access to tracking information as well as order history and invoicing information".
Companies need to concentrate on three areas while implementing a solution:
Business process analysis: When a company automates an existing business process in any area, it inevitably takes a period of time to work with key stakeholders in that company to understand how the current process works, and what issues exist with that process that may need to be resolved. "It is important to have a clear picture of what processes are required before starting to offer this electronically, to ensure all have an understanding of what the impacts of offering this service will have on the company in terms of management of its supply chain and how people perform their jobs", says McGrath.
Return on investment: It is critical that a company understands the costs and benefits available from offering e-fulfilment, both short and long term, before investing heavily in this area. Benefits can be in terms of cost efficiencies, providing access to greater segments of the market and strengthening of relationships with their customers. Measuring these benefits against e-fulfilment projects can be a challenge in itself. Companies today tend to work towards providing these services by piloting a subset of functionality with trusted partners, and taking the experience from these pilots to determine their next steps.
Consistent offering: Companies need to be able to offer these services in a consistent manner to the bulk of their customers rather than duplicating this service offering to each customer. This requires a solid foundation that can be scaled in terms of numbers of customers and transactions, and types of functionality offered. This is helped by using international standards such as CPFR (Collaborative Planning, Forecast and Replenishment) to guide the process.
Finally, the e-fulfilment solution you select should be flexible to change as your business changes, scale to meet your needs and be provided by a vendor with a track record of product support and product longevity.
It is important that e-fulfilment solution is treated as a business opportunity or issue to resolve, not as an IT project in its own right. Business sponsorship is required so that any changes that are needed, such as changing the organisation structure or inventory management policies, are performed in conjunction with the right stakeholders so as to minimise any business impact and maximise any business opportunities. As McGrath explains, "It is also important to understand where a company may take its fulfilment processes in the future, so that a solution does not have to be re-engineered every couple of years".