Fulfilling a Customers Order

8/3/2019 Fulfilling a Customers Order

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Fulfilling a Customer·s OrderFulfilling a Customer·s Order

Prof. Rushen Chahal

Introduction to e-Business

Prof. Rushen Chahal



Lesson ObjectivesLesson Objectives

y To list the steps for fulfilling a customer·s

order

y To understand and use logistics/e-logistics

y To compare and contrast e-logistics with

the traditional retail model

y To identify key areas of profitability for

different types of e-tailers

y To understand and solve logistic problems

unique to e-tailers

Prof. Rushen Chahal



Order Fulfillment and Logistics:Order Fulfillment and Logistics:

An OverviewAn Overview

y Overview of Order Fulfillmentorder fulfillment

All of the activities needed to provide customers

with ordered goods and services, including relatedcustomer services

back-office operations

The activities that support fulfillment of sales, such

as accounting and logisticsfront-office operations

The business processes, such as sales andadvertising, that are visible to customers

Prof. Rushen Chahal



II -- Order Fulfillment = LogisticsOrder Fulfillment = Logistics

y Logistics ² the planning of the process of

moving product from vendor to customer.

Order fulfillment is part of logistics and isoften used interchangeably. In the case of e-

tailing, it is called ́ e-logistics.µ

Prof. Rushen Chahal



IIII -- Order Fulfillment ProcessOrder Fulfillment Process

y Once a customer decides to purchase a

product using e-services, the process is

switched to ́ back-office operationsµ

y Each step of the process is not always

dependent on the previous step, but can

be simultaneous with or occurring before

a previous step.y Only a few logistical plans will include all

9 steps

Prof. Rushen Chahal



9 Steps of e9 Steps of e--logisticslogistics

y 1 ² Arrange a method of payment

y 2 ² Check product availability

y 3 ² Arrange shipments

y 4 ² Insurance

y 5 ² Replenishment

y 6 ² In-house production

y 7 ² Suppliersy 8 ² Contact with customers

y 9 ² Returns

Prof. Rushen Chahal



Step 1: Arrange a method of payment.Step 1: Arrange a method of payment.

y Possible payment methods:

At the time of order: e-payment (e.g. PayPal,

Alipay), credit card

At the time of delivery: COD

Chinese e-tailer payment troubles

y For electronic payments, a system of

verification of payment is needed beforeshipping

Prof. Rushen Chahal



Step 2: Check product availabilityStep 2: Check product availability

y If possible, inform

customer of

availability beforeorder is placed.

y If out of stock or the

product will take

time to manufacture,inform customer of

the delay.

Prof. Rushen Chahal



Step 3: Arrange shipmentsStep 3: Arrange shipments

y Electronic shipping ² quick and immediate

y Physical product ² determine best shippingmethod for level of service

y Logistics for shipping is the step that pure e-tailers need to focus on. This step can eat into

profits quickly if the shipping process is notefficient.

y It is the biggest daily activity (labor, energy, money,

etc.) for e-tailers. E.g. Amazon.com ² Majority of 17,000 employees work in the fulfillment process.On its busiest day of 2007, Amazon shippedalmost 4 million items.

Prof. Rushen Chahal



Step 4: InsuranceStep 4: Insurance

y This option needs to be available for

customers since product can be lost or

damaged in the shipping process.

Prof. Rushen Chahal



Step 5: ReplenishmentStep 5: Replenishment

y This is an overview step. It should be

examining all aspects of physical inventory

at a location and reordering as needed:

Product ² product sitting on shelves or

material to manufacture product

Non-product ² shipping materials, parts for

machines in process, items that are part of theshipping process (scanners, totes, carts, etc.)

Prof. Rushen Chahal



Step 6: InStep 6: In--house productionhouse production

y Pure e-tailers (e.g. taobao.com) don·t have in-house

production. They order from other suppliers.

y Manufacturing e-tailers need to focus most on this

step of logistics to insure the highest profitability.y If shipped from manufacturing site, the e-tailer

should keep stock low and aim for ́ just-in-timeµ

production.

y

If shipped from another site, the e-tailer shouldfollow traditional logistic model.

