Saturday, March 9, 2019

The Hidden Key to E-Commerce Success

Order fulfilment The Hidden Key to e-Commerce success By Fred R. Ricker and Ravi Kalakota n July 1995, a young W ide anyy Street entropy fermentor whiz named Jeff Bezos opened a bookstore offering some(prenominal) than than atomic number 53 million titles yet virtual(prenominal)ly no document. His brainchildAmazon. comhas gr ingest since thusly from four employees operating out of a 400 squ be-foot gar let on in Seattle into an online company with a stock valuation greater than most occurrence 500 companies.His initial modela virtual bookstore intentional to do line of products exclusively on The Inter cyberspace offers a wealth of the internetwas untried cable opportunities for obviously brilliant start-ups and established compaand fountainhead executed, nies a equal. Yet while every unriv bothed as evidenced by wants a composing of the e-Commerce action, not everyone has laid the Amazon. coms suc unavoidable groundwork for success in gaining and cess. peerless of the most often overkeeping client looked prerequisites is point fulfillattention and generment and dispersion. Succeeding ating high societys. n the e-Commerce age is every Yet the companys bit as both(prenominal)(prenominal) about designing and success to date is executing these blocking and dwarfed by the tackling functions as it is about emf of its the latest engine room. app atomic number 18nt ambition to shape up the worlds most efficient consumer- reign over setFred R. Ricker is director of health-c atomic number 18 supfulfilment musical arrangement. execute range of a function scheme for Manhattan Associates Amazon. com enviInc. Ravi Kalakota is the director of the sions a killer supCenter for Digital Commerce and GCATT ply kitchen stove that back chair professor of electronic commerce at deliver virtually any Georgia State University.He is also the harvest-festivalnot just fonether and CEO of e-Business Strategies. 60 Supply range of a function care Re view I books directly to guests better than its competitors. In fact, it took Amazon. com except one quarter after adding music to its offerings to puzzle the Nets tempering music seller. The company currently is targeting the $150 billion pharmaceuticals commercialize with a 40-percent s discipline in Drugstore. com. To twenty-four hours, the accent mark among more mature wind vane retailers like Amazon. com is shifting from foodstuffing to fulfilment logisticswhat happens after the rder is placed. Good fulfilmenttaking the proper product, regularizeting it in the right box, conveyance it, and gaining the customers approval on arrivalis a demanding task. We believe it is hitherin the down-and-dirty details of consumer direct order fulfilmentthat the epic battles for supremacy of the e-Commerce foodstuffplace leave ultimately be won or lost. The outcome of the e-Supply stove, a group of strategically aligned companies concentreed on delivering differentiable meter value, signals a shift in the nature of online disceptation.It involves rethinking traditional provider relationships and the subprogram of cultivationdriven fulfilment logistics. In the sore ne twork economy, establishing a sustainable e-Commerce part is as a lot about using the right fulfilment strategies to get your products or dishs to perverters as it is about having the right product at the right price. The key to success is being able to give customers what they want, pin tumbler 1999 Illustration by Roger Roth when they want it, and how they want itall at the for the first time cost. That requires real-time fulfilment solutions.These rising demands yield driven a three-phase evolution. graduation exercise the e-Corporation, which focuses on creating and maximizing the potential of internal depict fetter, evolves into e-Business communities, w present distributors, suppliers, customers, and others are linked but not fully structured. These communitie s and so become the e-Supply ambit, which requires business-process and engineering synchronizing across the entire drawing string. (Exhibit 1 depicts this progression. ) Unfortunately, much of the start-up grooming for e-Commerce ventures applies old models to rude(a) enterp deck ups.It assumes, for example, the existence of a brick-and-mortar support foundation for the fulfilment or the off-the-cuff development of that infrastructure. Like it or not, most e-Commerce retailers place their initial emphasis on the exciting areas weave product development, traffic generation, dynamic or customized Web pages, transactions, and so on. Often, e-Commerce retailers give little vox populi to order fulfilment and dispersiona capability particular to the success or bankruptcy of Web commerce. Our research shows that the lack of an Fall 1999 ntegrated supply stove infrastructure or weaknesses in integrating multiparty logistics components bottomland undermine the benefits of e-Co mmerce and hinder in advance(p) responses to the disputation. The e-fulfilment Opportunity The Internet offers a rich parvenu opportunity for