Hours culture hits home

26 July 2000
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27 July 2000

Residents of any major British city are used to having promotional leaflets for the latest nightclub or hair salon thrust into their hands. But in central London last week, the flyers being distributed outside Tube stations were for something rather more ground-breaking, writes Geraint John

Urbanfetch is a new website that promises to deliver a variety of goods, including CDs, books, electronic gadgets and rental videos, to selected postcodes within an hour.

The service has been transplanted from New York, where it has been catering to the whims of busy office workers since October. It is one of a handful of ventures set to compete for business among e-friendly London shoppers who are happy to order from their PC and pay for the convenience.

Pure Internet retailers - the so-called e-tailers - are not alone in providing web ordering and rapid fulfilment. Major supermarket chains, such as Tesco and Waitrose, have been building up their web services for some time. And in recent months, home delivery specialists, from Domino's Pizza to Express Dairies, have announced plans to offer a wider range of products to customers.

So what does this trend mean for logistics and supply chain professionals - apart from the obvious headache of guaranteeing fast delivery when traffic congestion is at an all-time high?

Judging by the views expressed at the Institute of Logistics and Transport's annual debate in Surrey this month, they face a difficult set of challenges centred around issues of capability, service and cost. And the pressure to perform is intensifying.

David Kirkwood, a managing director at logistics specialist Tibbett & Britten, said e-commerce marked the most radical change in his 30-year career. "Customers are increasingly demanding," he told the audience. "We are handling a personal order and that means that we are unbelievably close to the end consumer and that they are unbelievably close to my warehouse. They can find out where it is and call."

Fellow speaker Mark Knowles, a manager working on Internet ventures at Boots, said for high-street retailers the dot.com revolution had exposed a "capability gap" in operations. "Our warehouse and distribution network is designed for shipping bulk orders to fixed points around the country, not for picking singles and sending them to 25 million individual addresses."

The scale of the investment required, particularly in IT, has persuaded some to turn to third-party providers, such as Tibbett & Britten, to plug the gap. Its newly formed European technology logistics division, which Kirkwood heads, boasts that it can deliver to 98 per cent of inner London addresses within one hour of receiving an order.

And in April, rival logistics giant Exel announced the launch of a dedicated home-delivery division, Exel Direct, aimed at both e-tailers and its traditional retailer customers, such as Argos and Marks & Spencer.

Control question

But not everyone is happy about using third-party providers. Manolis Priniotakis, a senior fulfilment manager at eToys UK, said that his company was worried about losing control of a key determinant of customer satisfaction. EToys was slated by the media last Christmas, amid reports of children's presents not arriving in time.

Having the right infrastructure and ability to provide first-rate customer service is one thing, but whether companies can do it cost-effectively is quite another. iForce, a UK fulfilment specialist whose clients include auction site QXL.com, reckons it costs as much as £8 to deliver an order within one hour. Even so, Urbanfetch is offering free delivery, using couriers on foot, bicycles and motorbikes, and in vans.

For Mark Lezemore, head of logistics at Direct Wines, the most fundamental issue is how fulfilment and transport costs can be kept down when customer expectations are so high. "We don't have time to get the niceties of cost-effective logistics together," he said. "Competition is driving costs up, because we are no longer competing with what our customer wants, but against each other's delivery promises."

Last month's decision by troubled supermarket Somerfield to close its 24-7 Internet service highlighted the difficulty of making home delivery pay, and could mark the beginning of a wave of closures and consolidation.

According to Mark Barratt, director of the e-Supply Chain Research Forum at Cranfield School of Management, many firms have focused on building volumes, rather than controlling costs. One consequence has been unsustainably high returns of unwanted goods.

"There is a real lack of understanding about what consumers want," he told SM. "Once that becomes clearer, companies will have to decide whether it matches what they can deliver."

SMjul2000

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