E-COMMERCE FULFILMENT SPECIAL REPORT 03 brought to you by
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E - C O M M E R C EF U L F I L M E N TS P E C I A L R E P O R T 0 3b r o u g h t t o y o u b y
FULFILMENT brought to you by 2
elcome to Power Retail’s Special
Report, E-Commerce Fulfilment.
Ensuring the back end delivers what the front
end promises is one of the enduring challenges of
online retail.
Carl Hartmann, Managing Director of
Temando Systems, says that the number of emerging online retailers he
comes across who have invested tens of thousands of dollars on a website
without giving any thought to fulfilment is quite significant.
The invisible stage in the ecommerce retail chain from when the
customer clicks the ‘Pay now’ button to when the purchased product
arrives is one of, if not, the most critical parts of the process.
Successful retailers understand that in order to complete the positive
customer experience, the fulfilment stage needs to be seamless,
including delivery and returns.
Really successful retailers understand that the fulfilment stage
is an opportunity to drive significant extra value, and use the channel
intelligently to extend their brand values and strengthen the
customer relationship.
We talk often about the superiority of the US and UK markets in the
online retail space, and there are good reasons for that, due in large part
to population density and the luxury of markets conditioned to mail
order retail.
However, the credit for advances in those markets also goes to strategic
investment in sound fulfilment marketing, turning the ‘last mile’ into
something of a ‘golden mile’ in building customer relationships.
The good news for Australian retailers is the landscape is evolving,
the choice of providers is widening and there is enormous upside in
enhancing the customer fulfilment experience.
This Special Report aims to bring Australian online and multichannel
retailers up to speed with best practice fulfilment strategies, provide a
deeper understanding of the logistics options and deliver insight into
new ways to utilise this critical channel.
Grant ArnottEditor and PublisherPower Retail
CONTENTS
What Fulfilment Means for Online Retailers 04
What Australian Retailers Say About Industry Standards 07
Multichannel Operational Challenges 08
Fulfilment as a Marketing Tool 10
Case Studies 12
Q & A 14
Solution Providers 16
FOREWORD & EXECUTIVE SUMMARY
PUBLISHER
Power Retail is Australia’s news
and information resource for the
online and multichannel retail
community. The medium exists
to help bridge the knowledge gap
between what is being done and
what can be done in e-commerce
retailing.
www.powerretail.net
PRINCIPAL SPONSOR
Deloitte refers to one or more
of Deloitte Touche Tohmatsu
Limited, a UK private company
limited by guarantee, and its
network of member firms, each
of which is a legally separate and
independent entity. As one of
Australia’s leading professional
services firms. Deloitte Touche
Tohmatsu and its affiliates
provide audit, tax, consulting, and
financial advisory services through
approximately 4,500 people
across the country.
www.deloitte.com.au
SOLUTION SPONSOR
The Temando System is a global
fulfilment engine that has
been built from the ground up
as an enterprise level solution
to overcome the hassle of
sending freight in e-commerce
environments. With single point
access to over 200 carriers,
and deliveries priced from just
$3.65 + GST, it’s easy to see why
online retailers big and small are
discovering the benefits of the
Temando aggregation model.
www.temando.com
EVENT PARTNER
Online Retailer is a four-day
blizzard of new ideas, problem-
solving solutions, career
networking, cost-saving resources
and quality learning. It’s the most
comprehensive curriculum on
online and multichannel retailing
in the Asia Pacific, and it’s one of
the world’s largest e-commerce
and digital marketing events for
retailers.
www.onlineretailer.net
W
What’s the point of your online presence?Most retailers have developed a web presence but are operating off multiple platforms and systems. Deloitte can help
you harness the business opportunities created by the web. From the consumer experience to business processes,
it’s a changing world and taking the right actions needs the informed guidance of an expert.
Make a point of visiting www.deloitte.com/au/multichannelretail
FULFILMENT brought to you by 4
s the ecommerce cyberspace race speeds out of
control, retailers based in the Australasian region often
hit a bottleneck at the fulfilment stage. While retailers
consistently prioritise investment and continuous
improvement in the front end components of the business, such as site
design and driving traffic, the back end is rarely examined as closely.
Yet in reality, the delivery of the product is often the only physical
interaction the customer has with the retailer. And it is also the part of
the experience most likely to destroy a relationship permanently should
it go wrong.
Even experienced online shoppers take a leap of faith every time they
hand over their credit card details via the internet. Fulfilment is not an
area to be overlooked at the strategic and investment level.
You can have the fastest, slickest, most engaging, optimised website
in the universe but it will amount to naught if the delivery experience
is inferior. The customer experience should not end with the online
transaction – the fulfilment channel is not only a critical part of the
equation, it’s an opportunity to extend the brand values and deliver
(pardon the pun) a competitive advantage.
“Logistics is 50% of the picture,” says Nick Robertson, CEO of ASOS.com.
“If a customer places an order and doesn’t get it, that’s 100% failure.”
If companies expect to attain success in the online retail
environment, they are going to have to continue to invest in the
logistics and fulfilment processes in order to keep up with rising
consumer expectations.