direct consumer access, but it also raises new repugns. Web retailers find product fulfilment picking and fisticuffs in very small quantities and shipping via plowshare carrier wavesa particularly difficult activity. It often requires relying on third-party fulfillment vendors (a concept discussed later in this denomination) to do the job.But collaboration in fulfillment chains is no longer confined to conventional two-company alliances, such as amid shipper and a logistics serves provider. Today, groups of enterprises are banding unitedly for a roughhewn purposeto satisfy customer demand. A new form of competition is emerging e-Supply chain vs. e-Supply chain. In the Internet book retailing war, for example, the competition is not only between Amazon. com and Barnes & Noble but also among groups of companies that pull up the e -Supply chain anchored by each company. An e-Supply chain is, in effect, a virtual organizaSupply ambit Management Review 61ORDER fulfillment process. ) Vendors could work within specified routing guidelines and still tender for trucks online in conjunction with other geographically close vendors to get full-truckload rates. Internet start-ups give birth the luxury of starting from summon and defining their fulfillment infrastructure Business butt on and Technology specifically for the products Integration being offered online. This is not the case for established Phase 3 E-Supply Chain companies like catalog companies or store- base retailers such as Wal-Mart, Borders, and JCPenney.These companies already stir fulfillment and distribution webs designed to ship a categorisation of products in bulk quantities to hundreds of stores. They fool that they mucklenot layer home deliverance on the existing infrastructure. The established companies must(prenominal)iness decide whether to extend their existing facilities for consumer-direct eCommerce or build a new flummox of fulfillment facilities tailored to low volumes and eminent-variety product mixes. The enlightened ones realize that they hold to invent a new customer-driven fulfillment model that can extract enough be out of the current model to justify home language costs.That new model, we believe, is an intercompany order-fulfillment and transposition model. It utilizes business process synchronization to eliminate redundant processes among supply chain art companies and to advance schooling sharing doing away with wastefulness labor, inscription, and guardianship costs. The design and implementation of such a coordinated and synchronized fulfillment infrastructure poses a major managerial problem. To shed light on this problem and provide a prescriptive roadmap, we spoken language the following questions What is the touch of current customer-direct business models on fulfillment s trategies?What is the definition of consumer-direct fulfillment logistics? why is having a consumer-direct model so authoritative? What types of fulfillment strategies are currently employed in e-Commerce? What strategic business-process reengineering and synchronization steps can managers take when designing a consumer-direct fulfillment logistics outline? Fall 1999 viewing 1 Evolution of the Network Economy Distributors Suppliers Internal Supply Chain Reengineering orthogonal Linkages Customers Phase 1 E-Corporation Logistics Providers Phase 2 E-Business Communities ion that encompasses a group of occupation companies, all working together to slash costs and share profits. By optimizing not only their internal processes but also their mutual interactions, they realize the benefits of a truly unifyd supply chain. This conceptbusiness-process and supply chain synchronizationlays the basis for the next revolution in supply chain guidance. It takes supply chain consolidation to a new direct of talent by requiring companies to focus on synchronizing business processes around ideal inter present points and upgrading these points as the industry evolves. synchronizing of these touch points eliminates costs associated with inefficient safari of goods, redundant processes, and excess inventory. In doing so, it promotes a dedicated collaboration of all supply chain art partnerssuppliers, manufacturers, distributors, wholesalers, thirdparty providers, out-migration companies, and retailers. by dint of e-Commerce, redundant processes among trading partners (such as threefold accuracy audits, receiving-dock appointments, and inventory supplying activities) can be eliminated.The immediacy and availability of the Internet, once security and data cleansing issues are worked out, fulfills the promise of true synchronization. To take just a few examples, if vendors can gain access to a publicly available schedule on the Internet and book their own receiving ap pointments, they no longer privation to put up requests for appointments and wait for responses. Retailers would not need to research late requitals if their customers could download payment status directly from the retailers Web site. (At least two major retailers bemuse already begun this 62 Supply Chain