December 13, 1999

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Rule No. 1: Don't Annoy Your Customers
Online retailers are learning to use improved logistics to keep customers happy

By Alorie Gilbert

Related links:

Fulfilling Expectations

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InternetWeek Transportation/Logistics Network Computing Logistics Services: Governing Who Goes Global

ll eyes are on online retailers as they enter into the biggest Web shopping blitz yet. Analysts project consumers will spend $6 billion to $15 billion online in November and December-and whether Web companies meet expectations will depend largely on their ability to deliver goods on time.

Botched logistics can spell disaster, as the handheld computer startup Handspring Inc. is learning. When the company launched its line of Visor handhelds in September, it made them available exclusively through its Web site and call center, but wasn't prepared to handle the flood of orders that came pouring in.

Overwhelmed by the demand and plagued by glitches in its order-management and shipping systems, Handspring has had problems with entire batches of Web orders, losing shipments, delivering and billing customers for merchandise they never ordered, and keeping scores of customers waiting months for products. "Handspring dropped the ball big-time in getting the product out of the door," says Deji Osinulu, a frustrated customer who received his Visor but was billed for multiple orders. "With all the examples and resources out there, what they did was inexcusable."

Seasoned E-retailers know their approach to order fulfillment and delivery is critical for making their business a success. But reliable delivery is just the beginning: Online champs keep customers in the loop from the virtual shopping basket to a package's arrival at their door.

To make 1999 a vintage year, Wine.com, which is bracing for a tenfold increase in orders this season, installed Manhattan Associates' KPMS warehouse-management system this fall to help it route more bottles of wine and bubbly around the country. The new system automates shipping, receiving, and inventory replenishment at Wine.com's Napa, Calif., distribution center, replacing a labor-intensive, manual process that required the company to staff up its warehouse during surges in business. "We threw more people at it, but that's not a scalable solution," says Cyrus Khoshnevisan, VP of technology at the Palo Alto, Calif., wine seller.

The KPMS software, which took seven weeks to install, gives the company more information about the movement of bottles through its warehouse. The system also helps the staff divide labor and specialize in warehouse-management functions. "It's given us headroom to handle orders in the volumes we're expecting," says Khoshnevisan.

Wine.com also wants to share more information with customers on the status of their orders. To do that, the company plans to tie the new software to its shipping partners' systems, as well as other internal applications. The company has already built integration points with its Oracle Financials package-as inventory moves in and out of the warehouse, the bookkeeping is automatically updated. By year's end, Wine.com plans to offer Web shoppers the ability to track their shipments.

Online retailer CDnow Inc. in Fort Washington, Pa., relies on tight relationships and electronic links with six music distributors in the United States and Europe to deliver music titles to more than 2 million customers. The company manages communication and the exchange of data with those partners as if they were the company's own remote warehouses. For instance, when orders come in over the Web, CDnow's order-management systems electronically routes them to the distributor closest to the consumer. The company also has access to information about inventory levels and shipping status of orders at each distribution center.

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