Release Date: 16 March 2007
Release ID: 1156
Richard Stoughton, MD of Crossflight, comments on B2B fulfilment.
The process of accepting an order, disbursing an order to the relevant partners, assembling the component in production or in transit, and then packaging, shipping, and delivering the order - is frequently said to be the most complicated, costly process in the lifecycle of a B2B transaction.
But, has the growth of e-commerce complicated things even further? With annual growth of Internet sales reaching 25% to 30%, how are B2B marketers ensuring they successfully manage delivery, making the client experience as smooth as possible? Recent research conducted from branding agency UffindellWest revealed that consistently good service is the quality most prized by businesses when choosing a supplier, which suggests that service must be consistently good at every touch point and the possibility of late delivery or the arrival of damaged goods would likely harm the relationship and compromise future sales. An unprofessional manner of the people delivering can also be destructive. The point of delivery is a great opportunity to capture customer's details and to conduct customer satisfaction surveys, yet is often overlooked.
The fulfilment challenge
Last year Britain's e-commerce trade body (IMRG) announced that the biggest challenge to ecommerce is delivery and that very few e-tailers are getting it right. So is this also the case in B2B, or have the logistics veterans been able help marketers navigate the minefield of global B2B fulfilment just-in-time?
For any business, fulfilment services can potentially lead to damaged industry reputation. Poor standards can be set from day one with late or inconvenient deliveries, damaged goods, and rude delivery staff. In most cases fulfilment is not the specialism of the business and is frequently not considered early enough in development strategies, yet it is one of the factors most likely to suppress growth and brand image if poorly executed.
In developing an efficient logistics system of physical distribution there are a number of important points to consider:
How important is reliable and timed logistics to customer satisfaction and competitive edge?
Is the current IT infrastructure able to link logistics performance into customer service and management information systems? What is the projected company growth over the next few years?
The fact of the matter is that few companies really know how important logistics standards are to their business.
Now, in B2B, e-tail is very important in selling to SMEs, particularly the computing, office equipment, telecoms and stationery sectors. Yet almost 40% of companies with an e-commerce arm rate fulfilment as a key problem according to IMRG 2006 research. Nor can firms that do not sell online ignore the fulfilment issue. We all know how many companies have moved towards online customer self-service, and many of those service interactions require the despatch of items. There are plenty of other examples. Imagine the problem facing an accountancy firm whose shipment of client accounts do not arrive in time to meet a crucial reporting deadline. Think of the lawyers who need to interrupt a shipment to make critical changes to case notes, but find they have booked a service where this is not possible. On a broader level, many equipment and IT firms, even huge integrators, have to get products and parts urgently but economically to customers or service personnel. B2B product and services companies are increasingly recognising the importance of the logistics ‘touchpoint’ with the customer, and are researching customer perceptions of the service received and its importance to overall satisfaction levels.
Assuming one learns that customers actually do place a high priority on logistics standards, the ability of a firm’s IT systems to ingest and utilise logistics data becomes important. It has been shown in several studies that B2B customers are tolerant of delivery interruptions (up to a point) so long as they know where the shipments are, and how long they are likely to take to arrive at their destination. This is paralleled in client attitudes to IT problems – so long as they know when they are likely to be fixed, they can juggle other tasks to fill the gap. Exact timings are becoming of increasing importance in a world where just-in-time services are growing in popularity. In one example, an IT services firm which serves the banking sector has to conduct software and hardware upgrades for any client location in a single night, starting at 6pm and finishing at 6am the following day. While an element of the logistics supporting such a service can be planned, there is also the unknown element – will hardware fail testing, will a piece of software corrupt on installation, or will cables accidentally get damaged during the upgrade and need replacing. One single unresolved event results in the IT services company losing a proportion of its fees.
The customer touchpoint
Which leads us neatly on to the question of scale, and of logistics volatility. On the first question – scale – one needs to analyse the likely growth rate of the firm. Rapid sales growth needs to be backed by matching customer service levels if that growth is to be sustainable – and we know that logistics and delivery is one of the most vulnerable points for its impact on customer satisfaction. The usual choice for rapid growth companies is to outsource the logistics, but careful attention has to be paid to buying into a happy medium between price and quality. If customer research has shown that delivery standards are greatly valued, then buying on price alone would be foolish. A poor decision on this front almost scuppered one of the country’s leading mail order stationery companies in 2003, after ten years of 20% annual compound growth.
Certainly, for some companies with a consistent logistics requirement, setting up an in-house logistics and delivery department will be a viable option. Most B2B business, will find that their need is sporadic, or at least unpredictable. Again, an outsource option is usually the best here, where the choice needs to strike a balance between size of supplier, requirement and cost. Large firms may offer a good rate, but totally standardised services that cannot be tailored in any fashion. So if shipping and fulfilment standards are only at the commodity level, this will work well. Tailored services tend to be more the province of the medium-sized logistics firm, handling multi-sales-channel requirements, flexible prioritisation and seasonal peaks.
B2B businesses, with their higher average customer value, have far more to lose if the logistics and fulfilment touchpoint is neglected. As if that wasn’t enough, the pool of prospects is smaller for B2B marketers, which makes it even more vital that companies preserve their customer relationships. And customers are both end-clients and resellers. If half of one’s network of resellers do not, for instance, receive their promotional material on the day the new advertising campaign breaks, this delay is likely to reduce the value obtained from the advertising considerably. Such bottom line impacts are making B2B companies pay more attention to the logistics back-end.
Best practice for choosing and working with a fulfilment house
For a successful partnership with your outsourced fulfilment provider look for:
§ A service provider who can offer flexibility
§ A partner who can reliably scale up to match your company’s growth while achieving consistent, professional fulfilment standards.
§ A personable service - the last point of contact, the deliveryman, is an influential touch point for the customer. It provides the last opportunity to impress or alternatively destroy the customer relationship and therefore corners cannot be cut.
§ Timely supply chain delivery and professional customer fulfilment.
§ Professional high tech tracking capabilities and skilled supply chain management.
§ An account management service - one point of contact for all logistics queries, making it easier to monitor and organise the timing and supply of delivery.
§ A tailored service to provide a smooth logistics network
§ A partner that sits in line with your brand values.
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