Management ReviewThe Logistics of Consumer-Direct Fulfillment Three forces are converging to create an explosion in consumer-direct business models technology forces are put one over it possible, market forces are making it viable, and social forces are making it inevitable. Keep in mind, though, that consumers demand more than an interactive experience. They want voice communication convenience and lower fulfillment costs. They need to be assured of fast and reliable delivery. The value the consumer places on well timed(p) delivery can affect the logistics network design significantly. Time is money, and digital consumers of the twenty-first century dont have the same g ross profit margin levels as their analog-world ancestors. Todays consumers are yearning for instant rejoicing as never before. spouses in the supply chain must improve their efficienciesfrom order capture to fulfillment to provide that gratification. The goal of consumer-direct business models is to let customers select and configure products and services interactively, get a price quote, and dumbfound a committed delivery date online.Companies serious about straightforward customers online must substantially change their process to make consumer-direct retailing and manufacturing benignant to the consumer. Companies must re-evaluate the complete fulfillment business modelpromotions, merchandising, product selection, pricing, supplier relations, technical wariness, distribution, returns, and post-sale service. Each of these areas demands new processes, skills, and firees. To satisfy a consumer-driven marketplace, companies must instigate beyond the singular mentality of int racompany optimization.Instead, they must focus on how intercompany business process synchronization can transform consumer demands into consumer satisfaction. As with a wiz company, core competencies of each component of the virtual organization must be evaluated objectively to eliminate inefficiencies. Managers of that virtual organization will continue to reengineer stovepipe practices, while at the same time Building replenishment programs establish on consumers pulling the product through the supply chain from the manufacturer. Employing new forecasting methods that reflect total crease visibility.Investing collectively in technology and equipment to large(p)ize on market opportunities. The success of consumer direct fulfillment logistics models depends on the successful integration of Fall 1999 four key elements order-fulfillment stick outning, product execution, distribution management, and crossapplication integration. 1. Order-Fulfillment Planning. Rising customer exp ectations and short fulfillment deadlines call for effective provision that breaks artificial boundaries and bridges the gaps between the consumer and the other fakers in the supply chain.Fulfillment planning must consider the entire planning process from manufacturing, through distribution and deportationwithin a single integrated model. Fulfillment planning involves evaluation of multiple planning strategies such as Establishing a sustainable e-Commerce position is as Profitable-to-promise Should I take the customer order at this time? Available-to-promise Is inventory available to fulfill the order? Capable-to-promise Does manufacturing cleverness allow for order commitment? give the plan that best meets the desired customer-service levels considering transportation and manufacturing constraints. Its important to plan backwards from customer priorities and fulfillment deadlines. Thus, to get under ones skin a feasible plan, the fulfillment-planning process needs to consider all supply chain constraints simultaneously. These admit transportation constraints such as truck capacity and weight, use of alternate modes, and availability of downstream resources such as gist docks. 1 2. Production Execution.With the advent of modular designs, more and more production functions are being performed at dedicated warehouses and distribution centers. The typical activities implicate light subassembly and sequencing, kitting, merging, consolidation, advancement, and labeling. Timing of the final assembly often drives the production plan for subassemblies. The process starts with the master production schedule for the finished product. An MRP (Manufacturing Resource Planning) system explodes this schedule to derive when, where, and in what quantities dissimilar subassemblies and components are required to make each product.Production also includes componentreplenishment strategies that minimize the pith of inventory in the pipeline and coordinate product Supp ly Chain Management Review 63 much about using the right order-fulfillment strategies as it is about having the right product at the right price. ORDER FULFILLMENT hand-offs between the various parties involved. Timely replenishment of warehouses is critical because customers will no longer earmark out-ofstock situations. 