In Australia, the challenges are exacerbated by our geography, our
logistics infrastructure and the rising tide of online shopping via
overseas-based sites. Offshore retailers, particularly in the US and UK,
are advancing their storefronts into the local market, and it is a serious
struggle for local retailers to compete.
Currently up to 50 percent of Australian online retail purchases are
made on foreign sites, able to deliver superior customer experiences,
wider product range and efficient, inexpensive delivery. It’s a significant
threat, and the local industry has a long way to go to catch up.
“Talking to our clients, there is anecdotal evidence to suggest the
pent-up demand for a new kind of logistics service,” says
Andy Powell, Director of Multichannel, Deloitte. “The demand is
two-fold: maturing online retailers are outgrowing their ‘garden shed’
fulfilment operations, and established multichannel retailers see
their current operational capability as misaligned with direct
customer fulfilment, but are reticent to invest in alternative
infrastructure in-house.
E-commerce fulfilment: Leveraging the last mile
A
According to Powell, the logistics provider marketplace in Australia has
been slow to respond. He heralds a retail revolution, where the modern
multichannel and online retailer will need to adapt to the shift in
consumer fulfilment expectations to survive and thrive.
Track and trace, presenting different priced options for the customer,
and improving value through the fulfillment channel all add to
increasing returns. The UK and the US are certainly leading the way, and
there are many opportunities readily available for local merchants to
enhance their offerings.
“Argos in London are currently trialling a service called Shutl,” says
Martin Newman, a global ecommerce leader based in the UK. Shutl has
two service offers – Shutl Now, for immediate delivery within 90 minutes
(and it is frequently faster), or Shutl Later, allowing the shopper to pick a
convenient one hour delivery window.
Certainly a dream for the customer, but in practical terms how can
service levels like this be implemented economically?
“This is dependent on a number of scenarios, but the two key
requirements are that the retailer can fulfil stock from a local store, and
have a real-time view of stock,” says Newman. “Otherwise, this would
become impossible to control from a stock management and stock
optimisation perspective.”
Newman highlights some of the best practice delivery options
becoming more prevalent in the UK as standards to which local retailers
can aspire.
“There are some better delivery options being provided by large retailers,
and adopted by smaller ones, which have some compelling customer
propositions,” he says.
These include:
. Deliver to my home or work
. Offer me a standard 2-3 day service, and a next day service
. If you can, offer me a same-day service
. If I’m a gift buyer, enable me to send multiple gifts to multiple
recipients
. Enable me to pick a specified date for delivery… again very important for
gift buyers
The demand for precision, choice and quality in the delivery process
is rapidly increasing. In the UK, consumers are already conditioned to
expect quality fulfillment, and anything less than best-in-class is met
with derision. The pressure is on, and it’s going to impact our shores.
Recent research by UK Royal Mail revealed a gap between shoppers’
delivery expectations and reality, with £2.7 billion in revenue lost during
2009 due to shopping cart abandonment – more than half those who
abandoned their carts cited unhappiness with the delivery charge as their
reason for not converting.
In order to effectively deliver ‘delivery’ as a part of the online
shopping experience, the Royal Mail in conjunction with the Internet
Measurement Research Group (IMRG), recommend that retailers:
WHAT IS YOUR BIGGEST FULFILMENT CHALLENGE?
WHAT PRICING DO YOU USE FOR SHIPPING?
10%
30% 30%
20%
10%
FULFILMENT brought to you by 6
. Be transparent and upfront with delivery costs;
. Allow flexibility with delivery dates, times and special instructions;
. Implement open communication with customers about dispatch,
tracking and expected delivery times; and
. Ensure that goods are actually delivered on time and intact.
In our snap poll of 40 Australian retailers, only 20% offered free
shipping, with 30% charging the customer full price for shipping. The
news for local retailers is that in the mature ecommerce markets like the
UK and US, free shipping is the norm rather than the exception, and
that trend is likely to arrive here soon. The sooner retailers adopt a free
shipping model, the better it will be to drive conversions.
“Too many retailers still view delivery as a revenue generator, and
in doing so have a poor customer proposition around delivery,” says
Newman. “In general terms, free delivery options drive conversion and
sales, expensive delivery options are a barrier to purchase.”
The challenge for local retailers is balancing the customer
demands for low to nil shipping costs with the higher per unit freight
chargesin Australia comparative to other markets, due to the lower
drop density.
In September 2010, Myer CEO Bernie Brookes was quoted on ABC’s
Inside Business claiming the high cost of freight is inhibiting the
growth of ecommerce in Australia. A study by Frost & Sullivan released
in July 2010, titled Online Shopping Trends in Australia, surveyed 1000
Australian consumers and cited a lack of competition in postal/ delivery
services as a key inhibitor of online retail growth in this region.
THE NEW RETAIL ORDER
The landscape is shifting, slowly but surely, in favour of the retailer
as new solutions emerge to meet the fast-growing demand for online
shopping, and the associated fulfilment and logistics challenges.
While Australia Post is still the most dominant choice, with the majority
of market share and by far the biggest brand, it is certainly not the
only choice.
Retailers can breathe easier knowing that competition is arriving, and
more options are available enabling significant cost savings.
