processes. Now add e-commerce. The dra-
matic escalation of trade volume through e-
procurement environments – and antici-
pated volumes through e-marketplaces – has
created a B2B opportunity estimated to be
10-times that of B2C.
As B2B business models evolve to satisfy
this explosive growth, the basic trade rela-
tionships among supply chain partners are
evolving as well. In particular, B2B e-fulfill-
ment is migrating from long-term one-to-one
relationships to fluid many-to-many rela-
tionships. Traditional third-party outsourced
fulfillment arrangements are evolving into
complex service bundlings involving ware-
housing, picking, shipping, information
systems support, labor augmentation and
management – all provided by one service
company operating under one long-term
contract. (Currently, these services are
increasingly available in smaller
components, making it possible for
organizations to partner with the best-in-
class provider for each capability.)
For the enterprise selecting the appropri-
ate channel for customer-facing fulfillment,
two issues stand paramount: the importance
of the buyer to the seller and, conversely, the
importance of the seller to the buyer. These
issues exist regardless of distribution chan-
nel, each channel having its own fulfillment
requirements.
Mutual Partnership (B2B)Often where the supplier and customer are
strategic to each other’s business, the
emphasis is on high logistics availability to
support rapid, often just-in-time (JIT),
port, and customer service solutionsthat deliver operational excellence infulfillment
• New types of relationships that lead tocreating integrated and responsive sup-ply chain networks between supplychain participants
• New technologies and services to sup-port these supply chain networks
B2B E-Fulfillment ChannelsE-fulfillment includes activities such as
order management, call center management
and telemarketing operations, online credit
checking and credit card processing, all
aspects of customer service, procurement
and inventory management, warehousing
and shipping, and processing and disposi-
tion of returns. Together, these activities can
represent most of the tangible assets sup-
porting a company’s e-commerce strategy.
More important, they can be responsible for
delivering some of the most memorable
aspects of service to customers – one of the
bases for repeat customers.
This conventional view of e-fulfillment is
breaking down. The problem is that con-
sumer-direct models are putting high
demands on the distribution system as a
result of smaller, more frequent, more time-
sensitive orders to an often significantly
broadened geographic base. This pressure is
further exacerbated by product returns
“Where’s the package I ordered the other day
off the Internet?”
That was probably the most commonly
asked question during the 2000 holiday sea-
son. That season was to be business-to-con-
sumer (B2C) e-commerce’s big coming out
party. And sure enough, toys, clothing, soft-
ware, books, home electronics, and millions
of dollars of other goods were ordered off the
Internet. The problem was, a lot of people
waited to receive what they ordered.
The click-and-mortars soon discovered a
fulfillment gap. The traditional fulfillment
solutions did not live up to expectations
implied by B2C e-commerce. As a result,
consumers became less than bullish about e-
commerce.
From that experience, e-fulfillment has
become a hot topic, so much so that it has
the potential to be an excellent play – finan-
cially and competitively – in the new world
of e-commerce. This is particularly true for
those players already in the fulfillment mar-
ket for some time; they are most likely to
overcome the fulfillment challenge.
Most industry observers agree that if the
challenge of B2C fulfillment was great, the
B2B challenge will be even gretaer. Why?
Because the variety of B2B channels is very
large, the fulfillment requirements of these
channels are still being defined, and e-ful-
fillment can’t provide the breadth of fulfill-
ment capabilities required by all of these
channels.
Integrated fulfillment is an e-fulfillment
approach with a broad end-to-end supply
chain performance objective. Integrated ful-
fillment combines:• Newly emerging warehousing, trans-
Integrated Fulfillment
E-Fulfillment Challenge –The Holy Grail of B2C and B2B E-Commerce
White PaperWhite Paper
5FULFILLMENThttp://hintlian.ascet.com
James T. Hintlian is a partner in the Accenture Supply Chain Management practice with global responsibilityfor integrated fulfillment services.