3. Distribution Management.Distribution management encompasses the entire process of transporting goods from manufacturer to distribution centers and then to final consumption point. The process also may include packing, muniment preparation, customs brokerage, and inventory and warehouse management. One of the most important innovations here is the integration of distribution with transportation planning and scheduling through a comprehensive supply can address by utilizing standardized education formats and communication points between trading partners.Distribution center inventory has to be integrated effectively with the customer contact system. In high-velo city retail settings like the Web, customers chop-chop become unhappy if the seller is out of stock for what is denote as in stock. Accurate distribution center inventory, updated betrayly, is essential to runway an effective online business. A Framework for e-Commerce Fulfillment Strategies In the face of change magnitude competition, absence of pricing indicant, and shrinking operating margins, companies will succeed or fail based on the efficiency of their fulfillment strategies.Business analysts often focus on the number of orders a company generates on the Web as an indicator of its belligerent strength. But a more accurate euphony may be the companys process for rapidly and efficiently translating the orders into fill-rates that satisfy and exceed customer expectations. This section presents a framework of evolving fulfillment strategies. It then illustrates that framework with a wide array of examples and derives implications and guidelines for management. The framew ork is based on two dimensions the structure and the operation of fulfillment strategies.On the structure dimension, the strategies are classified as either primaevalized or distributed. In a centralized structure, all warehousing, pickup, packing, and shipping are operated in a central site, usually a distribution or logistics center. In a distributed structure, warehousing, pickup, packing, and shipping or delivery are located at different sites. On the operation dimension, the fulfillment strategies are either self-operated if the fulfillment process is operated by the company itself or outsourced if it is done by third parties or partners.All of these strategies, discussed below, have trade-offs regarding investment funds, inventory costs, and running(a) complexness. schema A. Distributed Delivery Centers Fulfillment through distributed delivery centers is an acceptable approach for companies that are just getting online or for those that have a delivery funcFall 1999 Time is money, chain execution solution. Transportation-management software spans the liveliness cycle of the freightage and allows customers to view all of their shipments across a network of multimodal transportation providers. Distribution anagement also means providing users with easy access to shipping, trailing, and delivery data. Reverse logistics is another function of distribution management. Faster product obsolescence and more generous warranties have escalated the number of returns. Reverse logistics not only encompasses dishonored or returned goods but also products designed for remanufacture, hazardous materials, and reusable packaging. 4. Cross-Application Integration. To be effective, companies need to seamlessly integrate the three elements of fulfillment logistics described above.At present, this rarely happens. almost Web servers only have a sporadic connection to the green light Resource Planning (ERP) system like SAPs R/3, which controls accounting, production, ma terials management, and distribution. Thus, when the user wants to know when a product will be delivered, the Web application often cannot tell that user what inventory is available in the ERP system or at the third-party warehouse. These are precisely the kinds of problems that business-process synchronization 64 Supply Chain Management Review nd digital consumers of the 21st century dont have the same tolerance levels as their analog-world ancestors. tion in their stores. This approach minimizes the upfront investment and can be set up quickly. It also dish outs strategies such as Buy Here/ peck Up There. This strategy allows consumers to place an order by phone or online at one store location and pick up the mathematical product at another. Though distributed delivery centers do have their advantages (like the obvious diminution in shipping costs), they also can experience certain difficulties.For one thing, controlling inventory for every center at an appropriate level may result in operational complexity and incur overpriced inventory costs. In addition, in-store employees often are unfamiliar with warehouse picking and packing procedures. Further, high employee turnover can make picking and packing quality standards difficult to maintain. Yet another problem is scheduling. To minimize combat with customers who are obtain during the daytime, picking operations often are plan for off-peak shopping hours.Although this may appear to be an efficient use of resources, the slow picking may force an additional day into the delivery cycle, since carrier