We've Got a Secret

A Challenging Situation

Get Real

Risk-sharing played a role in 28-year-old Tony Toranto's method of finding a fulfillment company for shipment of Guardian Angel, a product that enables people to test their alcohol levels as a way of curbing drunk driving accidents. The small test strips, which are placed on the tongue after drinking, come packed in a credit-card-sized package that fits in a wallet. The company currently ships orders on a regular basis using two primary distribution channels; the first involves direct-mail shipments to policy holders of major insurance companies, and the second accommodates policy holders reordering the tests and people who order them directly from the company's Web site (www.guardianangelonline.com). Toranto says he never even considered handling fulfillment in-house at his San Francisco operation.

"Building a customer fulfillment operation that could handle shipments of a large number of Guardian Angels in a short period of time was beyond our expertise," says Toranto. "We were under no delusions about that, and we knew the most efficient way to execute that was to outsource it."

While researching operations, Toranto networked with other start-up executives and got a variety of recommendations. He also hired an experienced direct-mail project manager who could help select and work closely with the fulfillment houses to coordinate shipments and make sure the direct-mail activities ran smoothly. As a result of his efforts, Toranto didn't have trouble finding a fulfillment operation that wanted to work with his business-and he also learned to be realistic when communicating the uncertainties of his business demands and shipment quantities to potential vendors. "If there's ambiguity, you have to come to a mutually acceptable arrangement for some risk-sharing," he explains. "It might be that early on, your price structure may be different, or that you may make adjustments later."

The Bottom Line

Despite the growing pains that e-commerce businesses and fulfillment operations are currently experiencing, the future looks bright, as new fulfillment players are set to emerge in the coming year. For the time being, however, the best plan is to realistically assess your business needs, talk with executives from similar start-ups and find the system that best suits your model. It won't be easy, but it may be well worth the costs. Just about anyone can build a snazzy Web site, but in the end, your ability to handle fulfillment demands and deliver on promises to customers will be what distinguishes your business from the pack.

"The feedback we get from customers about our selection and customer care has been really positive," says Stanford. "It's what makes our company. So while fulfillment is our greatest frustration, in another sense, it's our greatest reward."

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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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