The New Back End

Before 2000, every aspect of back-end support operations for the direct marketing industry was tailored to meet the needs of typical catalogers and their customers. In the 1970s and ’80s, direct marketing was limited to the mailbox. The costs and requirements for information systems, fulfillment operations, inventory management and transportation functions were limited by technology and developed exclusively to meet the expectations of catalog customers.

Consumer catalog orders were generated over a 12-week selling season. 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 fill customer orders. Back orders, delayed shipping and high customer service call-to-order ratios were fairly typical.

In the 2000s, merchandising on the Internet has changed the rules. E-commerce support operations learned some hard lessons in 2000, and they 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 now are rethinking the process from order acquisition to package delivery.

New Customer Expectations

Some e-commerce marketers are creating new customer expectations by advising customers of the exact day that an order will arrive at their home, 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 promise, has become the most critical success factor in developing repeat customers.

Rethink Fulfillment Process

Mature fulfillment operations with large-scale investments in automated storage, multi-item picking, packing and sortation systems are finding that “state of the art” for the catalog business isn’t 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, limited dock doors, staging space, unloading-reloading capacity and material handling resources all are constraints to high volume processing of prepackaged, single-item orders. Fulfillment centers must create the flexibility to accommodate the extreme highs and lows of these 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 and reload capacity, staging areas, and high volume material handling, labeling and shipping are essential.

New Systems Development

Heavy investments in programming to keep up with the changing demands for processing and communications may not pay off if you’re not creating a flexible, low-cost system able to take advantage of new programming technology and high-speed hardware. So take a hard look at mature mainframe systems before investing in new development.

Disposable Applications

Look at new systems development with the belief that most of your accomplishments will be obsolete in a very short time. New programming technology and inexpensive, high-speed hardware are making it 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.

Traditional methods of demand forecasting and inventory planning aren’t yet effective for Internet sales. New customer demographics, geographics and the lack of sales history are preventing accurate forecasting. True demand is difficult to determine based on Internet activity. This includes lost orders when items are out of stock or when items are removed from the offering.

Shorter Cycle Demand

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.

Jacksonville, Fla.-based sports merchandise multichannel merchant Football Fanatics carries more than 50,000 unique team and league-licensed products from NFL, college, MLB, NBA, NASCAR and NHL teams. An integral part of maintaining the utmost level of customer satisfaction involves the selection of a transportation professional as a partner to ensure the highest levels of service and efficiency.

Football Fanatics previously used several carriers to directly handle all of its inbound freight shipments from vendors and had limited visibility to incoming orders.

The company was fielding numerous calls from vendors on how to best route its shipments. Carrier costs were rising, and Football Fanatics wanted to enhance service to its customers. It sought a transportation solution to ensure top customer service, manage routing requests and come at cost-effective rates.

Cost Reduction in Freight

With the help of a transportation provider that focuses on the direct marketing industry, Football Fanatics identified and selected high-service, cost-effective national and regional carriers.

Leveraging the volume generated by a consortium of participating companies, the provider obtained aggressive LTL (less than truckload) rates for it, resulting in a significant freight cost reduction.

Nicholas C. Isasi is the director of business development for DM Transportation Management, an inbound freight management firm. You can reach him at (407) 517-4673 or nicholasi@dmtrans.com.