pickups may take place before the completion of the current days picking and packing activities. Strategy B. Partner Fulfillment operations Some online retailers are using the partner fulfillment model, which means they have no inventory, no shops, and no product brands. Fulfillment is performed entirely by partners. This approach has clear advantages from the standpoint of inventory-carrying costs. But there are some disadvantages as well.This has been evident in the experience of Peapod, an online grocery retailer that provides online shopping and home delivery services. Peapod discovered that its initial strategy of partnering with local supermarkets for fulfillment meant charging consumers high delivery costs of up to $16 an order. This pricing level made it virtually impossible to build a customer base. To disembowel more customers, the company has begun to dismantle some of its partnerships and move toward a distributed-delivery fulfillment model by establishing its own warehouses in selected markets.The introduction of a distributed-delivery model, however, has put a strain on the companys financial growth. Peapod management estimates that each new distribution center requires a chapiter use of goods and services of roughly $1. 5 million plus operating expenses. Peapod expects a net loss at each facility during the first 12 to 18 months of operation. In the long run, howe ver, the new centers should give the company higher boilersuit margins as well as greater operating efficiencies. Fall 1999 Companies will succeed or fail based on the efficiency of their fulfillment strategies.Strategy C. Dedicated Fulfillment Center Today, many online retailers have established their own dedicated fulfillment centers. These players include Amazon. com, BarnesandNoble. com, Dell Computer, Micro Warehouse, and Insight Enterprises. This approach is well suited to the book and computer industry, where the fulfillment centers can facilitate prompt delivery. The dedicated fulfillment center model reduces delivery costs for low-margin items. Using this approach, companies can measure expected delivery time in hoursnot days.The tradeoffs of this approach are rugged or unpredictable sales volumes. This will result in high inventory-carrying costs. High up-front investment. Depending upon its warehouse apparatus and flexibility, a distribution fulfillment center can inc ur high costs. It may, for example, require major systems modifications, automated warehouses, and conveyors. This option, moreover, can add operational complexity to the product and breeding settles. Yet even though this approach increases the up-front capital investment, it can reduce long-term operating costs.Decreased flexibility. The operations scalability is confine to the existing warehouse infrastructure. This may make it difficult to meet the disagreement in demand inherent in some retail segments. Strategy D. Third-Party Fulfillment Centers (Virtual Warehousing) As companies struggle to manage unpredictable demand better, they are turning toward third-party fulfillment centers (3PFs), which can be thought of as virtual warehouses. Through this approach, companies can lease the skills and facilities needed for order fulfillment quite an than owning them.Third-party fulfillment companies offer flexibility in accommodate wide swings in demand over short periods. They a lso help facilitate inventoryreduction initiatives such as just-in-time programs. Another advantage of 3PF is the limited changes that must be made to legacy knowledge systems. This option provides a much more robust capability than in-store fulfillment and minimizes operational impact. It also converts much of fulfillment into a variable cost offset by eliminating warehouse and Supply Chain Management Review 65 ORDER FULFILLMENT store costs associated with the sale of the product.This strategy allows retailers to leverage their buying power and extend product selection into lines not currently offered in their stores. The radical drawback of 3PF is few existing national fulfillment companies can accommodate a wide range of products. Even more problematical, ceding control of this critical aspect of the business represents a major paradigm shift for retailers. Depending upon the service levels required by customers, multiple fulfillment centers may be necessary to minimize deliver y timeand this increases costs and required stock levels. y clear that customers dont just buy products instead, they buy the service envelope. They are looking to enter into a complex relationship with the selling company. Given the new reality, companies do not create value for customers by merely offering varieties of products. Rather, they must devise a logistics fulfillment strategy that envelops the product and meets customer needs such as convenience, reliability, and support. The choice of a fulfillment strategy depends on whether a company elects to compete first harmonicly on customer responsiveness or operating excellence.In either case, the fulfillment strategy must support the overall