Xmas is weeks away and online retailers are gearing up for the expected rush. Efficient stock management systems and smooth relationships with suppliers and delivery firms are vital to their success. How do etailers manage their supply chain?
The week before Woolworths' first Christmas online was quiet, but not without a touch of drama. That resulted in cranberry sauce and Christmas being indelibly associated in e-commerce director Richard Harrison's memory. Four years ago he and a couple of colleagues found themselves driving around Auckland looking for spare crates of the sauce to fill orders. "Cranberry was as scarce as hens' teeth at that time of the year," he recalls. The sauce is one of about 50 items the supermarket has found must stockpile to meet the Christmas demand of the online gourmet.
Woolworths expected a quiet period in the first week of Christmas shopping in the second year of its online operations but it was not to be. While orders were met, resources were stretched and the going was tough, admits Harrison. Things went more smoothly last year, and the company, which employs over 9000 people and operates 96 supermarkets, has spent two months preparing for this festive season. Developing a history of doing business online means experience can be used to forecast demand and ensure stocks are kept in reserve to meet it, says Harrison.
He attributes much of the success of the service to the all-Microsoft information system Woolworths bought and the applications the division has developed for it over the years. The back-end of the system consists of Microsoft Internet Information Server 4.0, SQL Server 6.5 and Transaction Server 2.0 and active server pages, on Microsoft Windows NT 4.0 and Windows 2000, now in the bedding-in process.
The Woolworths website was developed by Auckland-based Olympic Software.
Reporting and analytical tools and fulfillment software have been developed in-house.
"We've had a hefty year of development and the good thing is we're at the stage where the tools are now robuster and working more consistently for us," says Harrison. The information and intelligence the online service is able to gain on this part of business allows staff to manage the business a lot more efficiently than was possible in at the beginning. "So, now the IT part is really starting to play the role it has needed to play," he says. The business has reached the stage that without good quality information systems it simply could not be grown.
The service works like this: when a customer uses a web browser to communicate with the company's web page and decides to make a purchase, the web server gets in touch with corporate gateway system that determines where the customer is and where the order is going to be fulfilled. The order is routed to the appropriate store and goes into the fulfilment system. There a team of people use laser devices that allow them to pick the ordered goods in logical sequence. The goods are then packed and sent to a staging area where refrigerated and frozen goods are held in a temperature-controlled environment until they are picked up by a courier. They are then taken in refrigerated trucks to the addresses stipulated by the customer and delivered at the time the customer has indicated as being most convenient.
It is not a traditional courier operation, says Harrison. The couriers need to be the right kind of friendly people. They have got to know how to handle food, understand what the customer needs and deliver on time, he says. "It's very much a partnership with them," he says. "We're not experts on distribution and we look to the couriers to provide that expertise." "Woolworths is fortunate enough to have some great couriers and they do a fantastic job for us.”
A distinct advantage Dick Smith Electronics would claim over other companies in the online sales business is that it has been doing mail orders for 20 years and knows all about remote ordering. As soon as the company gets confirmation of online orders from its website an email is sent to the order-takers in the mail order division, which handles mail, online and some other kinds of orders. Credit cards and identification information is then checked out.
Once the warehouse gets an order it prints out picking slips and the goods are shipped as soon as possible. A number of couriers deliver the goods ordered, partly because DSE ships products to resellers, large corporate customers and educational institutions as well as online retail consumers. The company's own stores throughout the country get special delivery priority.
DSE's warehouse and fulfilment division share the same information, which is handled by its IBM AS/400. It runs most systems from stock management to inventory control and distribution. All of the applications have been developed in-house by the Australian firm’s systems division. The desktop computers in stores and elsewhere in the company, which run Microsoft Windows 98 and Windows 2000, act as terminals and run normal office applications.
The company’s stores don't order stock, says IT manager Greg Clare. "They've models based on sales history and the system automatically replenishes the stores on the basis of their sales."
Tyranny of distance
Toys Direct, a family-owned Wellington-based internet gift, craft and toy shop started in 1998, says increased international security post-September 11 has affected delivery of its wares to overseas destinations.