Prof. Rushen Chahal



Step 7: SuppliersStep 7: Suppliers

y All e-tailers use suppliers:

Manufacturers get raw material or partially

assembled product

Retailers get product from manufacturers

y E-tailers may or may not store product

High run items are best kept in stock

Low run items are best provided fromsupplier as needed

Prof. Rushen Chahal



Step 8: Contact with customerStep 8: Contact with customer

y With an invisible process (back-door

operations), the customer needs to be

informed as much as possible.

y Most common types of communication:

Order confirmation

Payment success

Shipping confirmation Tracking information

Any problems in the process

Prof. Rushen Chahal



Step 9: ReturnsStep 9: Returns

y The flow of product from customer back

to the vendor is called reverse logistics.

y Possible reasons for customers to return

or exchange product:

Damaged

Doesn·t work

Don·t like it Wrong product/type/color

Prof. Rushen Chahal



Where planning each step is activeWhere planning each step is active

y Before customer starts shopping

Steps 6, 7

y While customer shops online

Steps 1-4, 8

y After customer is done shopping

Steps 8, 9

y At all times

Step 5

Prof. Rushen Chahal



IIIIII ² ² Differences with traditional logisticsDifferences with traditional logistics

Traditional E-logistics

Product availability Immediate Immediate ±

downloadable product

& some services

Delay ± physicalproducts

Customers A few loyal/repeat

customers to the same

store

Many anonymous/

unknown customers

Demand type Push Pull

Distribution Bulk, large, volume to

retail outlets

Small, individual parcel

directly to consumer

Prof. Rushen Chahal



Differences with traditional logisticsDifferences with traditional logistics ² ²

cont·d.cont·d.

Traditional e-logistics

Nature of demand Stable with mild

fluctuations for

holidays

Seasonal, fragmented

Communication ±

inventory &

accountability

Unidirectional, from

start to finish

Bidirectional, each step is

informing previous and

next

Transporter The company -Outsourced (FedEx, UPS,

etc.) or

-Special delivery service

(Kozmo.com,

Groceryworks)

Prof. Rushen Chahal



IVIV ² ² Problems with eProblems with e--logisticslogistics

y Problems that are inherent with traditionallogistics are magnified with e-logistics sincemost businesses are organized for traditionalbulk delivery Inventory costs

Quality problems, inspections

Wrong product received, shipped out

Wrong type of material (for manufacturing)

Cost for next-day delivery

y Demand forecasting ² guessing how much willbe ordered at a certain time and stockingappropriately

Prof. Rushen Chahal



Problems with eProblems with e--logisticslogistics ² ² cont·d.cont·d.

y Reasons for trouble with demandforecasting Growth ² a growing business is harder to predict that a stable one

Global market ² product is offered to the world, so anyone canorder. May have unexpected rush

Economic conditions

Many other influences

y Variable delivery times

y Third-party logistic suppliers (3PL) Expensive

Might be unfamiliar with e-business

Prof. Rushen Chahal



VV ² ² Solutions for eSolutions for e--logisticslogistics

y Warehouse management system (WMS)

² a tool that integrates the entire process

Product handled from arrival in building unto

shipment to the customer

WMS can automate where to place product,

instead a stower spending time searching for a

place

Even non-inventory can be monitored and

restocked automatically

Prof. Rushen Chahal



Solutions for eSolutions for e--logisticslogistics ² ² cont·dcont·d

y WMS ² cont·d

RFID ² Radio frequency identification: Wireless

scanners can track product anywhere in

warehouse

Prof. Rushen Chahal



Solutions for eSolutions for e--logisticslogistics ² ² cont·dcont·d

y Delivery solutions

FedEx, UPS

Self delivery

y Third-party logistic suppliers

Outsourced logistics can be switched to a

different company if first one is bad

Easier for small companies (most people inthe company are unfamiliar with forecasting)

Prof. Rushen Chahal



VIVI ² ² Solutions for eSolutions for e--logisticslogistics ² ² ReturnsReturns

y Lacking a good return mechanism is the

second highest reason on why some

people refuse to purchase on the Web.

Extra hassle of packaging product in a box and

paying for shipping

Product may be lost in shipping

Hard to describe the problem on paper

(versus showing the problem with the

product in person)

Prof. Rushen Chahal



Solutions for eSolutions for e--logisticslogistics ² ² Returns cont·dReturns cont·d

Options Advantages Disadvantages

Return item to

place where

purchased

Works with small

companies and

expensive items.

Similar to brick-

and-mortar store

Customer unhappy

(time & money)

Company unhappy

(sell at loss, spend

time checking item)

Separate the

logistics of returns and

delivery

Easy for company,

independentinternal unit

handles

Customer still

unhappy (sameamount of work and

hassle)

Prof. Rushen Chahal



Solutions for eSolutions for e--logisticslogistics ² ² Returns cont·dReturns cont·d

Options Advantages Disadvantages

Outsource

returns

Company doesn¶t

deal with problem

Customer still

unhappy

Company doesn¶t

have control of

product

Physical

drop locationfor customer

Easy for customer,

saves them money

Co. may have

physical location,

e.g. Wal-Mart

Requires contracts

with other companies

Extra logistics to get

product back

Prof. Rushen Chahal

Documents

Fulfilling a Customers Order