The cost of imperfect order fulfillment

Delayed or incomplete orders affect business revenues in tangible ways, and can incur high penalties. Ensuring perfect order fulfillment requires End to End Visibility of Supply Chain, which is difficult given the complexity of business operations today. The solution should provide monitoring across organization silos and third parties, as well predictive analytics. Failing to provide perfect order fulfillment can have severe consequences on your business.

Loss of revenues

Consumers today have higher expectations for the customer experience. New digital channels mean that it is much easier to shift their business to those providers that will meet their requirements and expectations.

Everyone is happy when sales are strong of course but retail’s busiest times of the year can also put a magnifying glass to any slow-downs or errors in the supply chain that could occur at any point across the process including: omni-channel service delivery, in-store stock replenishment and the drop ship process. These issues are costly any time of the year.  Examples include:

  • Product substitution – your customer receives what they did not order or only a portion of their order
  • Product out of stock – store shelves are empty and your customer receives nothing
  • Product delays – your customer receives the products too late.

In studies conducted by NewVoiceMedia, businesses are losing $62 billion in revenue per year through poor customer service – up more than $20 billion since 2013. And this is in the US alone. Over this same time period, the number of U.S. consumers who reported leaving a business due to inadequate customer service increased from 44 percent to 49 percent. And it’s not just about revenue loss for the business. Consumers who switch vendors are vocal in their dissatisfaction, and communicate this to the marketplace whether through negative online reviews or social media.

In a May 2017 research study carried out by IDC and Axway on over 600 executives, it is shown that customer experience has now become a board level mission critical agenda item, at the source of brand value and strategic differentiation for large enterprises. Enterprises are switching their focus from internal resource management to external customer experience.

High penalties

What’s at stake for the retailers is huge. With Amazon guaranteeing same day delivery from the moment you click on a button, retailers can no longer afford to have empty shelves that make them lose immediate revenues and have customers turn away to other stores or eCommerce sites. According to the Food Marketing Institute, $75 billions of sales are lost every year because products are out-of-stock, accounting for 10% of total, industrywide grocery sales.

To better compete with Amazon.com, major US retailers are becoming extremely stringent on their suppliers’ order fulfillment. A recent (Nov. 2017) article in the Wall Street Journal indicates that Wal-Mart and Kroger have shrunk their delivery window from 4 days to 2 days, and even 1 day for house-hold items. Any deviations are fined $500 per order or 3% of order amount. Penalties do not stop at fines, your organization can be blacklisted, or excluded from promotions and dedicated shelf space. For your organization, this can amount to millions of dollars per month. For the entire retail suppliers’ industry, this can theoretically reach $5 or $6 billons a year.

 

It’s Time to Be Proactive

To avoid revenue loss and incurred penalties, you need to be equipped with tools that enable real-time, end-to-end visibility so you can proactively and positively resolve issues.

Visibility into the supply chain is critical and that of course includes traceability of purchased goods to understand the location of an order and how it is being processed. But monitoring should also be done at both the technical level, which could include the number of transactions per day and the number of failed transactions as well as at the business level which includes discrepancies between forecast and received products, the number of delivered products, percentage of completed deliveries, preparation and expediting delays and elapsed time for order reception.

You should even take this concept one step further. Perhaps even more important for a business to take in is predictive visibility. Predictive analysis captures any given moment in time and can alert the business to a potentially undesirable event (the order will be 2 days late or an invoice is blocked therefore on-time payment should not be expected) so appropriate people can take proactive steps to correct the situation or at the very least, minimize the fall out.

Proactive monitoring of the ordering and shipping process anticipates risk rather than simply detecting problems after the fact. Predictive visibility goes a long way in satisfying demanding customers. Not only will it ensure a smoother ordering process for them, predictive visibility can lower out-of-stock rates, shorten order-to-delivery cycles, reduce safety stocks to the lowest possible levels and protect revenues by sharing physical store sales with digital channel sales, instead of losing them to pure eCommerce players. Predictive visibility drives operational intelligence in the areas that really make a difference for your bottom line.