Robert E. Mann is an associate partner in the Accenture Supply Chain Management practice. He has spentthe last 18 years helping retailers and direct marketers with their supply chain and operations challenges.
Phil Churchman is a senior manager in the Accenture Supply Chain Management practice.
James T. Hintlian Robert E. MannPhil ChurchmanAccenture
The next hurdle for B2C and B2B businesses is in the physicaldelivery of products to customers. Doing so – effectively, reliably,economically – will make fulfillment a strong market differentiator.
replenishment. For this, the relationship
makes heavy use of automated re-ordering
through electronic data interchange or the
Internet, as well as vendor-managed inven-
tory services. In the latter case, the supplier
might take on the burden of monitoring
material levels at the customer’s sites, even
to the point of using telemetry. The capabil-
ities providing physical fulfillment are var-
ied, often involving physical or electronic
kanbans (at the bulk, pallets, and tote bins
levels, for example) to support JIT replen-
ishment direct to assembly.
E-Procurement (Primarily B2B)Products in this channel arrangement are
frequently supplied from multiple supplier
locations to a single customer location.
While several possible product characteris-
tics will influence the fulfillment solution,
the solution typically involves consolidating
items from the multiple sources into a single
delivery or a repetitive set of deliveries.
Agents and Distributors (B2C and B2B)Two broad categories of fulfillment models
exist in this channel environment: stocked
and stockless. The fulfillment solution to
support the stockless environment is similar
to the e-procurement channel.
However, agents and distributors typically
need to maintain a large number of stocked
items to meet delivery lead time require-
ments. From this buffer stock, they must
rapidly assemble many small orders.
Automated picking using sophisticated
materials handling systems can be appropri-
ate in this environment. However, automa-
tion should be used sparingly as inappropri-
ate automation can result in expensive,
inflexible solutions that can not adapt to
changing fulfillment needs.
Regardless of automation, agents and dis-
tributors might consider these fulfillment
strategies:• Segregating large and small items into
different picking facilities• Utilizing trans-shipment locations to
transfer stock into smaller vehicles fordelivery
• Holding fast-moving items at local
replenishment facilities and slow-mov-ing items centrally
• Different lead times and availabilitypolicies for different products
Direct Channel (B2B and B2C)Direct channels range from “low-cost
direct,” where the emphasis is on reducing
the customer and the supplier’s transaction
costs, to “high-value interactive,” which
focuses on increasing the breadth of service
provided to the customer. In both cases,
customers can place and track their orders
with a supplier.
Where the service and delivery require-
ments are similar to traditional channels,
fulfillment will typically be through the
existing fulfillment network. Where
requirements are significantly different, new
fulfillment solutions are required. This is
especially the case where a direct channel is
being used to bypass existing distributor,
wholesaler, or retailer channels. Specialist
fulfillment services are emerging to meet
this need; however, they are relatively
immature and there are no clear leaders.
Exchanges and Auctions (Primarily B2B)While transaction volumes are still very low
among the enormous variety of B2B market-
places that have emerged in the past 12
months, the pressure is on for these
e-marketplaces to turn their attention to the
fulfillment solutions required to support the
anticipated transaction volumes. In these
solutions, real time is key in two key areas:
confirming availability of fulfillment capac-
ity and providing a price for delivery.
Digital Transaction Hubs (B2B)These hubs, which focus on reducing the
cost of integration between buyers and sell-
ers, differ from trade exchanges in that par-
ticipants in the former routinely buy and sell
product from one another. They do not
require the buyer/seller matching capability
provided by exchanges. Digital hubs let
member companies collectively outsource
fulfillment activities they do not consider to
be a part of their core competency or a com-
petitive differentiator. Through outsourcing,
the member companies can achieve enor-
mous economies of scale that individually
would have been impossible.