business strategy. To ensure that this happens, a company needs to complete the following steps (1) assess the competitive environment, (2) select the fulfillment strategy, (3) achieve business-process synchronization, and (4) design and implement the necessary cross-application integr ation. Importantly, the fulfillment strategy must take full advantage of new planning, warehousing, and transportation technologies that can cut order fill times dramatically.Assess the Competitive surround The first step in fulfillment-logistics design is assessmentthat is, identifying the opportunities, strengths, and weaknesses that will tempt overall performance and viability of the fulfillment strategy. During the assessment phase, a company must gather information on the competitive environment across these strategic variables Effectiveness. What are customers priorities and how are they changing? How closely does the overall design address the stated and unstated requirements of customers?Consider likely changes in buying patterns, potential competitors, long-run cost pressures, and new technologies. Value differentiation. Why do my customers buy from me? What makes my value proposition unique compared to the competition? Do customers appreciate the value in my offering and can this be leveraged into differentiated pricing strategies? The first step toward value differentiation is to map your customers entire experience with your product or service. Do this for each important customer segment. Capital intensity. Should we choose a capitalintensive, high fixed-cost strategy?Or a less capital-intensive, flexible strategy? The e-Commerce impact on working capital outlay differs from retailer to retailer. It depends on such factors as the existing logistic infrastructure (dispersion of warehouses, existing product give, etc. ), the Fall 1999 Effective fulfillment strategy is dynamic, using multiple channels simultaneously to reach important customers. Strategy E. Build-to-Order The customized build-to-order model is an emerging fulfillment center strategy that extends beyond the traditional framework and adopts an integrating or boundary-spanning perspective.Companies working to coordinate build-to-order fulfillment logistics strategies need to Synchroniz e and manage the entire flow of materials through a complex network of resources in their supply chains as opposed to simply managing inventory in warehouses. Turn their attention to maximizing the throughput, rather than focus on controlling fixed costs. Alter the material flow upstream quickly and proactively as demand and product mix change, rather than react to changes in customer demand at the end of the process.A fundamental requirement of fulfillment logistics is the dedicated collaboration of all supply chain trading partners to eliminate the costs associated with inefficient movement of goods, redundant processes, and excess inventory. Effective collaboration not only ensures that the order flows through smoothly but also provides two crucial capabilities the ability to adapt to progressively frequent changes in consumer tastes and e-Commerce technology and the ability to improve processes continuously.Designing the Right Fulfillment Strategy Design of the fulfillment st rategy is central to the overall incarnate strategy. It is becoming increasing66 Supply Chain Management Review nature of the products carried (for example, books Select the Fulfillment Strategy The second step in the design process is to select vs. produce), and the delivery demands of the an appropriate fulfillment strategy based on the findcustomer. Channel extendibility. Can the fulfillment design ings of the competitive assessment.Each fulfillment divvy up possible new products and services and strategy brings its own strengths, weaknesses, and incorporate new forms of customer interaction? trade-offs. These center on such issues as investEstablished companies must remain committed to ment, effectiveness, cost efficiency, operational coma portfolio strategy of customer interaction. This plexity, channel extendibility and scalability, and is based on the belief that valuable synergies exist risks associated with the business alliances. Exhibit 2, among online, catalog, and spe cialty retailing.To which summarizes the key characteristics of the five cite one example, EXHIBIT 2 online order desks A Summary of Five Fulfillment Strategies with innovative Type of Distinctive Major Potential Management walk-up portholes Fulfillment Characteristics Strengths Weakness Challenges Strategy can be located strategically in Distributed delivery Distributed Easy start-up Complex inventory Establishing sophisevery store so that centers actuate delivery management ticated inventoryoperation sites Operation in control.High inventory management sysSelf operated. shoppers can costs tem order products Unfamiliar with JIT inventory manand serve themwarehousing proce- agement. dures. selves. With an integrated portfo- Partner fulfillment Minimized up-front Service limited by Establishing orderDistributed lio