“Think back just a mere 20 years in Australia and selling goods came
with some severe limitations,” says Carl Hartmann, Managing Director
of Temando. “Businesses were limited by size, physical location, staff,
population, catchment, stock, and so on. Most business was done locally,
and promotional activities were designed to get customers physically to
the store.
“The ecommerce landscape, however, is different in almost every way
DEMYSTIFYING THE LOGISTICS OPTIONS1. Direct Shipping: The retailer manages all elements of the logistics
process, including warehousing, order management, pick and pack,
and shipping.
2. Drop Shipping: the retailer accepts payment for an order, but the
customer receives the product(s) directly from the manufacturer.
This is a popular method for pureplay and smaller retailers to control
inventory.
3. Outsource Shipping (3PL): Warehousing, transportation, pick and
pack, order management and other services are outsourced to a
specialist third party logistics provider (3PL), allowing the retailer to
focus on core competencies.
4. Break Bulk: product is shipped to a central depot in ‘bulk’ (usually
on pallets) and is then ‘broken’ into multiple consignments for
distribution to various locations, hence the term ‘Break Bulk’. The main
advantage lies in reducing overall distribution costs on large volumes
by maximising the line-haul component and minimising local delivery
costs.
5. Hybrid Models: A blend of two or more of the above options.
Choosing the right suppliers
0%
20%
10%
30%
5%
25%
15%
Efficient order fulfilment
speeding up delivery
managingreturns
containingcosts
Free Shipping
Customer pays all shipping
Hybrid (eg.Customer spends minimumamount, earns free shipping)
Other
20%
40%
30%
20%
Results from Power Retail Snap Poll of 40 Australian online retailers
WHAT ARE YOUR DELIVERY SERVICE STANDARDS? WHAT LOGISTICS MODEL(S) DO YOU USE?
50%90%
40% 40%
20%
40%
10%
brought to you by 7FULFILMENT
– stock can exclusively be held in a warehouse, or even sourced direct
from the importer/manufacturer on demand.”
Temando is an aggregator, and one that utilises cloud-based
technology to streamline fulfilment and provide a single access point
to multiple carrier options. The advantages for a retailer are that
depending on the order, an aggregator can choose the appropriate
sending option for each item, saving time and money.
“Many companies in the UK are increasing margin by adopting
aggregated courier services where they are able to determine who
is the cheapest and most relevant courier for each order,” says
Martin Newman.
The one-size-fits-all approach to fulfilment will go the way of the
dinosaur soon, if overseas markets are any indication, and Australian
retailers need to understand two things:
1. There are alternatives to single carrier fulfillment models, and a
growing number of suppliers is emerging to optimise the fulfillment
channel, in line with overseas trends.
2. In order for online retail in this country to thrive, the price of
shipping options from the consumer’s perspective must be extremely
appealing.
Our snap poll shows an average delivery time no less than two days,
when in other markets same-day delivery is not uncommon or
expensive. Add to that the challenges faced from overseas retailers, many
of whom are able to land packages door-to-door in Australia with only
a minimal compromise on time and cost. That gap is closing, and there
is a real imperative for the local shipping and fulfillment industry to
improve and optimise delivery standards before more market share is
lost offshore.
What is required, according to Powell, is time for online orders
to build up, and a bold move by a provider to fund the infrastructure,
systems and operational capabilities to meet the real needs of
online retailers.
“When they do, they will win a lot of business, prove the model and
others will follow,” he says. “The resulting competition will drive up
standards.”
MARTIN NEWMAN’S TIPS FOR PROCURING A THIRD PARTY LOGISTICS SUPPLIER
The key things to look at are:
• What are the SLAs (Service levels)?
• What percentage of stock loss will the 3rd party fulfillment company
agree to?
• What is the SLA around the time taken to dispatch a customers order?
(This must be a prerequisite in order for the retailer to meet their own
service levels promised to the customer)
• What are their operating hours? Again, this will directly impact the
service the retailer is able to offer to customers
• What couriers are they using and who owns, and is responsible for,
that relationship?
• Who handles customer service queries and issues?
• Does the fulfilment company provide the packaging? And does that
meet the retailers needs and those of their customers?
• Ensure that you provide product training and knowledge. i.e. you
might have specific brand related requirements that affect how
products should be packed
• Who else is the company fulfiling orders for? Are they fulfilling orders
for any similar retailers?
• What insurance cover do they provide and is it sufficient to cover all of
your stock and in all circumstances?
• What disaster recover plan and processes do they have in place? I.E.
How quickly can they be up and running in the event of a disaster?
• Finally, what are ALL of the costs you are likely to incur?
Recent research by UK Royal Mail revealed a gap between shoppers’ delivery expectations and reality, with £2.7 billion in revenue lost during 2009 due to shopping cart abandonment – more than half those who abandoned their carts cited unhappiness with the delivery charge as their reason for not converting.
same day directshipping
2 days out-sourcedshipping
next day Dropshipping
0% 0%
40% 80%
20% 40%
10% 20%
50% 100%
30% 60%
3 days bulkbreak
3-5 days hybridmodel
more than 5 days
don’tknow
FULFILMENT brought to you by 8
Managing Cross-Channel Challenges
or pureplay retailers, managing order fulfilment by
delivery is bread and butter, and frequently they are ahead
of their ‘bricks and clicks’ counterparts when it comes to
this discipline.