Integrated Fulfillment
White PaperWhite Paper
low high
low
high
E-Procurement DigitalHubs
MutualPartnership
DirectDistributors/Agents
B2BE-Marketplaceand Auctions
B2C+B2B
ImportanceBuyer-to-Buyer
Importance ofSeller-to-Buyer
Figure 1 – E-Commerce Channels (Source: Accenture)
Integrated Fulfillment
able to an enterprise creates a concomitant
complexity in that enterprise’s supply chain.
This emphasizes the importance of carefully
aligning three key aspects of the enterprise
and fulfillment providers before embarking
on a vision of integrated fulfillment.
Merging operational excellence with e-
commerce opportunities is the first key
aspect. Such excellence is not to be taken
lightly. To be successful, e-retailers must
embrace an almost Zen-like “back-to-basics”
approach to delivering their products to cus-
tomers on time, at the right quality, and at
the right cost. This approach is fundamen-
tally the same as it has always been:
• Segment customers according to needs• Customize the logistics network• Integrate demand and supply plan-
ning• Integrate product, information, and
financial flows through the supplychain
• Differentiate the product closer to thecustomer
• Source strategically• Use supply chain spanning perform-
ance metrics
What’s changed today are the new tech-
nologies that broaden the possibilities in
achieving this operational excellence. For
example, in the electronics and high tech
industry, supply chain collaboration tech-
Conversely, a provider of fulfillment serv-
ices need only integrate into the digital hub
– not the individual member companies – in
order to provide services to all of the mem-
ber companies. Thus connected, the
provider can offer value-added services,
such as inventory, transportation, and sup-
ply chain management, at a cost and on a
scale previously unimaginable.
In balancing the aforementioned channels
with an e-fulfillment solution, the e-com-
merce enterprise must consider factors such
as speed of implementation, degree of cus-
tomer contact and operational control, relia-
bility and flexibility of service, and initial
and ongoing costs. On top of that is one of
the most critical considerations: how best to
combine an enterprise’s capabilities with
those of chosen supply chain partners. Such
business relationships include the use of
spot shipments, consolidators, market-level
logistics services providers, as well as devel-
oping a fixed relationship with a fulfillment
service provider. The advantages of each of
these relationships depends upon the degree
of specialization required, and whether
shipments are bulk or less-than bulk.
The Three Keys to Integrated FulfillmentThe variety of distribution channels avail-
nologies make outsourcing manufacturing
and distribution to the best-in-breed
provider possible. In the automotive indus-
try, automakers and their OEM suppliers
now have visibility to demand and inventory
in the dealership network, thereby letting
the manufacturers postpone final assembly
until an order is received.
The second key to realizing integrated ful-
fillment is in creating new kinds of relation-
ships and services. New relationships are
necessary because e-commerce is stretching
the traditional relationships between
providers and users of fulfillment services –
a relationship that remains primarily at
arm’s length. Some of the characteristics of
these new kinds of relationships are:• More collaboration between service
providers and users.• Win-win commercial arrangements.• A true understanding of core compe-
tencies and re-assessment of activitiesthat can be outsourced.
• Arrangements that provide services toboth networks as well as individualcompanies.
For service providers, integrated fulfillment
demands skills and capabilities far beyond
that provided by conventional carriers and
third-party logistics providers (3PLs). For ful-
fillment service users, integrated fulfillment
requires a substantial cultural shift if partners
are to participate in fulfillment networks that
could include competitors.
The fact is, technology is no longer the
primary competitive advantage to realizing
integrated fulfillment. Instead, the ability to
change, develop new kinds of relationships,
and implement new solutions will be the key
differentiators.