A multitude of retail options, mobile shopping and e-commerce all point to an increasingly complex flow of information. Visibility is key and with predictive insight and alerts, supply chain execution simply runs smoother. In the end, this helps organizations deliver as they committed during the ordering process.

 

 A Real-World Example: Eyewear lens manufacturer

Axway worked with a large made to order corrective lens provider to improve the customer experience for their order fulfillment process. The group is present in over 100 countries, and the fulfillment process spans multiple systems, in multiple subsidiaries in the world, multiple manufacturing labs many of which can be involved in manufacturing a single order, as well as multiple 3rd party logistics partners.

The impact of the poor customer experience included revenue loss as well as their “upscale image” in the marketplace. The company was struggling to meet its 72-hour service level obligation from order receipt to lens delivery to the optician. Additionally, they were facing call center challenges as it took too much time to answer Optician order status inquiries. Because they lacked end to end visibility across four different systems there was no proactive notification for operations to be aware of abnormal situations such as orders that were stuck or slow in a processing step or that there were not enough resources to process peak order days.

The Axway Real-time analytics solution provided a holistic view of the order fulfillment process across all their systems enabling real-time tracking of items from when Opticians send Requests until lenses are delivered by the labs to Opticians. Status evaluation were implemented to provide pro-active monitoring of emerging issues in advance of negative impacts to avoid missing SLA and accelerate problem resolution:

  • Ability to collect data from multiple cross-unit data sources and provide one single view
  • Historical Reporting on activity

 

A Real-World Example: A major retail chain

Axway worked with a major retail chain, which serves 800,000 customers each day, offering some 30,000 products including groceries, clothing, household items, hardware and gifts present in over 600 stores worldwide.

Every day, the retailer receives orders from its stores and from individual customers who purchase goods through its e-commerce site. The company needs to ensure reliable order fulfillment – whatever the source of the order – and meet SLAs for the timely delivery of goods to stores and end customers.

The company has to ensure timely store replenishment to avoid out-of-stock situations that could lead to a loss of revenue, customer churn, and harm to the corporate image. Much of its stock is replenished with just-in-time delivery, making it essential to have real-time visibility into the status of orders.

To manage its outbound logistics, the retailer had a number of different IT systems, each of which played a specific role in the supply chain. As business expanded, the IT systems became more complex, and orders often became blocked in one of the systems without anyone noticing it. Usually, the problem only surfaced when a delivery deadline was missed – far too late to meet the SLA and customer expectations.

Axway provided a solution that interfaces with existing systems, to allow oversight of outbound logistics and support the development of new digital client channels.  The analytics solution provided the following capabilities :  end-to-end monitoring of data flows and business processes, modelling of the entire order life cycle to ensure orders aren’t lost in the company’s heterogeneous IT systems, which implement a variety of communication protocols, send an alert when an order is blocked, with an escalation process to ensure rapid resolution of the problem, analyze the financial impact of blocked or incomplete orders and determine the level of intervention required, ensure that stores receive delivery on-time.  The solution also provides an audit trail that captures the history of every order and determines how long it took to transit the system.

With Axway analytics solution now deployed across the outbound logistics supply chain, the company has seen an array of benefits:

  • Reduced operational risk. Now, orders aren’t lost, delivery deadlines aren’t missed, and stores aren’t out of stock.
  • Process optimization. The company can now do a fine-grained analysis of processes to identify which orders take too long, determine the source of the problem and modify its processes accordingly.
  • End-to-end visibility. The company now monitors the entire order fulfillment process and has a predictive-analytics capability so that warnings can be issued about problems that are likely to occur unless action is taken.
  • Enhanced customer experience. In-store customers can find their favorite products and online customers can obtain real-time information about their order.

With Axway analytics solution, the retailer could identify order errors in real time. By doing this upstream, they avoid tens of thousands of euros’ worth of blocked orders every day.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s