June 28, 2002

The Big Buy-In

Every customer relationship begins with a positive buying experience. Intelligent warehouse management is a great way to ensure one

by Jerry Sparger

The Internet is changing consumers' buying expectations. Consumers can shop online 24 hours a day, compare products in a matter of minutes, and purchase goods from sellers anywhere in the world.

As D.F. Ross explains in his book, Competing Through Supply Chain Management (Kluwer Academic Publishers, 1998), customer expectations have evolved: They now want customized products (not standardized ones) configured to their needs, they want them at a time and place of their (not the seller's) choosing, and they expect to pay for them at an often negotiated, or solution-based (not fixed), price. These new expectations put more pressure on sellers to support real-time ordering and status and product customization at the time of order because they must close sales before customers move to a competitor. At the same time, customers expect pricing and support consistent with planned production of standard products.

Some of these changes directly affect the order entry and fulfillment process. The competitive differentiators for an "intelligent" supplier then become the speed and flexibility with which products can be configured to meet customers needs, 2437 shopping and support, the ability to receive an order from any location and fulfill the order from any distribution point, and the totality of service associated with the product, including rapid order status and ease of order change.

Therefore, these differentiators imply the following goals:

• Give customers accurate and timely information about available products.
• Simplify the steps required for customers to place orders.
• Offer customers reliable and timely information about their orders.
• Allow customers to revise their orders prior to shipment.
• Offer customers alternatives or complementary items to the items they wish to order.
• Integrate all distribution centers into one "virtual" center to optimize inventory availability.

The New Order Process

Several functions come into play when a consumer makes a purchase. Sales, order entry, and processing, order fulfillment, and customer service functions must work together efficiently to create a positive buying experience. When these functions interact, your company can provide continuous, real-time, one-stop shopping and support to their customers.

In many businesses, these functions are independent — each has its own process and supporting technology, with delayed information exchange at limited points of interface between processes. The result is that companies can't give their consumers rapid, accurate order processing, fulfillment, and support.

This lack of tight integration and sharing of information across customer-serving business processes can cause serious problems. For example:

• Sales or order entry confirms an order, even though the inventory to fulfill the order has been depleted. This happens when order entry doesn't have real-time inventory status. The result is an unhappy customer.
• Sales or order entry confirms an order, inventory is in stock at the time of order, but by the time the order is processed, someone else's order has depleted the inventory. The customer is expecting the order, but instead gets a notice that the item is back ordered. This happens if the warehouse doesn't have the ability to actually control inventory by order. Again, the result is an unhappy customer.
• Order entry indicates a desired item is out of stock, but doesn't offer the customer alternatives in order to make the sale. This happens if order entry doesn't have real-time inventory status and lacks business logic to know what possible alternatives might exist. The result is that the distributor loses a sale and perhaps a customer.
• Order entry accepts and confirms an order, but fails to let the customer know of complementary products that are available. The cause is the same as the previous problem. The result is the loss of additional sales opportunity.
• A customer wants to know the exact status of his or her order, but has difficulty getting an answer from telephone or Internet-enabled customer service. The customer is either put on hold or current, accurate information regarding the location of the order in the order entry-processing-fulfillment cycle isn't available. This can happen if customer service doesn't have real-time access to precise information about an order, or there's no Internet screen to provide such information. The result is a frustrated customer, lost sales, and too many customer service representatives or sales personnel tied up pursuing order status.
• A customer places an order, but the local warehouse is out of stock. A remote warehouse has the item, but order entry isn't aware. The customer is told the desired item is unavailable. This can occur when the inventory of multiple distribution centers isn't integrated. The distributor loses a sale.

The solution to these problems is to tightly align sales (or the catalog), order processing, fulfillment, inventory control, and customer service. This alignment enables a distributor to provide rapid, error-free order entry and fulfillment regardless of the method of order placement. However, integrating these business processes requires technology that can enable real-time, cross-process exchange of information as well as control, not just reporting, of functions within each process.

The warehouse management system (WMS) is the "place" in the order entry and fulfillment cycle that contains most of the information that must be tracked in real time, and that can also control the fulfillment of orders. The WMS can be a stand-alone system, or part of an ERP system. In either case, not all WMSs provide real-time information and fulfillment control. Even those that do, such as CGW Inc.'s EnterpriseOne-Plus and Irista's IristaWarehouse, must be integrated with sales, order processing, and customer service.

By placing the WMS in control of the order entry, fulfillment, and status processes, you give your customers access to the most accurate and timely information about your inventory and their orders. You will not inadvertently accept an order without inventory to fulfill it. You'll be able to sell alternative and complementary items without human involvement, if you desire. And customers will be able to obtain status and even change an order up until the time of packing for shipment.

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