The firm, which also operates other sites devoted to outdoor play equipment, Peter Rabbit, teddy bears, crafts, babies and wooden toys through the XtraMSN marketplace, has used NZ Post International Air for overseas orders. The service has been reliable and cost-effective to date, says manager-operator Janice Hudson, but recent delays mean NZ Post can’t accurately predict delivery dates. The target for Australian orders, for example, is three to six days. "One Australian order was still not received after 22 days, and was resent using track-and-trace," she says.
Hudson says she is considering only using overseas services with a track-and-trace facility, but this is expensive for the customer and a point may be reached where it is not viable to order internationally. "I am concerned about Christmas deliveries. With the usual Christmas delays, plus increased security, [we] can't promise delivery by target dates," she says. Some 95% of the goods listed on Hudson website is kept in stock in warehouses and storage facilities, while the rest is on order.
ToysDirect uses a fairly standard processing system. Hudson says customers add items to a shopping cart and pay using a credit card, which is processed before despatch. "When an online order has been completed, the customer receives an automated email confirmation that we have received the order and are advised when it will be processed.
We also receive a copy of the email. We then view and process the order in the database with date, time of despatch and delivery method used. The customer then receives automated confirmation.” The goods are then packaged for despatch, either by courier, Mainfreight truck or mail, taking a day or two in New Zealand depending on the product and delivery method. For international orders, ToysDirect seeks further confirmation by email from customers by informing them of the postage cost.
Some products are imported from Europe and Australia, others are sourced from New Zealand. Hudson says due to the vast number of suppliers, there is no one standard "system" linking her business with suppliers. Imports are sourced online, through physical catalogues, regular contact email and freight agents, with orders online or by fax.
"When buying from wholesalers, the business relationship is consistent with the retail industry. We have regular contact -- phone or email with suppliers. Ordering is online, or by phone and fax. There are also regular rep visits -- a mixture of old and traditional. It is good to have ordering systems in place but important to have the regular personal contact with suppliers," she says.
The company uses US software modified by ToysDirect programmers to take orders. Its website was developed in active server pages using Macromedia Dreamweaver Ultradev and is hosted by 2Day on a Windows 2000 server. The back end uses an Access 2000 database.
Hudson says sales are consistent with budgets and increasing all of the time. She claims growth of around 30% over the past year.
Chatting with the customers
Jenny Hannah's lingerie and swimwear etailer JenniferAnn.com is aiming for higher targets. She claims continued growth of 17% to 20% a month, with 76% of orders exported to the US. Other sales are mainly domestic, but JenniferAnn.com also claims healthy sales in Japan and Poland.
Over the past year, Hannah says staff numbers at the Manukau-based business have doubled from five to 13, and last month the company launched a website design business, JenniferAnnWeb.com, which she says is working on 30 to 40 websites.
Hannah says the new offshoot, employing a further eight contractors, follows calls from people wanting to launch websites and is not a response to lower growth. "I said we had the experience in-house. We know what we are doing when building websites. It is growing faster than we expected," she says.
The company’s core business uses a software system called Actinic, supplied from the UK. JenniferAnn.com is presently rewriting its system to improve system flexibility, as the company plans to expand into giftware, cards and cosmetics, and will retrial men's clothing.
But Hannah says customers should not notice any difference during the changeover. Normally once an order comes through over the web, the system spits out a report with an allocated order number. This goes through to the packaging department, where the goods are all on-site at the company’s Manukau warehouse. A team of packers get the orders together, which are then sent out by regular arrivals of overnight couriers. The couriers use track and trace systems and the goods are delivered the next day, if in New Zealand.
The company website has recently incorporated live 24/7 chat with customers. Hannah says customers love going to the site and talking to customer service reps who "know the products inside out". "We find we can convert many orders because of it," she says.
Developing and maintaining links with suppliers are more traditional and is known as “indenting”. JenniferAnn.com has just finished indenting for autumn/winter 2002. At the beginning of the buying season, reps from Bendon, Berlei, Exposay and others visit the company, which also receives products sent from Australia and the US. Other purchasing decisions are made on visits to fashion shows. "A lot of buying decisions are based on the product being pitched. We expect the supplier to have photos. If not, it's discarded," she says. Hannah says the events of September 11 caused sales to plummet, particularly from New York, but says they recovered within a week.
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