New and Emerging CapabilitiesThis brings us to the last key aspect of inte-
grated fulfillment. In the past, fulfillment
services were provided by individual firms
to individual firms. These services were rel-
atively easy to classify, such as 3PL, haulage,
freight forwarding, and parcel
carrier. No longer. Completely new kinds of
services are necessary because e-commerce
demands a dramatic change in the fulfill-
ment solution landscape. New fulfillment
capabilities are needed to support B2B2C
White PaperWhite Paper
Technology Enablers Technology Enablers
Traditional Emerging
FulfillmentService
Providers
FulfillmentService
Providers
eMarket
Intermediary
FulfillmentServiceUsers
FulfillmentServiceUsers
Supply ChainManagement
Service Provider
Figure 2 – The Changing Fulfillment Solution Landscape (Source: Accenture)
Integrated Fulfillment
and to better compete among emerging mar-
ketplaces. We have classified these capabili-
ties under three broad types of services.
Fulfillment E-MarketplacesFulfillment e-marketplaces match buyers
and sellers of a product or service, or they
provide a mechanism (including exchanges,
auctions, and reverse auctions) for setting a
price, or both. These marketplaces fall into
two categories: public and private. Public
marketplaces are open to any carrier or ship-
per that wishes to participate. Private mar-
ketplaces are restricted to member providers
and users, are typically constructed around
a specific synergistic opportunity, and they
tend to be focused on specific modes and
geographies. Public marketplaces are cur-
rently more prevalent, but private market-
places could rapidly gain traction as:• They are constructed around a specific
synergy opportunity.• They are focused on a specific
requirement.• Service providers are pre-vetted and
known by users.• All participants are committed to the
success of the exchange.
Infomediaries Infomediaries provide information through-
out a network that supports synchronized
decision-making at the operational, tactical,
and strategic levels. This information, pro-
vided to a community of users, ranges from
specific track-and-trace information to
industry trends, prices, and news feeds.
In the context of fulfillment, infomedi-
aries primarily focus on the provision of
track-and-trace information. And for good
reason: Not only does the information need
to be collated and presented in a format cus-
tomized to the needs of the user (arguably
the relatively easy part), it also needs to be
gathered at the point where the information
was created (for instance, at the loading
dock, in transit, or on the assembly line).
The practical challenges to capturing and
recording high-quality and complete track-
and-trace information across the supply
chain are great. Traditional approaches, such
as keyboard entry and barcode scanning, are
now being complemented by technologies
such as global positioning satellite, mobile
phone, and radio tagging. As these technolo-
gies mature, we can expect to see the range
of infomediary services continue to develop.
Flow Management ServicesFlow Management Services manage the flow
of transactions through the network. An
extension of this capability is to provide sup-
ply chain planning services (for example
transportation and warehouse management
systems, demand planning) to network par-
ticipants; that is, end-to-end order manage-
ment visibility throughout the entire order
life cycle. Such capability lets enterprises
outsource not only fulfillment execution and
scheduling, but also the management and
optimization of these activities across com-
plex, multi-partner supply chains. Just now
emerging within these flow management
services is custom business logic to identify
business exception conditions that alert
management to take action through some
Web-enabled communications tools.
Who’s Going to Win?With expertise in transport and distribution,
3PLs should be dominating the new world of
e-fulfillment. However, traditional logistics
companies are generally lagging in develop-
ing capabilities to support the dynamics of
B2B e-commerce. For many, managing con-
tracts, assets, and industrial relations have
been core competencies; they have less
experience with new requirements for tech-
nology, planning, and service development
competencies.
To remain competitive, the traditional
3PLs must undergo significant organiza-
tional change. To date, many have created e-
commerce divisions, yet many of these are
not integrated with the rest of the business,
which leads to confusion about customer
ownership, varied service levels, minimal
knowledge sharing, multiple customer entry
points, and limited scalability.
In addition, and despite current narrow
profit margins, these companies will have to
invest substantially to integrate and scale
their e-commerce operations. Information
technology may be their biggest barrier to
success – many lack the latest in
client/server information systems. But there
are also non-technology limitations to over-
come. Most 3PLs have single-user or occa-
sionally dual-user operations, they use inter-
nal carriers, and have limited geographic
coverage. In addition, while closed-book
third-party agreements tend to work better
in the e-commerce environment, some 3PLs
only operate on an open-book basis.
