Integration: Making e-Fulfillment a Pet Project

Tags: Warehouse Management Systems (WMS), E-commerce

Start-up PetFlow.com had a solid business strategy, but integrating back-end logistics and fulfillment operations proved a challenge—until it implemented a warehouse management system.

THE COMPONENTS

Companies: Online retailer PetFlow.com; warehouse management system (WMS) provider Synergy Logistics

Challenges: The third-party logistics provider hired to manage the subscription-based pet food deliveries couldn't keep up with PetFlow's rapid growth.

Goal: Manage inventory to provide on-time scheduled deliveries.

Approach: Petflow brought fulfillment in-house and implemented the Snapfulfil WMS, deployed on a software-as-a-service (SaaS) basis.

Result: The SaaS deployment provided a quick, low-cost technology solution, which allowed PetFlow to take over its fulfillment operations without a large capital investment.

 

In 2000, dot.com entrepreneurs Joe Speiser and Alex Zhardanvosky created Azoogle, a successful online advertising network that helped customers such as Netflix, Omaha Steaks, and Stamps.com build recurring client bases—in effect, repeatable business, the Holy Grail for any retailing organization.

After selling off a chunk of the business, the pair began looking for a new challenge. They wanted to build an e-commerce company from the product side out, offering a staple product that was recession-proof and invulnerable to seasonal demand. The operational model would be predicated on selling goods to consumers as part of a subscription-type service.

They formed PetFlow.com in March 2010, and began selling pet food four months later. Speiser and Zhardanvosky envisioned creating an e-commerce channel that would flow pet food directly to their customers' doorsteps on a regular schedule—similar to the service Netflix and Diapers.com offer their user communities.

The much-publicized 1999 failure of Pets.com—which had generated plenty of marketing sizzle, yet failed to deliver—created a vacuum in the online marketplace, with virtually no competition. Seeing an opportunity, Speiser and Zhardanvosky sought counsel from the former CEO of Pets.com to discuss what went wrong.

"Pets.com had about 15,000 SKUs, but only 600 were dedicated to food," says Speiser. "Our focus has been pet food, which the customer has to buy regularly. Once you've established that purchase, you can upsell with items such as water bowls and toys—but you can't start there.

"Pets.com attacked the market from the wrong side," he continues. "It started with luxury pet items and hoped to sell the essentials later."

Handling the Shipping

PetFlow also differentiated itself by focusing on the convenience factor of having an automatic replenishment system that effectively supplies more than 100 premium pet food brands. PetFlow offers a flat $4.95 shipping rate for all orders up to $59, with free shipping for purchases of $60 or more.

"We can't offer free next- or second-day shipping like Amazon can," says Speiser. "We have one warehouse in New Jersey and another in Las Vegas. But with a scheduled delivery service, we can account for the transportation time and make sure an order arrives when it's supposed to.

"Customers don't care how their order is sent, as long as they get it when they need it," he adds. "That's how you save money on shipping."

Combining a targeted product and consumer niche with a well-planned business model positioned PetFlow for success right from the beginning. It wanted to change the way pet owners bought food, taking them out of the shopping experience.

"We didn't just want to sell pet food," says Speiser. "A recurring customer base service is very defensible; it's how you grow a business. It's difficult for competitors to come in and take away those buyers.

"Let customers set the schedule, and they will be yours—as long as you don't mess up," he adds.

Yet somehow, PetFlow wound up in the doghouse.

Integrating Front with Back End

One of the unique challenges that start-ups such as PetFlow often encounter is how to integrate a solid business plan with a logistics and fulfillment strategy that is up to the task.

Speiser and Zhardanvosky were veterans of the online advertising world. They knew what consumers wanted and how to sell products. They just weren't sure how to execute the back-room plan.

"It's hard to start up an e-commerce company without a third-party logistics (3PL) provider," says Speiser.

"You don't have efficiencies or economies," he continues. "You can't lease a 100,000-square-foot warehouse to move 10 orders a day."

PetFlow partnered with a 3PL to manage its e-fulfillment operation. But signals got dropped. PetFlow began growing at an accelerated pace, and the 3PL couldn't keep up.

"We partnered with a company that we thought could manage our forecasted growth," Speiser says. "We didn't know the provider didn't believe our projections."

Whether it was failing to buy enough racks and equipment to store and move product or not scaling labor fast enough, the 3PL couldn't deliver. Its warehouse management system (WMS) was overloaded. PetFlow quickly outgrew the 3PL as quality assurances and customer service started to lag.

