20 INDUSTRIAL DISTRIBUTION / November/December 2013 www.inddist.com
Accelerating Fulfillment Requires
Balance
Learn the benefits and impacts of same-day fulfillment
BY HELGI THOR LEJA, Industrial and Electrical Distribution Leader
– Fortna Inc.
Same-day fulfillment is no longer the holy grail of distribu- tion. Leaders are enabling faster fulfillment and reaping real bottom line and competitive advantage benefits. The key is
balancing potential revenue gain or service level improvement
against investment and operating costs required to deliver on the
promise. And the pivot point is your cut-off time. Choosing the
right strategy and cut-off time(s) depends on understanding the
impacts not just within the DC, but across the organization. This
article outlines the benefits and key considerations of enabling
same-day shipping.
The Bar Has Been Raised
In today’s instant gratification culture, it’s not surprising that distributors are focused on reducing the time it takes to get an order
into the hands of a customer. With more companies following
Amazon’s lead in offering same-day delivery and free shipping,
customers now expect shorter order to delivery cycles — which
requires faster order fulfillment from the distribution center. And
companies are looking at compressing fulfillment time as a way to
compress their “cash to cash” cycle. Faster delivery to the customer
often means faster payment, and ultimately, an opportunity to get
paid before the invoice comes due on that inventory.
In a recent customer experience study, 48 percent of customers
stated they are not willing to wait more than five days for a purchase and more than 40 percent of online shoppers indicated they
have abandoned their shopping cart because of an issue with the
estimated delivery date. Depending on where your customers are
in relation to your distribution centers, this may mean compressing fulfillment time to hours or minutes instead of one day.
Same-day fulfillment is not new — it’s been the goal of a lean
logistics strategy that reduces touches in the DC and minimizes
waste. But customer expectations for faster order-to-delivery
time and the need to reduce inventory levels across the supply
chain are driving some companies to push for fulfillment times to
an hour or less and offer later order cut-off times for stores and
customers.
This strategy may offer a key competitive advantage and help
to lower overall inventory costs, but it may also increase labor
costs and require additional infrastructure investment. For exam-
ple, companies may put in more automation or even do counter-
intuitive things such as add “touches” that were removed as part
of a lean initiative to achieve this level of service. It’s a delicate
balancing act between service and cost. The best way to start is
to understand the potential benefits that come from improving
service.
Same-Day Fulfillment: What are the Benefits?
In addition to meeting customer demand for faster order processing, same-day fulfillment holds the potential for several other
benefits.
Competitive advantage. Accelerating fulfillment often results in
revenue growth and increased market share.
The first to get the product to the customer gets the sale. Ask
yourself, does being first have an advantage for your business?
One automotive parts retailer uses same-day delivery from its
DCs to its stores as a competitive differentiator. With hundreds
of thousands of SKUs in inventory, it’s impossible to stock them
all at each of its stores. But having the right part available at the
right time is important to customers, especially for mechanics
working on repairs. So the company makes a number of same-day
deliveries from its DCs to its retail stores to ensure that any part
in its inventory is available when the customer needs it. In some