Mail order companies have the potential
to create an end-to-end offering that
includes payments, call centers, and physi-
cal fulfillment. However, they will have to
improve their service levels to operate effec-
tively in an e-commerce environment.
Fulfillment houses are generally multi-user
enterprises that use multiple carriers. For the
most part, these operations are not particu-
larly technologically sophisticated.
Conversely, traditional catalog retailers are
generally technologically sophisticated, but
they face a market already saturated by
existing businesses and channels, plus con-
flicts with potential B2C customers. Despite
having an already extensive network of
home delivery, they still need to enhance
their fulfillment capabilities to meet the
demands of the Internet shopper.
Seizing the OpportunitiesThe convergence of the vision and reality of
integrated fulfillment provides abundant
opportunities for new, competitive services
across the supply chain. For shippers, these
include leveraging new workflow manage-
ment and infomediary solutions to achieve
new levels of supply chain integration,
filling spot fulfillment needs through
public exchanges, and participating in
private networks.
For carriers, integrated fulfillment helps in
developing targeted e-channel strategies,
establishing service differentiation (through
infomediary and workflow management
services), targeting markets where
differentiation is possible through services
or cost, participating in private networks,
and selling marginal capacity through
public
exchanges.
Last, for
B2B e-com-
merce in gen-
eral, the
White PaperWhite Paper
more on the web
The process of integratedfulfillment is discussed infurther detail in an interviewwith JC Penney’s Dave Evans,http://evans.ascet.com
Integrated Fulfillment
to consumers. Moreover, price differences on
the Internet are apparent, therefore e-fulfill-
ment costs have the potential to destroy any
competitive advantage an enterprise might
claim. (In addition, the variable costs associ-
ated with product returns may invalidate a
heretofore acceptable operating model.)
For all of these reasons, the fulfillment
strategy is just as critical in the development
of an e-commerce strategy as the choice of
product offering, marketing approach, and
website design. Apparently this message got
through to the online B2C store fronts oper-
ating during the 2000 holiday season.
According to results of Accenture’s second
annual U.S. e-fulfillment study, online U.S.
e-tailers developed strategies to address e-
fulfillment and supply chain issues. More
important, they improved their execution,
making great improvements in service levels
that consumers value. (Of note, 92% of the
attempted holiday purchases over the
Internet were successful this past holiday
season; in the 1999 holiday season, upwards
opportunities include providing vertical,
geographic, or mode-specific infomediary or
workflow management services, or both,
and integrating with public and private
logistics exchanges.
The bottom line: No matter which model
an enterprise selects, the enterprise will be
providing consumers with a new service –
often for free – while trying to maintain profit
margins. In the old world, picking items from
retail shelves, paying and packaging at coun-
ters, loading purchased goods into transport,
and delivering those goods to the home were
carried out by the consumer and were not
generally recognized as components of the
total shopping cost. With the exception of a
segment of consumers who value the con-
venience factor of home delivery and are pre-
pared to pay a premium for it, today’s con-
sumers expect their complete online
shopping experience to be competitively
priced with traditional retailers’ shelf prices.
The reality is that high e-fulfillment costs
will inevitably increase the sustainable price
of 25% of the attempted online holiday pur-
chases were unsuccessful.)
Such improvements come from rigorously
questioning the underlying logic of potential
fulfillment models. The success of any one
model will rely on the development of ware-
housing, transport, and customer service
solutions designed to deliver operational
excellence. Also key will be the establish-
ment of new kinds of relationships between
supply chain participants, such as increased
collaboration between service providers and
users, win-win commercial arrangements,
and a true understanding of core competen-
cies and re-assessment of activities that can
be outsourced.
Clearly, the approach to integrated fulfill-
ment has enormous implications for the
growth and profitability of any product-based
e-commerce venture and requires a strategic
selection that not only recognizes the need for
exemplary service performance, but that also
delivers a competitive cost advantage.�
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