can be either the cornerstone or the central function of a successful enterprise. Leading companies such as Amazon, E-Bay and other successful online retailers have set a high bar, investing in these tools:
- Powerful big data science that finds individual consumer's doppelgangers and recommends products that these mirror images have purchased
- Searching that guides the consumer to recommended products
- State-of-the-art purchasing and warehousing
- Amazing delivery—order at 10 AM and get same day delivery
- Low prices and shipping speed and cost choices
Manufacturers can hardly resist doing a deal with one of these leaders even though they know that this increased volume will be at a lower margin. But those that have worked long and hard to create better products and to differentiate their brands find themselves competing in the mega e-commerce retailer price game.
Amazon may not do as well with branding and pricing—two key aspects of the manufacturer—distributor—consumer chain. And the consumer is worse off for it.
Since branding includes product differentiation and value association such as sustainability, fair trade sourcing, supporting employees and communities, etc. these differentiators have become something that consumers want to know about and are willing to pay a premium for.
One alternative to beat e-commerce leaders at their own game is for manufacturers to go directly to consumers by establishing e-commerce sites.
Compared to the large e-commerce firms' need to profile every prospect and every product, the manufacturer's targeting task is less complex with fewer targets. Manufacturer's e-commerce can provide valuable product and usage information which can differentiate their products on non-price attributes. Huge firms can't begin to match the level of product information.
The manufacturer must meet world-class standards for product fulfillment. E-commerce digital and user interface is difficult but order fulfillment is even more complex and demanding.
Kim Whitler of the University of Virginia Darden School of Business observed in his article
: "There seems to be some arrogance oftentimes within the digital realm. What they are doing is a lot of coding. It's one-dimensionally complex. It's very different when you're talking about a physical [fulfillment] experience."
Fulfillment involves so much more complexity:
- Interface with e-commerce
- Inventory management
- Picking, packing and shipping
- Process control and continuous improvement
- Tracking and measurement of each aspect of the fulfillment process
- Key Account Management levels of communication
- People with relevant industry experience
- ...and ever lowering costs
The flawless execution of the order fulfillment process is so difficult that is becomes a sustainable source of competitive advantage—much harder to imitate than the front-end digital part of e-commerce.
How one company met the challenge
This major producer of nutritional products has a first-class e-commerce website which is used to reinforce their highly differentiated, sought after brands. For example, they use their e-commerce site to provide valuable information for mothers about baby nutrition, or how nutrition can control diabetes, as well as how their products fit into a healthy diet. Another example is that he site includes information about how nutrition can enhance energy and health for those age 65 and up, as well as other valuable information about their nutritional products.
1) IT infrastructure
The client had a sophisticated e-commerce site. The fulfillment partner's IT infrastructure needed to be compatible. Further, the client was always enhancing their site and the fulfillment partner needed a flexible process for changes and improvements. The client managed its complex e-commerce business through web-based reporting: The fulfillment partner needed to feed its metrics into the web-based reporting system.
The fulfillment partner's workflows had to meet federal regulations. The partner had experience with fulfillment of products that needed to meet the same regulations. The client's products needed to be warehoused within certain temperature ranges and in accordance with strict aging rules. The partner had experience with fulfillment of products with similar requirements. The client's strategy included high levels of customer service like returns and batching orders from different order streams. The partner demonstrated relevant customer service experience. And the partner's in-place continuous improvement process exceeded the client's specified requirements.
The partner demonstrated the ability to measure customer satisfaction with overall satisfaction measurements, like Net Promoter Score, as well as the ability to monitor satisfaction at the transaction level. Similarly, the partner demonstrated the ability to measure financial performance at both a high level and in retail.
The fulfillment partner's execution team had industry and functional expertise. The demonstration of the right skill sets and experience convinced the client they would execute flawlessly.
Fulfillment is about flawless execution and working closely with a collaborative team that makes it all happen. It's your people who learn from the data to continuously improve processes and IT infrastructure. And it's this team, supported by key factors of success that are hard for competitors to imitate.
By teaming the branded nutritional products manufacturer with the fulfillment partner;s flawless execution, customers were served more effectively than mega e-commerce retailer could deliver, no matter what the price. And it made the nutritional products manufacturer's business more successful as well.
Don't underestimate the potential of going directly to your consumers. You'll need to find a rock-solid partner for fulfillment which will benefit both you and your consumers.