For multichannel retailers, managing fulfilment and logistics
across multiple channels represents complex challenges. With online
consumers becoming conditioned to expectations of fast, efficient
delivery, providing a seamless customer experience becomes imperative
in order to ward off competition from online upstarts.
“Today’s consumer routinely researches, purchases, ships and returns
products across all channels - using mobile devices, phones, websites,
email, stores, and catalogues in whatever way is most convenient,”
says David Selinger, CEO of RichRelevance. “As shoppers shift between
channels, they want a consistent and transparent experience.
“However, today’s cross-channel experience is far from seamless.
Consumers frequently experience dissonance in the shopping
experience caused by inconsistent pricing and policies, as well as choppy
transitions from one channel to another. These failures in customer
“handoffs” (ie: when customers migrate from channel to channel) cost
businesses billions in potential sales dollars every year, in the US, in
Europe and in Australia.”
The legacy of traditional order fulfilment held by traditional retailers
can be a double-edged sword. There are advantages in the ability to
offer in-store pick-up as an alternative to delivery, not only to enable
the consumer to avoid delivery costs, but the in-store visit to collect a
product offers up cross-sell/up-sell opportunities.
Having experience in supply chain management is a critical advantage,
typically enabling better visibility of stock and demand forecasting to
optimise the supply chain.
However, many multichannel retailers struggle with the transition to
volume online sales, having to select ‘eaches’ and incorporating pick and
pack processing of orders. Many local carriers are not geared up for nor
showing interest in B2C deliveries, making it difficult for multichannel
retailers to justify the cost versus benefit. One of the challenges they face
is the delivery time window, and the high risk of missed deliveries (with
associated costs) due to the recipient not being available during that
window. Where this is not such a great problem in the US and UK, it is a
significant barrier for carriers in Australia. It is not insurmountable, but
it keeps the delivery costs higher than optimum for merchants.
Nonetheless, ecommerce fulfilment is an inevitable shift for all serious
multichannel players, as demand for online shopping continues to grow
each year.
Some of the ways multichannel retailers can use their inherent ‘bricks
and clicks’ advantages are:
• Giving customers the choice of delivery or local in-store pick-up, with
the option to reserve product online (cross-channel ‘click and collect’)
• Giving in-store customers the choice of home delivery
• Managing returns with the option of returning via post/courier or
returning in-store, even if bought online
• Providing online and offline customer service options (‘virtual
assistants’ and multiple contact channels, including telephone, email
and social media)
F
In the UK, Tesco has built a dedicated ‘Dot Com Only Store’ (DCOS) to handle the picking and delivery of groceries via the Tesco.com website. Stock in the dedicated Dot Com Store is laid out just like the floor of a supermarket, but instead of customers patrolling the aisles, employees pick orders from the shelves.
brought to you by 9FULFILMENT
Managing an integrated cross-channel fulfilment strategy presents
significant challenges, no doubt, but there is a growing number of
solutions emerging to help enable integration. Technologies that plug
in to existing order management systems are becoming more available
and more robust, with the ability to provide a single customer view
through the whole-of-business CRM system. That data must be available
to customer service personnel in every store, online or offline.
There are many great models of intelligent cross-channel strategies.
Department store giant Sears in the US has begun converting some of
its under-performing K-Mart stores into pure pick-up centres, giving
customers the opportunity to order online and pick up same day,
without the associated costs of running a fully operational retail outlet.
In the UK, Tesco has built a dedicated ‘Dot Com Only Store’ (DCOS) to
handle the picking and delivery of groceries via the Tesco.com website.
Orders were previously processed in Tesco Superstores in the area, with
personal shoppers hand picking products direct from store shelves and
delivered by store-based van fleets to the customers.
Stock in the dedicated Dot Com Store is laid out just like the floor of a
supermarket, but instead of customers patrolling the aisles, employees
pick orders from the shelves and drop directly into customer order
crates. Pickers can pick multiple customer orders simultaneously (up
to six) using larger than average trolleys, which can be spread across
different van routes. According to Retail Technology Review, the DCOS
(first one opened in 2008 and a second has just opened) is proving
itself in freeing up retail sales space and enabling faster growth of
online sales.
In Australia, in-store customers at IKEA are offered (through Kings
Transport and Logistics) same day, next day or a nominated day delivery.
Customers are contacted the day prior or the morning of delivery,
advising an AM or PM window via SMS. Drivers will then call 30 to 60
minutes prior to arrival.
In the returns channel, customers can not only be given the option
to return the item in-store, but also be incentivised to do so, giving the
retailer another relationship-building and up-sell opportunity. Tracking
customer preferences for returns can inform future customer service
strategies, and also give invaluable insight into individual product
performance.
From pizzas to plasma screens, giving the customer the ability to
track and trace their products online is a staple of the modern online
retail world. A number of carriers are able to offer this service, and it is
increasingly becoming a consumer expectation.