Speiser and Zhardanvosky considered finding another 3PL, but given their needs, experience, and entrepreneurial independence, that approach didn't make sense.

"PetFlow doesn't have a high concentration of SKUs," Speiser explains. "Among the 5,000 unique products we sell, there isn't a great deal of similarity in our daily shipments. Pickers are constantly moving, building different orders. Our average order weighs 35 pounds and takes up a lot of space, which generates costs. The 3PLs we considered didn't have the necessary pick/pack intelligence embedded in their WMS offerings to handle our needs."

Snap To Demand

PetFlow decided to find a WMS partner and bring fulfillment in-house. After considering a number of solutions, the company partnered with Synergy Logistics to implement its Snapfulfil software-as-a-service (SaaS) WMS.

Snapfulfil is a proprietary turnkey WMS solution developed by Synergy Logistics, a UK-based software company with a U.S. division, Synergy North America, in Charleston, S.C. The subscription-based offering features a Tier I WMS with all essential scanning hardware and radio frequency (RF) infrastructure. Because it is a SaaS deployment, there is no up-front capital investment in computer equipment or IT overhead.

Digging into WMS

Snapfulfil caters to a broad user group, ranging from small and medium-sized businesses such as PetFlow to larger global companies, both shippers and intermediaries. Its value proposition is geared toward start-ups, sophisticated warehouse operations, and everything in between.

"We're currently taking a client live that would be considered a traditional WMS user," explains Lori Kesten, vice president of North American sales, Synergy North America. "It operates 13 warehouses and has existing processes that have evolved over time. The implementation process is longer because the company has to unwind what it has done in the past in order to achieve the full benefits of the new system."

That process of unwinding is part of any new technology integration. With PetFlow, Synergy had the luxury of setting the system up the way an e-commerce operation should work, without any barriers to implementation. It was a blank slate. As a result, Synergy was able to set up the system in 30 days—a condensed time frame unheard of for most traditional WMS installs.

"Having a cloud-based solution gets you up and running much faster than some other options," says Speiser. "Implementation time was extremely short. It was a matter of getting our ceilings wired with RF antennas, which we'd do for any WMS."

The price was also attractive. Even if the roll-out bombed, PetFlow could flip to another solution without losing too much money.

Finally, the flexibility to make changes in the cloud offered the e-commerce company greater latitude to tweak the system or push out changes as needed, rather than relying on costly upgrades. The Snapfulfil SaaS WMS solution is a single version, but every user receives a unique URL, functionality switches, databases, and interfaces. A company with multiple warehouses can specify different conditions within that instance. In PetFlow's case, for example, it meant tying the WMS into its existing customer relationship management system.

PetFlow capitalized on this aspect when it decided to alter its plan for small parcel deliveries. The company has a contract with FedEx to ship orders through its residential service.

"We realized that smaller orders falling below a certain weight class should move via FedEx SmartPost," says Speiser.

"We asked Synergy to make sure that any order going out below a certain weight threshold receives a different shipping label," he continues. "Within one day, they released a software patch. Then we were able to ship using SmartPost, which saves a lot of money."

Delivering Perfect Orders

In December 2011, PetFlow began to diversify its online product portfolio beyond just pet food—a measured progression that stands in stark contrast to Pets.com's boom-and-bust trajectory.

That fable serves as a constant reminder of how fickle success can be. But PetFlow's business model, and the way demand triggers replenishment, creates an ideal platform for optimizing supply chain performance and making sure back-end fulfillment can match pre-determined sales and inventory needs.

"I know each week how many orders are going out, so I can staff up ahead of time," says Speiser. "Because we're bringing in product that has been pre-sold, I can plan inventory more effectively, without having to sit on it."

Even with some of its growing pains still raw, there is a sense that PetFlow's do-it-yourself entrepreneurial approach and baptism by fire is beginning to pay dividends beyond 10-percent-per-month sales growth.

Working with Synergy, PetFlow has created a back-end operation that lives up to the quality, convenience, and customer service pet owners demand.

"With the repeatable component of PetFlow's business, it's crucial to provide the perfect experience for the customer every single time," says Kesten.

Snapfulfil's robust WMS functionality supports that goal by delivering perfect orders. Thanks to the solution, PetFlow's fulfillment operation today is the cat's meow.