strategy, estab- operations investment partnership routing system operation sites Less operational Low overall Maintaining stratePartner operated. ished companies respo nsibility efficiency gic alliance with can gain many pliable delivery High inventory costs partners new online cusarrangement and inventory-man- Ensuring service Low shipping charge agement complexity. quality and reliability. tomers from the to customers. retail outlets. I n f r a s t r u c t u re Dedicated Avoids the higher High up-front Converting traditionCentralized inventory costs investment al warehousing to operation site scalability.Can the fulfillment centers Easy to manage Decreased flexibility. consumer-direct fulSelf operated. design handle Fast delivery fillment multiple products Reduced long-term JIT inventory mancosts of operation. agement. and a high shipment volume? Physical distribu- Third-party fulfillLeast investment Few options Selecting the third Centralized No learning curve available party tion can be a ment centers (3PFs) operation site Third party No operational com- Risks in strategic Establishing intermajor logistical operated. lexity alliances organiza tional inforand administrative Limited changes to High operational mation systems with legacy systems charge. the 3PF. headache. Online Minimized operaretailers are findtional impacts. ing that having to Build-to-order Spans both Minimum inventory Over-customization synchrony entire adapt their existcentralized Pulling ensured Costs and resources flow of materials vs. ing infrastructure and distributed No stock inventory of integration. anaging inventory to handle small operations. Controlled fulfillAltering material ment. flow upstream vs. shipments going customer demand to millions of condownstream. sumers can be time consuming, complex, and expensive. The challenge is to keep each and every fulfillment strategies, is a managerial guide for customer satisfied while protecting the bottom find out which strategy is right for a company at line from wearing resulting from waste, errors, and a given situation. inefficiencies.How well do the available distribu- Achieve Business-Proce ss Synchronization Intercompany business-process synchronization, tion strategies help accomplish that key objective? Fall 1999 Supply Chain Management Review 67 ORDER FULFILLMENT in its purest form, gives rise to the virtual organization in which all trading companies work together as one competitive supply chain entitythe e-Supply chain. In the virtual organization, each trading company shares its information and resources, which results in better planning and more efficient product movement.In making business-process synchronization a reality, companies typically will encounter these challenges Design and Implement Cross-Application Integration Among the key objectives of intercompany collaboration are more modern distribution services, such as frequent inventory replenishments, more customized packing of goods to reduce unpacking times, more creative packaging and labeling of goods to meet merchandising strategies, and more effective exchange of trading information in complianc e with EDI standards.Achievement of these objectives demands an increased use of cross-application integration. Superior application integration in a supply chain is central to achieving superior fulfillment productivity and speed. An effective fulfillment-management system must have the ability to integrate with 1. Integrated enterprise applications. Included here are the ERP systems that integrate the inventory management, marketing, and financial functions. 2. Integrated interenterprise systems. These are the supply chain management systems for transportation, order management, warehouse management, and demand planning.For instance, FedEx has integrated its logistics and transportation capabilities with the SAP R/3 system. For R/3 users, the solution will simplify every cerebrate process step from order entry through shipment and tracking by tightly integrating with FedEx. For FedEx, this capability creates a competitive bar that other carriers have to overcome. 3. Distribution center management and warehouse management systems. Included among these solutions are facility management systems. Efficient management of a distribution center operation now requires collecting information on customer orders, inbound shipments, products vailable on-site, storage locations, product weights and sizes, and outbound shipping data (including customer-specific shipping requirements, routing data, and carrier requirements). This information must be analyzed dynamically to determine the most efficient use of the distribution centers labor, materials-handling equipment, and shipping and receiving areas. Todays information technology revolution does not merely support new order-fulfillment strategies, it creates them. Technology Challenge. Intercompany businessprocess synchronization requires sophisticated technology applications.It can be difficult, however, to identify those systems that truly support this initiative. The