From the June 2000 issue of Entrepreneur

Any follower of e-commerce news could tell you that this past Christmas was quite a disappointment for many frantic online holiday shoppers. News reports highlighted Web retailers turning away last-minute shoppers wanting guaranteed delivery and Toysrus.com's failure to deliver some promised packages by Christmas day. Now Toysrus.com faces a lawsuit brought on by angry parents who didn't receive their toys before the holiday. You can avoid these kinds of problems by managing your inventory properly and implementing well-organized back-end fulfillment and shipping operations.



Melissa Campanelli is a technology writer in Brooklyn, New York, who has covered technology for Mobile Computing & Communications and Sales & Marketing Management magazines. You can reach her at mcampanelli@earthlink.net.

Partnering Up

Entrepreneurs shipping large volumes especially should outsource such back-end operations as customer service, order entry, order management, fulfillment and customer returns. It's a good idea to use referrals to find a smaller fulfillment company. But keep in mind that some fulfillment houses turn away small businesses because they're more costly to service than corporations that ship large volumes of items. The variety of products being shipped also affects service and price level-for example, it's more costly and time-consuming to prepare packages that contain different combinations of items than it is single-product packages.

Before choosing a fulfillment partner, make sure you specify the services you need, your expected volumes and your business' terms, such as whether you'll pay handling on a per-piece-picked basis or on a package-shipped basis. "Not defining these terms ahead of time is the single biggest thing that makes these outsourcing arrangements fail," says Bob Hutchinson, managing director of KPMG's consumer markets supply chains solution practice in New York City.

Going It Alone

If your company ships less than 20 packages per day, you can easily fulfill and ship them on your own by using the software and services from major shippers such as the U.S. Postal Service (USPS), UPS and FedEx.

Software from these carriers can be used to process domestic and international shipments, handle routing and billing, print labels and pick-up records, track packages, order supplies and view time-in-transit options. Customers can track shipments through companies' Web sites; find estimated delivery times; and compare, price and select the various shipping services.

Options offered for basic ground delivery run from overnight to seven days. "Two to three days" is becoming the norm for residential delivery.

Service First

Although standard delivery times for the big-name carriers are well-known, always tell customers that the arrival of a shipment is affected by such things as product availability and time of year. For example, high-volume demands during holidays can bog down shipments.

There are a variety of factors that determine the cost of shipping, but, in general, USPS offers the least expensive services. "For Second Day, also known as Priority Mail, [USPS rates] are half the price or less," says Art Avery, principal consultant at Avery & Associates, an e-commerce distribution and logistics consulting firm located in Allentown, Penn-sylvania. "UPS prefers to ship to businesses and from large shippers, and they allow large shippers to get discounts off the published UPS and FedEx rates."

In addition, Avery says, shipping to a "business ZIP code"-that is, one where a lot of businesses are located-costs $1 less than the official rates. The extra dollar you'd otherwise pay covers the extra travel and fewer package stops residential deliveries require.

Another advantage of USPS, says Avery, is it's the only service that delivers to P.O. boxes. One drawback, though: USPS isn't quite as technologically astute as the other carriers-although that may improve in the future.

FedEx generally offers the most expensive service, but its new two-to-five-day home-delivery program may become an enticing option. The program allows customers to schedule their delivery-even in the evenings. And UPS' recent announcement that it plans to open a series of pack-and-ship stores this year will give customers a new way to pick up their packages. For details about these and other services, check out the carriers' Web sites: www.usps.gov or www.uspsprioritymail.com for USPS, www.fedex.com for FedEx and www.ups.com for UPS.

But meeting customer needs doesn't stop there. Shoppers won't want to calculate shipping costs themselves, so make sure your shopping-cart system works in conjunction with the carrier's software to calculate those charges automatically. You can even set up your system to configure shipping options based on a set percentage of order costs-giving you the ability to offer free shipping for orders above a set threshold.

Handling returns is another opportunity (sometimes missed) to make customers happy. Fact: About one-quarter of all online purchases are returned. To keep customers, you've got to have a no-hassle return strategy in place. Customers like return policies that say they can return products within 30 days for a prompt refund. Smart companies go so far as to insert return labels in their packages. Others put return forms on their Web sites; then they can send authorization to their customers via e-mail and notify a carrier to go pick up the package within one business day.

Same-Day Service

Is it outlandish to think you can get your product to a customer's doorstep in 24 hours or less? Not in today's high-tech world. Many small businesses have already started experimenting with same-day delivery.

Sameday.com in Los Angeles, California, is one such business. It offers same-day delivery service to retailers who stock their merchandise in Sameday.com's fulfillment centers. Currently, Sameday.com can fulfill orders placed no later than 2 p.m. by 8 p.m. in Chicago, Los Angeles, New York City and San Francisco (Atlanta, Dallas and Seattle to come). But expect to pay for the convenience: Delivery charges average about $10 per order.

To date, Sameday.com has been used mostly by large companies that can support inventory in multiple centers. But as e-commerce customers get used to having their purchases delivered in a single day, more entrepreneurial businesses should become interested.

"The e-commerce consumer, who is used to working with a very interactive and quick process on the front-end, isn't going to want to wait five to seven days," says Andrew Krainin, Sameday.com's senior vice president of marketing. "[The traditional] model doesn't really meet the needs of people buying online."


Comparison Shopping

It pays to shop around.

Art Avery, a principal consultant at Avery & Associates, an e-commerce distribution and logistics consulting firm in Allentown, Pennsylvania, says the U.S. Postal Service (USPS) provides the most affordable delivery options compared to other carriers. Here, he compares how much it would cost to ship a 3-pound package from Allentown, Pennsylvania, to Norcross, Georgia:

ServiceNext-day2nd-dayGround
FedEx$23.7511.50N/A
UPS$21.7510.004.97
USPS$18.504.30N/A


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