Critical to true cross-channel integration is the centralisation
of data, so that the customers interactions with each channel
during the full cycle of the fulfilment process is available to the
whole of business.
The key to multi-channel fulfilment success is having a united
approach to cross-channel integration across the whole of business.
It’s undeniably difficult in the fast-paced, ever-evolving world of
ecommerce, but it’s time for retailers to roll up the sleeves and plan for it
now. The retail revolution is coming, and those who delay the inevitable
are more than likely accelerating their demise.
CURRENT FULFILMENT METHODSTemando’s Carl Hartmann shares his views on available
fulfilment methods.
It is probably no surprise that still the most common way that people
send things is manually – calling up to make a booking, filling out a
consignment note by hand – overall a very labor intensive process. Some
of the savvier freight companies have introduced online services to
interact with them directly, but most online systems are more focused
around booking rather than pricing, not conducive to a one off sender
shipping their product from A to B.
The consumer is also limited to working with just that provider, which
may not be able to satisfy all of their freight needs. Carriers are now
developing secondary brands or divisions to prevent any potential revenue
dilution, by offering cheaper prices online, or through third party access
sites. Overall, the number of companies that offer such online services are
less than 10% of the total market.
Larger clients, especially those with ERP systems, require more
automated solutions such as freight management systems that
are becoming increasingly commonplace, and although they have
mechanisms to compare pricing, they have been designed with
limitations and barriers to entry when trying to work with online portals.
The systems largely have not been designed to optimise ecommerce
workflows, nor have rapid scalability through a client’s growth lifecycle,
and as such, are focused on optimising cost and time efficiencies only.
Similarly, most postal services have adopted a post management system
to offer ecommerce-type customers easier access to them. In some
international markets they have gone so far as producing an API and
delivery calculators, but both freight management and post management
systems, and their respective front end portals, lack any necessary logic
for matching types of freight to relevant carriers, and as a result are
limited to what they can actually facilitate.
Another method of fulfilment is through brokers, who generally use
systems such as hub and spoke, to offer a single branded price to clients,
by using a small network of carriers. Whilst freight brokers’ prices can
sometimes be cost effective, many carriers are fearful of working with
them and some have an anti-broker policy to prevent and avoid potential
revenue dilution. This is because it has been commonplace for freight
brokers to gather a number of existing carriers’ clients together to
improve their purchasing power – often resulting in selling the clients
back to the carrier at a cheaper price, decreasing their revenues and
profitability in the process.
The shortcomings of these fulfilment models have led to the creation
of a new method of fulfillment called aggregation. In essence, it allows
all of the current models of fulfillment to be utilised simultaneously via
a single access point, albeit automating any manual processes at the
same time. This can provide both cost and time efficiencies through
automation, and further cost savings by allowing carriers to provide
cheaper prices, as aggregated clients are often without acquisition and
service costs. This results in greater profitability for carriers and cheaper
prices for consumers.
Freight aggregation provides a dynamic marketplace where freight
services can be easily accessed, and simply integrated with existing
ecommerce workflows. Enhancing this is also aggregated, single point
access to leading freight and post management systems, providing
customer lifecycle scalability from being a one-off “ad-hoc” sender to a
larger enterprise client.
FULFILMENT brought to you by 10
Maximisingthe Final Mile
ne of the areas for improvement all online retailers
can act upon immediately in the fulfilment channel is how
the product is delivered. For the majority of retailers, this
is a serious missed opportunity.
In ecommerce, the arrival of the product(s) is typically the only time
the customer will have a physical interaction with the brand – it is not
the time to fail. Using this critical moment as a brand extension can
build trust, loyalty and establish a significant point of difference over
plain packaging competitors.
Impractical, impersonal packaging damages the brand – how is your
online-purchased product presented to the recipient?
There are many quick fixes that can have an immediate impact on the
end-user – branded packaging, for starters, versus plain brown or white
wrapping. Branded labels, if branded packaging is outside the budget.
Incorporating a catalogue, flyers or other special offer promotional
materials can add value and get the customer thinking about his/
her next purchase while in a positive frame of mind. Even a relatively
unsophisticated customer relationship management system can
allow retailers to create personalised, segmented communications
pieces that can be included with the package. There are a number of
smaller retailers taking advantage of this opportunity to deliver a
special touch.
Fashion retailer Birdsnest includes personalised notes with every
delivery, along with the occasional free gift for regular customers.
Winner of the Online Retail Industry Award for Innovation, Shoes
of Prey also sends a personalised note and photos of the customer’s
newly purchased shoes. The company makes a particular effort to keep
customers updated on the delivery process (as it takes 5-6 weeks to
custom make a pair of shoes designed by the customer), which helps
heighten anticipation and the whole experience of shopping.
The number of ecommerce retailers not utilising the fulfilment
channel as a branding opportunity outweighs the numbers that do. In
order for the online shopping experience to improve in general, the
situation has to change.
O
Impractical, impersonal packaging damages the brand – how is your online-purchased product presented to the recipient?
Which would you prefer?
Looking for multi-carrier shipping pricing and full order management?
Integrate Temando within your shopping cart or CMS!
www.temando.com 1300 66 88 58
eCommerce. Delivered.
