April 2002 | Commentary | Viewpoint

How Retailers Become Promise Keepers

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Retailers today increasingly leverage online channels to offer services from third parties, including product drop-shipped from other vendors, cross-branded product bundles, and special orders. Amazon essentially built its business on this model and traditional retailers have followed.

These strategies present great opportunities for new revenues, efficiencies, and service levels. But serious pitfalls exist, too. When things go wrong, the customer blames the retailer, even if a third party makes the error. This is especially true in order fulfillment services such as delivery, installation, and setup—areas that the retailer may not control. To succeed, retailers need to manage the complete customer experience, whether they control it or not.

Retailer Challenges

Many retailers struggle with the collaborative complexity needed to execute these strategies. As a result, they find themselves using costly and error-prone manual processes that provide limited visibility into the status of customer orders.

Coordinating demand from multiple sales channels, fulfilling goods through third parties, and managing product returns are difficult challenges in any business. The challenges are magnified by retail's intense customer service requirements, as well as their huge impact on the bottom line.

While inventory levels declined significantly in the last decade, order management costs rose dramatically. These increases were largely due to the retailer's need to manage orders across multiple third parties—extended or distributed commerce management.

To manage multi-enterprise orders efficiently, retailers need real-time visibility and information exchange across their extended supply chain. This provides trading partners and customers with immediate information about order status, inventory availability, and order changes. Most importantly, it enables retailers to make a solid commitment to a customer even when a product is manufactured, fulfilled, and serviced by multiple third parties.

Traditional enterprise systems were never designed to handle the complexities of distributed commerce. Retailers working with multiple vendors and sales channels need to:

  • Extend business processes across business units and trading partners.
  • Make a commitment to a customer even when the product is made and supplied by a third-party vendor.
  • Coordinate any service or installation that might be required to fulfill the product.
  • Accept and manage product returns efficiently.

A new wave of distributed order and inventory management software complements existing legacy and ERP systems and has enabled retailers to coordinate and control orders and inventory across extended supply chains. This software is built specifically to aggregate orders from multiple sources and broker them to multiple entities for fast and efficient fulfillment.

Using Centralized Systems

Retailers such as Target and Hallmark are using centralized commerce platforms to coordinate and monitor complex fulfillment processes across a network of sales channels, warehouses, stores, drop-ship vendors, manufacturers, and 3PLs. These systems give them control over the entire customer order fulfillment process and enable them to monitor each order throughout its entire lifecycle.

Unlike traditional systems, these applications are also highly flexible so companies can easily adapt them as they alter their business processes. They also offer great opportunities for new revenues, improved operating efficiencies, reduced inventory levels, and increased customer satisfaction.

Retailers will continue to partner with multiple companies to reach new customers, expand product offerings, and tailor services to customer preferences. But, to do so effectively, they'll have to find ways to control the entire customer experience and ensure a promise made is a promise kept.

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