We've Got a Secret

Fulfillment Structure Problems

News Flash

Stanford is among the throng of new e-retailers who have discovered that having a great Web site is by no means the key to e-commerce nirvana. Inventory management and order fulfillment often turn out to be the most costly, complicated and time-consuming components of their business operations. In fact, an unstable back-end fulfillment structure is the reason why many Web businesses fail to turn a profit.

Stacie McCullough, a senior analyst with Forrester Research Inc., says fulfillment is particularly challenging for small e-commerce businesses, as automated warehouses are optimized for shipping products in bulk to wholesalers and retailers rather than picking, packing and shipping smaller orders to customers.

Herb Tabin, 33-year-old founder of Stogies Online (www.stogiesonline.com), could encounter similar problems if he were to outsource fulfillment for his online cigar business. Currently, Tabin's 18-person in-house fulfillment staff manages to ship more than 2,500 boxes of cigars to his customers on a monthly basis, but Tabin, whose company is now averaging $200,000 per month, believes he'll eventually need to seek outside help. So far, he hasn't been impressed with what he's found in the way of fulfillment houses. "They're not equipped to handle our product," he says. "They don't know much about it." Tabin plans to continue looking for an appropriate fulfillment company, but he doubts he'll find one. "If someone could provide us with a reasonable fulfillment house that could talk about our products accurately, we'd go for it, but the problem is, they're just not out there."

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This article was originally published in the May 2000 print edition of Entrepreneur with the headline: We've Got a Secret.

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