Need to Send Something?
Instantly compare rates and services from a wide range of freight carriers and couriers. Our free and easy to use system allows you to book and track shipments online.
Integrate with Temando
Easily integrate Temando with your online store. Use either our readymade plug and play shopping cart modules or make your own custom solution using our API.
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Optimise your workflows with readymade ERP modules and cloud based connectivity. Use Temando to take control of your entire logistics channel in one easy to use location.
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CASE STUDY 1INVENTORYSITUATION
An Australian giftware retailer had added a
transactional online channel to its 23 bricks
and mortar stores, and was enjoying higher
than anticipated growth in the new channel.
ISSUE
Central inventory supported both online and
stores. Demand patterns for online fluctuated
significantly and were different to demand
patterns experienced in bricks and mortar
stores, with high demand “spikes”. Fulfilling
against them ran down inventory destined for
stores, who in turn suffered out of stocks.
SOLUTION
Lacking sophisticated demand forecasting
tools, the retailer decided to create a separate
pool of inventory for online orders, with
higher safety stock allowances to cover
demand variability.
TAKE-AWAY
Online extends reach, but customers you never
dreamt of buy in ways you can’t easily predict.
Either ring-fence and separate inventory or
allow a solid buffer until you understand how
online demand patterns may impact your
inventory needs across channels.
CASE STUDY 2FULFILMENT MODEL
SITUATION
A large Australian retailer was planning to go
multi-channel and needed to develop its direct
fulfilment model.
ISSUE
System constraints and inventory accuracy
at store level meant fulfilment from store
was not feasible, yet there was no capability
to deliver direct customer orders from its
in-house distribution centres, which were
based primarily on automated, store-labelled,
cross-dock.
SOLUTION
The retailer did have an existing provider for
large item home delivery, run as a separate
operation. It worked with this supplier to
modify its operations to allow for central
inventory and pick/pack/ship operations to
support its online offer.
TAKE-AWAY
Online fulfilment is about capability
to manage small order pick/pack/ship.
Traditional retail supply chains do not cope
well with this – they run on bulk orders and
full case or pallet quantities. If you can pick
from store, these issues are diminished. If
you can’t pick from store, and need to fulfil
centrally, it may be better to find a discrete
operational solution and build required
capability than to try to turn your existing
fulfilment model on its head.
The mini case studies that follow, drawn from our client experience, exemplify the hot issues in online fulfilment as we see them right now and the critical get rights. We hope you find
them insightful.
CASESTUDY
DELOITTE ONLINE FULFILMENT CASE
STUDIES
brought to you by 13FULFILMENT
CASE STUDY 3THIRD PARTY LOGISTICS (3PL)
SITUATION
An Australian electrical retailer was seeking
to extend to online and find a single service
provider for all its online fulfilment. It was
looking for a range of parcel sizes and weights
and full national coverage promise, with track
and trace as standard.
ISSUE
Some providers offered only metro coverage.
Others could not cover the weight and size
range or did not have track and trace. Only
one supplier was able to respond to the entire
brief and won the work. Once “live” it became
clear the provider was using delivery partners
in regional areas, where its traceability and
seamless service promise was unfeasible,
causing customer service issues.
SOLUTION
The customer service promise was tailored,
based on postcode, to the known capability
of the lead service provider – a less than
satisfactory result, but one in which customer
expectations could be managed and delivery
“promises” kept.
TAKEAWAY
Until a 3PL emerges from the pack with a full
service integrated solution, Australia’s online
and multi-channel retailers need to face reality
– they are likely to be combining multiple
service providers, with associated complexity.
The customer promise and customers’
expectations need to be managed accordingly.
CASE STUDY 4CHARGING FOR SHIPPING
SITUATION
The relative freight cost in Australia as
percentage of goods is higher than other
developed markets due to overall lower
drop density and a lack of established small
order home delivery operations. Overseas
competitors are offering fast (4 – 7 days) and
cheap ($15) delivery.
ISSUE
Retailers in all sectors are struggling to find
the right balance between cost recovery and
driving market share.
SOLUTION
All retailers are grappling with the issue, but
overall some solution patterns are emerging.
. Shipping pricing must be consistent with
your value proposition as a retailer – so a high
perceived value-added offer may allow higher
shipping than a volume discount offer.
. Offering free shipping for volume orders is a
winning and increasingly common solution
. Be prepared to offer time boxed free or low
cost shipping as another mechanism in the
promotional mix. We have seen uplifts of
40% in some categories with this strategy
. Regardless of the above, simplicity is
paramount – a great fulfilment offer may
have no impact if the customer cannot
immediately see the cost to fulfil – this
means item-level delivery price visibility or
real time basket order delivery calculators
. The simplest of all is free shipping from day
one. Some online retailers have launched
successfully with this model, but it is not for
the faint-hearted!
TAKE-AWAY
There is no magic bullet answer, but
maintaining a permanent fully cost-recovered
freight charging model is unlikely to be a
winning solution unless you have a very
strong value proposition, highly loyal
customers and dominate your market.
Regardless of the path chosen, winners will
have a clear articulation of delivery cost as part
of item selection experience.
