March - 2000 - issue > Cover Feature

“The next holiday season will not be like this past season.”
"It’s the last few miles for delivery that did us in.”

“It’s relatively easy to capture the customer’s attention – retaining them is a different story.”

“Can you imagine that we could not take an electronic order after December 6 to guarantee December 25 delivery?”

These were laments from many an e-business. The estimated lost sales this past 1999-holiday season on account of delivery problems were $6 billion. The “last mile” of supply chain predictability and service became barriers to e-business success. For the statistically inclined, some shocking numbers make the point.

* 75 percent of the reasons customers leave a company has nothing to do with the product

* In the next six years, 80 percent of any given business’ customers will leave, 65 percent because the company did not fulfill a need

* Of dissatisfied customers, 85 percent of them tell nine people, 13 percent tell twenty people

* Of top 125 Web sites, 61 percent failed the basic test of customer service (that is, they took more than one day to respond to customer; 46 percent took more than five days to respond, or never responded)

What Went Wrong?

It has actually been easy to pinpoint the reasons for the failures. These are:

* Poor delivery predictability/failures in the “last mile”

* Too much inventory – wrong stuff/wrong place

* Poor supply base coordination

* Poor customer service

As product life cycles shorten and varieties proliferate, supply chains often are thrown into chaos in today’s global competitive marketplace. This chaos manifests as higher inventory levels, higher total costs in fulfilling customer orders, poorer customer service and lower customer satisfaction.

What better example of this phenomenon of failed fulfillment do we need than the fiascos that plagued this past holiday season for those who tried to order through “e-channels.” While many companies focused on the front end of the supply chain – offering faster access, glitzier front-ends and “stickier” customer interactions, there was a dismal failure in the key areas of configuration/postponement/fulfillment/delivery and customer service.

Death of Traditional Fulfillment?

Traditional fulfillment is facing relegation as a “has-been.” So will the new technologies “huff and puff and blow the house down”? Doubtful.

Not only have companies found themselves unable to swiftly and efficiently fulfill customers’ orders, but they also have been unable to integrate their processes. This has led to disjointed, expensive and disappointing efforts to satisfy customers.

Ultimately, the customer’s satisfaction and loyalty are still the key to long term success.

As e-business permeates our lives, it is behaving in many ways like other new technologies. Prior to its arrival, there are predictions that it will immediately and completely displace the previously dominant technology. However, it is clear, as in the case of other new technologies in the past, that there will be co-existence with traditional models.

1. First, the new technology will serve a different set of end users and will serve the old set of end users differently. In addition, there will emerge a hybrid world with new benefits for customers.

So the blending of new e-commerce front ends and established proven infrastructures based on proven, established and robust systems and people will be key.

A variety of new e-business companies are working to fill the void in these spaces. Watch, for example, the work being done in key areas such as:

* New customer service/relationship approaches from NetCustomer.com

* Comprehensive suites of supply chain integration from EntComm

* New return processes from companies like Unisel/e-RMA, and Yantra

Inventory is a liability in this age of mass customization and build-to-order. But just as your customers want the latest, greatest version of your product with the most current fixes applies, they also want it quickly. One solution is to build your product as close geographically to your customer as possible. Another, even better solution, is to have customers configure their own product. Often, since physical delivery is a requirement, building smaller quantities in local markets is a great way to meet your customer’s requirements while still minimizing the risk of obsolescence.

Examine this in the framework of both B-to-C and B-to-B models and study the types of goods and services delivered. A few areas saw the drastic impact of high volume and large scale needs this past year. However, over time, most arenas will face this challenge of scale, global needs and consistency.

What Is Key?

1. The ability to offer national and global solutions.

2. Value-added integrated solutions offering a suite of services that can be tailor-made by integrating technology, demand/procurement processes and infrastructures/operations.

3. Customer care! Customer care!

4. Visibility and clarity for supply chain design and implementation.

5. A predisposition toward progressive operations strategies with a focus on “pull” and low inventories. It is not only the warehouses that will make a difference!

If it is true that the people who made the most money in the California gold rush were those who sold the picks, shovels and sieves, then, this time around, it will be the ones who value the “last mile,” which will be the key to customer retention, profit generation and be the biggest ultimate competitive weapon for this new e-business era.