According to Fortune magazine, Amazon (the largest online retailer) is now the 100th largest company in America. The company was founded in 1994 with the intention of leveraging the Internet to create a new sales and fulfillment model. Amazon has gone from zero revenues to over $24 billion in little more than 15 years.
I remember writing about e-fulfillment in the 90s. Much of what I and others wrote about back then has come to pass, but the adoption of e-fulfillment technologies has been slower than expected.
Further, some of the language that was bandied about at that time was naive. There was much talk, for example, about how e-commerce and e-fulfillment would “disintermediate” the middle man, that distributors would go away. Although the Internet has adversely affected some companies, such as “brick and mortar” book stores and movie/game rental chains, distributors and wholesalers are not in danger of disappearing.
Part of Amazon’s attraction to Wall Street in the 90s, besides the company’s incredibly quick growth, was its talk about not needing to invest in stores and distribution centers (DCs). That turned out to be half true. Amazon doesn’t have any brick and mortar stores, but the company came to realize that providing fast and reliable fulfillment was going to be a key competitive differentiator. Consequently, Amazon ended up investing in and operating DCs. In fact, one of the risks the company highlights in its 10-K report is “If We Do Not Successfully Optimize and Operate Our Fulfillment Centers, Our Business Could Be Harmed.” In 2010, Amazon had 17.5 million square feet of DC space around the world.
But while I was wrong about the pace of change in logistics brought about by the Internet, its impact today is obvious. Virtually all retailers have an Internet sales channel, as do the majority of manufacturers and distributors. The Internet fulfillment channel is often the most challenging part of a company’s logistics operations. Many companies find that they can’t efficiently operate this channel without Distributed Order Management, Product Information Management, and enhanced each-picking and reverse logistics technologies. The increase in each-picking, in turn, has contributed to the vast improvement in goods-to-man material handling systems.
E-fulfillment and multi-channel logistics are no longer a pipe dream; they are standard operating procedure. And while the adoption of multi-channel fulfillment software has been slower than expected, the growth of e-fulfillment has been relentless. The fact that Amazon is now the 100th largest US company proves that. And Amazon itself has evolved based on its proprietary logistics and e-commerce technologies and its investments in advanced warehouses. Today, Amazon fulfills orders not only for its customers, but it has also become a 3PL specializing in e-commerce (see “Amazon: A Customer-Centric 3PL”).
Over the past 10+ years I have had the opportunity to discuss the definition of “e-fulfillment’ with colleagues on a number of occasions.
I used to work for a outsourced “turnkey” logistics provider who was the primary manufacturing and distribution partner for companies like Palm, Microsoft and Intuit. We manufactured or assembled printed content, CDs, hardware, etc and shipped to retail channels and consumers.
Toward the end of the dot.com era, everybody wanted to put an “e” in front of their offerings. It was just too cool. We called our fulfillment “e-fulfillment” like others did.
My argument was, and is, that taking of orders over the internet is the “e” part. OK, call it “e-ordertaking”. Fulfillment is the same old stuff regardless of whether the orders come in via the net, mail, fax, phone, EDI or whatever.
“e-fulfillment was, and still is, where the software and media industries have gone – delivery (fulfillment) of customer orders digitally over the internet.
We used to manufacture millions of boxes of MS Windows, MS Ofiice and Turbotax and ship them to retailers or direct to consumers.
Now they can download the software online. That is e-fulfillment.
Steve Murray
Principal Consultant & Chief Researcher
Supply Chain Visions.