CASE STUDY 5RETURNS
SITUATION
A US-based cosmetics company was
experiencing high levels of customer returns
in its online channel.
ISSUE
Returns were negatively impacting overall
profitability due to
. Shipping costs incurred (out and back)
. Inventory was often not in a saleable
condition
. Items often missed seasonal sale windows
and had to be discounted
SOLUTION
Reason code analysis was conducted to
determine alternative lower cost resolution
paths. Up to 25% of items being returned were
credited against reason codes which did not
require physical return. No one had thought to
question this.
TAKE-AWAY
Returns are a part of doing business online,
and need to be regarded as a critical aspect in
the service mix. However, while seeking to
provide a good service proposition, consider all
the practical requirements of the process and
the residual value of the returned item(s), so as
not to “bake in” unnecessary costs.
Q& A with
ANDY POWELL
1How would you describe the state of
fulfilment practices in multichannel retail
in Australia, compared with other markets?
In general, in Deloitte’s work with Australian
and global clients, we can see there are
fulfilment practices here which are comparable
with those in other markets such as the US and
Europe. There are some differences however.
Firstly, the take up of some of the leading
edge practices is not as widespread. Examples
include track and trace, pick-up options and
returns processes.
Secondly, we are seeing in other markets
a greater degree of flexibility – retailers are
adopting a hybrid approach to fulfilment with
more possible fulfilment options, a range of
pricing mechanisms and are integrating these
options better, often through investment
in systems.
Finally, other geographies also have a
history of mail order catalogue retail (eg. UK)
where the small order, home delivery model
and required capability is well-established.
Australia does not have that history and
capability and is struggling to develop it.
So, overall, while the best are comparable
with global standards, the average fulfilment
practices lag other markets somewhat.
2What are the key challenges facing
multichannel and pureplay retailers in
managing their shipping and fulfilment,
with particular reference to Australian
geo-demographics?
This is an interesting one. Although Australian
online retailers are catching up fast to other
markets in the sophistication of their offer,
Australian consumers’ take-up of online retail
lags the UK and US by about three years. This
means, especially with our relatively small
population, that the total number of deliveries
is low, and “drop density” is commensurately
low. This isn’t just across our “wide brown
land” but in the major capital cities as well.
High drop density (getting a lot of deliveries
on a single transport run and minimising unit
cost to deliver) is fundamental to achieving
cost effective fulfilment. Until a lot more
online orders are being placed, the cost of
delivery will remain high, relative to other
developed markets. The economics are stark
here – some overseas retailers are offering
air-freighted delivery (within five days) for
the equivalent of $13 – a cost broadly
equivalent to the standard cost of local
road delivery in Australia, with only a small
additional lead time.
3What changes and reforms do you feel
need to take place in order to bring local
fulfilment and shipping standards in line
with international best practices?
There is little we can see which requires
reform; what is needed is competition. The
constraints on improvements are the weight
of unit cost economics and a lack of sufficient
credible capability among the logistics
providers. What is required is time (as online
orders ramp up) and a bold move.
Why bold? A provider needs to be prepared
to fund the required infrastructure, systems
and operational capability to offer a service
which meets the real needs of online retailers.
When they do, they will win a lot of business,
prove the model and others will follow. The
resulting competition will drive up standards.
4What are some best practice models
of ecommerce retail fulfilment you’ve
seen, and what insights can retailers glean
to improve their practices?
The US and UK continue to lead the way. In
our work with the largest and most innovative
online and multichannel retailers in these
regions, we are seeing leading practices in four
domains:
INVENTORY
1. Improved ability to determine inventory
availability and allocate against it in real time,
including inventory based at third parties or
‘in transit’.
2. (For multichannel retailers) More
sophisticated demand forecasting in which
independent demand from traditional and
online channels is forecasted holistically
to better manage a single pool of stock
supporting all channels
FULFILMENT MODELS
1. Hybrid of fulfilment options, with ability
for orders to be split by fulfilment option.
2. A basic three tier shipping offer (urgent/
expedited/standard) as standard.
3. Pick up or drop off at nominated holding
location (not necessarily a store) for
convenience; shorter time window promises
(eg. higher prevalence of two hour windows as
standard)
4. Further improved online order tracking,
including mobile alerts.
FREIGHT COSTS
1. Ability for online real time order cost
calculations based on the entire basket,
optimised for most efficient shipping
FULFILMENT brought to you by 14
brought to you by 15FULFILMENT
configuration (eg. “This is the cheapest way to
ship all your items”, not just the cost to ship
the individual items)
2. “Free shipping for orders over”; time-boxed
free shipping promotions; incentives to buy
online and pick up in store.
3. Pay upfront for guaranteed priority
shipping (“delivery loyalty schemes”).
Guaranteed “free” priority shipping for a set
period for a fixed up-front fee – attractive for
loyal customers and a good loyalty lock-in
mechanism.
RETURNS
(An interesting divergence of approaches
leading to a very wide range of “best”
practice):
1. For older, established online retailers - more
restrictive returns procedures to minimise
‘frivolous’ returning and save returns costs,
which are then used to subsidise outbound
shipping.
