SUPPLY CHAIN STANDARD OCTOBER 2008
www.supplychainstandard.com
gratification
supply chain. Some believe that running updates on
transactions on a daily basis is sufficient, which might be
okay on the high street, but in online retailing this misses a
key advantage of the web – its immediacy.
Mark Needham, director of integration at specialist efulfilment
logistics services company, iForce, explains, “If
we have stock in at 8am in the morning, then we would
far rather be selling that product by 9am, rather than
waiting a whole day. It’s a bit of an eye-opener for new
clients when they realise that we normally update our
files every five to 15 minutes, which means that we can
update inventory figures for the web front-end very
quickly and therefore increase sales through greater
availability of stock.”
Another popular preconception held by retailers new to
e-fulfilment is that you just treat your e-fulfilment facility as
you would any store. So if a store sells a single item, you
replenish a single item. But Needham emphasises the
importance of fulfilling in singles but replenishing in cases
and pallet loads, “you can move a lot of stock inbound
quickly, which is far more cost efficient than bringing goods
in as singles”.
Exponential growth
The team responsible for integrating new business at iForce
has to respond to the growing demand for scaleable
operations, necessary given the very high growth rates
experienced in online sales.
A prime example is department store, John Lewis. The
retailer’s online business has grown exponentially in recent
years and has now just moved into the top slot becoming its
largest outlet, taking more orders than the company’s
flagship Oxford Street branch.
John Lewis’ e-fulfilment operations started out in just a
corner of one of iForce’s warehouses but soon took over the
entire shed. It was not long before a second iForce facility
was needed. Then at the end of 2006 it became apparent
that it would not be able to grow and meet its next peak
demand, so the decision was taken to move from two sheds
into a larger single operation. Keeping the contract with
iForce a lease was signed in July 2007 for a 230,000 sq ft
warehouse in Redditch and by mid-October Redd42 went
into operation.
Illustrating the importance big high street brands are
placing on web sales, Tesco Direct was set up in
September 2006 and in its first year of operation achieved
revenues of £230 million. That might be fairly small beer
for Tesco but such rapid growth gives an indication as to
the way things are heading.
Also, department store British Home Stores, has just
signed a three-year contract with DHL worth £3.6 million
for e-fulfilment services. DHL will process more than
VIEWPOINT
It’s a bit of an eyeopener
for new clients
when they realise that
we normally update
our files every five to
15 minutes which
means that we can
update inventory
figures for the web
front-end very quickly.
MARK NEEDHAM
IFORCE
SCS:E-FULFILMENT 21
150,000 customer orders and returns across the retailer’s
clothing, gifts, home and lighting lines each year. The plan
is to grow its online ordering business, reduce operating
costs and improve service levels.
According to John Owen, general manager e-commerce
at DHL Exel Supply Chain, one of the key differences of an
e-fulfilment operation is that it’s “really a mix of being a
fulfilment centre and a retail operation.
“The next person who is going to touch that product
after you have packed it is going to be the end consumer.
Therefore you need to have a set of processes in place that
produce a high degree of accuracy. When it’s shipped out to
the customer, it has to be absolutely the right product – the
right size and colour. A high degree of accuracy is needed in
meeting the customer’s expectations and if they have been
promised delivery for tomorrow, then that’s when they have
to receive that delivery.”
Owen sees “unpredictability” as the biggest challenge in
e-fulfilment. “We will typically have 30-35 per cent of the
week’s demand on the peak day of the week, which is
usually a Monday because that’s when you receive the
Friday, Saturday and Sunday orders. That daily profile can
We will typically have 30-35 per cent of
the week’s demand on the peak day of
the week, which is usually a Monday
because that’s when you receive the
Friday, Saturday and Sunday orders.
be significantly impacted by the weather – last year we
had a fairly poor summer [surely an understatement!], but
the August bank holiday was reasonably good, so in the
week that followed that August bank holiday the whole
profile for that week was different because people had
been out and about and the last thing on their mind was
ordering on the internet.”
In Owen’s view there are five main approaches to
e-fulfilment, appropriate from when a company trials
e-commerce, through critical mass to it becoming a
core competency.
The first is around leveraging a store fulfilment DC. If a
retailer has sufficient space and staff then one option is to
use that DC for e-fulfilment by drawing a notional line on
the floor denoting where the e-fulfilment operation takes
place. Then the DC feeds that e-commerce operation in
exactly the same way it would serve any other store,
except the store happens to be located in the same
physical location.
The second option is multi-user e-fulfilment. Here the
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