Data-Sharing Challenge. Supply chain systems not only need to communicate with one another but also to integrate their business practice knowledge into each trading companys business logic. The companies must work quickly and painlessly to integrate their trading partners knowledge into their own business applications. The Adaptability Challenge. All the information in the world cannot help if trading companies dont have the flexibility to alter business processes as consumer demands change.In this regard, all trading companies face similar challenges. For instance, when UPS issues a rate update, thousands of customers must implement these changes by a specified date and time. Companies need to implement business systems that can be upgraded easily to move with the market. The Standardization and Compliance Challenge. When one major player in the supply chain decides to upgrade to a new technology or adopt a new technical functionality, the other players are challenged to synchronize accordingly.When there are thousands of touch p oints, or interface points, the challenge can become enormously complex. In a perfect world, all trading partners would migrate in unison to the latest technologies to realize the maximum benefit. But it is not likely that an entire supply chain can or will do this at once. Thus, it is important to focus on synchronizing business processes around these touch points and upgrading them as the market evolves. 68 Supply Chain Management Review Acting in consonance for the Consumer Order fulfillment and replenishment is a core business process. What makes onsumer-direct eCommerce induce to customers is not just the online shopping experience but on-time delivery, fewer fulfillment errors, extra service, and convenience. These are the things that customers value. When companies fall short in responding to those values, they risk alien or losing customers as a result. Fall 1999 ORDER FULFILLMENT galore(postnominal) potential e-Commerce participants have underestimated the difficulty a nd importance of the fulfillment side of this market arena. They see fulfillment and distribution logistics as peripheral to their competitive strategy.Companies need to recognize that such benign neglect is risky and wastes opportunities for competitive advantage. In response to pressures from powerful market trends and technological changes, they must inspect past practices, channel commitments, and vendor relationships vigorously. Effective fulfillment strategy is dynamic, using multiple channels simultaneously to reach important customers. Todays information technology revolution does not merely support new fulfillment strategies, it creates them. Consumers interface with technology daily, raising the bar on what is expected on the fulfillment side.Meeting these rising expectations requires a conscious shift in fulfillment strategies and a technological infrastructure that ties together every aspect of the consumer-direct fulfillment chain. Interenterprise business-process syn chronization is a key to success in this emerging real-time marketplace. Deep information exchange among supply chain partners brings opportunities to develop interenterprise strategies that become new sources of competitive advantage. Information integration allows companies to monitor daily trends, market conditions, product acquisitions, and planning functions.To achieve operational integration, manufacturers, distributors, and retailers must exchange information effectively with other supply chain participants at key interface touch points. Importantly, this includes providing real-time information to customers so they know the status of their order at any given moment. When all trading partnersincluding raw-material suppliersperform all of the key supply activities in unison, they can make inventory decisions that lead to dramatically improved results.They can then share the rewards of producing the correct amount of the product, thereby lowering the cost of overproduction. Bu siness-process synchronization also enables partners to respond quickly and easily to unplanned consumer demand for items or for personalized and enhanced productsthe kinds of things like a shots Internet shoppers desire. The companies that employ business-process synchronization in the development of their consumerdirect order-fulfillment strategy will fulfill these consumer desires and emerge as the big winners in the Internet economy.Authors Note Used as a reference for this article was a White Paper by Alan Dabbiere of Manhattan Associates titled Business Process and Supply Chain Synchronization Achieving Supply Chain Excellence Through Technology. Footnote 1 Companies providing early versions of advanced planning capability include SAPs Advanced Planning and Optimization (APO) engine, i2Technologies, Manugistics, and Logility. More sophisticated systems that integrate production planning and transportation planning are under development. 70 Supply Chain Management Review Fall 1999

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