2. For newer online retailers with lower
levels of loyalty - Free returns / less restrictive
procedures as an inducement to build
shopping frequency and loyalty.
3. For all – a focus on reason codes for
returns and the selective use of ‘keep /
destroy’ authorisations to minimise the
return shipping and handling costs of low
value items
5 What should ecommerce retailers
be looking for, and be wary of, when
it comes to procuring logistics solution
providers?
The challenge is threefold, and should be
tackled in this order:-
1. Find partners who can actually handle the
type of business you’re giving them. Retail
supply chains have traditionally operated on
a high transaction / bulk handling / deliver-
to-store basis. Online orders require the
opposite – there are lower numbers of orders,
a requirement to pick “eaches”, not full cases,
the need to integrate multiple SKUs in the
same delivery carton, direct delivery to home
with associated time or access constraints, the
need to accommodate customer returns on
individual items – the list goes on. There are
surprisingly few providers who can offer
this (a real opportunity for a bold player in
this space).
2. Find partners who offer genuine national
coverage in a way which fully supports your
“offer”. This means home delivery in a way
which retains, for example, the integrity of
delivery promise and track and trace visibility.
Without this, the promises you make online
will be broken when it comes to the last mile
and your customers will lose trust. Check if
the provider is using subcontractors or other
partners. If they are, exactly what for, and to
what degree do they match the quality of the
core provider’s offer?
3. Find partners who offer the ability to
aggregate business with other retailers and
so improve drop density and reduce unit cost
to deliver. With the unit cost economics of
Australia’s geo-demography against you, it
pays to seek logistics solution providers who
can offer you access to a bigger order pool and
associated cost benefits. This also, of course,
offers you a chance to reference check them
with existing clients. You can do this overtly,
or covertly (just order a few things and see
what happens!).
6As multichannel retail gathers
momentum in Australia, what impact
do you see this having on the fulfilment
industry?
It can only be a very good thing. The industry
will need to develop capabilities which meet
the needs of online fulfilment – such as small
order pick / pack / ship; improved, lower cost
returns handling operations; better inventory
forecasting and availability. There really is a
great opportunity for someone to step out of
the pack and develop a tailored solution at
scale. This need not necessarily be an existing
3PL. If you consider the attributes above, there
are already organisations (possibly retailers
or wholesalers themselves) whose fulfilment
requires these capabilities. An example form
UK is Unipart Logistics, which has grown
from a small order in-house automotive parts
fulfilment operation into a fully blown 3PL
serving the online market. The field here really
is wide open for someone to take the lead.
There is little we can see which requires reform; what is needed is competition. The constraints on improvements are the weight of unit cost economics and a lack of sufficient credible capability among the logistics providers.
BIOAndy Powell is a Director in Deloitte’s
Multichannel practice. A retail sector
specialist with 24 years experience in retail
store operations, supply chain and IT, he has
consulted widely to retailers in Europe and
Australia, where his clients include Target,
Myer, Nike, Bunnings, Coles, Australia
Post, Telstra, Repco, Borders and Angus
& Robertson. He has spoken widely on
the topic of implementing multichannel
operations and co-authored Deloitte’s 2009
Report - Navigating Multichannel Retail In
Australia - Moving From If To How.
FULFILMENT brought to you by 16
SolutionProviders
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UK private company limited by guarantee, and its network of member
firms, each of which is a legally separate and independent entity. Please
see www.deloitte.com/au/about for a detailed description of the legal
structure of Deloitte Touche Tohmatsu Limited and its member firms.
In Australia, the member firm is the Australian partnership of Deloitte
Touche Tohmatsu. As one of Australia’s leading professional services
firms. Deloitte Touche Tohmatsu and its affiliates provide audit, tax,
consulting, and financial advisory services through approximately 4,500
people across the country. Focused on the creation of value and growth,
and known as an employer of choice for innovative human resources
programs, we are dedicated to helping our clients and our people excel.
For more information, please visit our web site at www.deloitte.com.au.
The Temando System is a global fulfilment engine that has been built
from the ground up as an enterprise level solution to overcome the
hassle of sending freight in e-commerce environments. It introduces
the concept of “cloud based logistics” to the industry, as it allows real
time connectivity between “above the line” elements such as content
management systems (CMS), shopping carts, enterprise resource
planning (ERP) and “below the line” elements such as warehouse
management and dispatch systems. With single point access to over
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why online retailers big and small are discovering the benefits of the
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Contact: [email protected] or 1300 66 88 58
Website: www.temando.com
Twitter: @temando
Facebook: www.facebook.com/pages/Temando/50336955634?ref=ts
Australia Post
www.austpost.com.au
Client Base
www.clientbase.tv
Coghlan
www.coghlan.com.au
Exalt Group
www.exaltgroup.com.au
Fastway Couriers
www.fastway.com.au
Fourfires Solutions
www.fourfires.net
Freightwise
www.freightwise.com.au
IFS Smartfreight
www.ifsonline.net
Inspired Logistics
www.inspiredlogistics.com.au
National Products Fulfilment
www.npfulfilment.com.au
NETO E-Commerce Solutions
www.neto.com.au
Quantium Solutions
www.quantiumsolutions.com
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