Order Fulfillment: The Hidden Key to eCommerce Success

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Order Fulfillment: The Hidden Key to e-Commerce Success
By Fred R. Ricker and Ravi Kalakota

n July 1995, a young Wall Street computer whiz named Jeff Bezos opened a bookstore offering more than one million titles yet virtually no inventory. His brainchild—Amazon.com—has grown since then from four employees operating out of a 400 square-foot garage in Seattle into an online company with a stock valuation greater than most Fortune 500 companies. His initial concept—a virtual bookstore designed to do business exclusively on The Internet offers a wealth of the Internet—was new business opportunities for obviously brilliant start-ups and established compaand well executed, nies alike. Yet while everyone as evidenced by wants a piece of the e-Commerce action, not everyone has laid the Amazon.com’s sucnecessary groundwork for success in gaining and cess. One of the most often overkeeping customer looked prerequisites is order fulfillattention and generment and distribution. Succeeding ating orders. in the e-Commerce age is every Yet the company’s bit as much about designing and success to date is executing these “blocking and dwarfed by the tackling” functions as it is about potential of its the latest technology. apparent ambition— to build the world’s most efficient consumer-direct orderFred R. Ricker is director of health-care supfulfillment system. ply chain strategy for Manhattan Associates Amazon.com enviInc. Ravi Kalakota is the director of the sions a “killer” supCenter for Digital Commerce and GCATT ply chain that can chair professor of electronic commerce at deliver virtually any Georgia State University. He is also the product—not just founder and CEO of e-Business Strategies. 60 Supply Chain Management Review

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books— directly to customers better than its competitors. In fact, it took Amazon.com only one quarter after adding music to its offerings to become the Net’s leading music seller. The company currently is targeting the $150 billion pharmaceuticals market with a 40-percent stake in Drugstore.com. Today, the emphasis among more mature Web retailers like Amazon.com is shifting from marketing to fulfillment logistics—what happens after the order is placed. Good fulfillment—taking the right product, putting it in the right box, shipping it, and gaining the customer’s approval on arrival—is a demanding task. We believe it is here—in the down-and-dirty details of consumer direct order fulfillment—that the epic battles for domination of the e-Commerce marketplace will ultimately be won or lost. The emergence of the e-Supply chain, a group of strategically aligned companies focused on delivering differentiable value, signals a shift in the nature of online competition. It involves rethinking traditional supplier relationships and the role of informationdriven fulfillment logistics. In the new network economy, establishing a sustainable e-Commerce position is as much about using the right fulfillment strategies to get your products or services to buyers 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, Fall 1999

Illustration by Roger Roth

when they want it, and how they want it—all at the lowest cost. That requires “real-time fulfillment” solutions. These rising demands have driven a three-phase evolution. First the e-Corporation, which focuses on creating and maximizing the potential of internal supply chains, evolves into e-Business communities, where distributors, suppliers, customers, and others are linked but not fully integrated. These communities then become the e-Supply chain, which requires business-process and technology synchronization across the entire chain. (Exhibit 1 depicts this progression.) Unfortunately, much of the start-up planning for e-Commerce ventures applies old models to new enterprises. It assumes, for example, the existence of a brick-and-mortar support infrastructure for the fulfillment or the...
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