processes. Now add e-commerce. The dra-

matic escalation of trade volume through e-

procurement environments – and antici-

pated volumes through e-marketplaces – has

created a B2B opportunity estimated to be

10-times that of B2C.

As B2B business models evolve to satisfy

this explosive growth, the basic trade rela-

tionships among supply chain partners are

evolving as well. In particular, B2B e-fulfill-

ment is migrating from long-term one-to-one

relationships to fluid many-to-many rela-

tionships. Traditional third-party outsourced

fulfillment arrangements are evolving into

complex service bundlings involving ware-

housing, picking, shipping, information

systems support, labor augmentation and

management – all provided by one service

company operating under one long-term

contract. (Currently, these services are

increasingly available in smaller

components, making it possible for

organizations to partner with the best-in-

class provider for each capability.)

For the enterprise selecting the appropri-

ate channel for customer-facing fulfillment,

two issues stand paramount: the importance

of the buyer to the seller and, conversely, the

importance of the seller to the buyer. These

issues exist regardless of distribution chan-

nel, each channel having its own fulfillment

requirements.

Mutual Partnership (B2B)Often where the supplier and customer are

strategic to each other’s business, the

emphasis is on high logistics availability to

support rapid, often just-in-time (JIT),

port, and customer service solutionsthat deliver operational excellence infulfillment

• New types of relationships that lead tocreating integrated and responsive sup-ply chain networks between supplychain participants

• New technologies and services to sup-port these supply chain networks

B2B E-Fulfillment ChannelsE-fulfillment includes activities such as

order management, call center management

and telemarketing operations, online credit

checking and credit card processing, all

aspects of customer service, procurement

and inventory management, warehousing

and shipping, and processing and disposi-

tion of returns. Together, these activities can

represent most of the tangible assets sup-

porting a company’s e-commerce strategy.

More important, they can be responsible for

delivering some of the most memorable

aspects of service to customers – one of the

bases for repeat customers.

This conventional view of e-fulfillment is

breaking down. The problem is that con-

sumer-direct models are putting high

demands on the distribution system as a

result of smaller, more frequent, more time-

sensitive orders to an often significantly

broadened geographic base. This pressure is

further exacerbated by product returns

“Where’s the package I ordered the other day

off the Internet?”

That was probably the most commonly

asked question during the 2000 holiday sea-

son. That season was to be business-to-con-

sumer (B2C) e-commerce’s big coming out

party. And sure enough, toys, clothing, soft-

ware, books, home electronics, and millions

of dollars of other goods were ordered off the

Internet. The problem was, a lot of people

waited to receive what they ordered.

The click-and-mortars soon discovered a

fulfillment gap. The traditional fulfillment

solutions did not live up to expectations

implied by B2C e-commerce. As a result,

consumers became less than bullish about e-

commerce.

From that experience, e-fulfillment has

become a hot topic, so much so that it has

the potential to be an excellent play – finan-

cially and competitively – in the new world

of e-commerce. This is particularly true for

those players already in the fulfillment mar-

ket for some time; they are most likely to

overcome the fulfillment challenge.

Most industry observers agree that if the

challenge of B2C fulfillment was great, the

B2B challenge will be even gretaer. Why?

Because the variety of B2B channels is very

large, the fulfillment requirements of these

channels are still being defined, and e-ful-

fillment can’t provide the breadth of fulfill-

ment capabilities required by all of these

channels.

Integrated fulfillment is an e-fulfillment

approach with a broad end-to-end supply

chain performance objective. Integrated ful-

fillment combines:• Newly emerging warehousing, trans-

Integrated Fulfillment

E-Fulfillment Challenge –The Holy Grail of B2C and B2B E-Commerce

White PaperWhite Paper

5FULFILLMENThttp://hintlian.ascet.com

James T. Hintlian is a partner in the Accenture Supply Chain Management practice with global responsibilityfor integrated fulfillment services.

Robert E. Mann is an associate partner in the Accenture Supply Chain Management practice. He has spentthe last 18 years helping retailers and direct marketers with their supply chain and operations challenges.

Phil Churchman is a senior manager in the Accenture Supply Chain Management practice.

James T. Hintlian Robert E. MannPhil ChurchmanAccenture

The next hurdle for B2C and B2B businesses is in the physicaldelivery of products to customers. Doing so – effectively, reliably,economically – will make fulfillment a strong market differentiator.

replenishment. For this, the relationship

makes heavy use of automated re-ordering

through electronic data interchange or the

Internet, as well as vendor-managed inven-

tory services. In the latter case, the supplier

might take on the burden of monitoring

material levels at the customer’s sites, even

to the point of using telemetry. The capabil-

ities providing physical fulfillment are var-

ied, often involving physical or electronic

kanbans (at the bulk, pallets, and tote bins

levels, for example) to support JIT replen-

ishment direct to assembly.

E-Procurement (Primarily B2B)Products in this channel arrangement are

frequently supplied from multiple supplier

locations to a single customer location.

While several possible product characteris-

tics will influence the fulfillment solution,

the solution typically involves consolidating

items from the multiple sources into a single

delivery or a repetitive set of deliveries.

Agents and Distributors (B2C and B2B)Two broad categories of fulfillment models

exist in this channel environment: stocked

and stockless. The fulfillment solution to

support the stockless environment is similar

to the e-procurement channel.

However, agents and distributors typically

need to maintain a large number of stocked

items to meet delivery lead time require-

ments. From this buffer stock, they must

rapidly assemble many small orders.

Automated picking using sophisticated

materials handling systems can be appropri-

ate in this environment. However, automa-

tion should be used sparingly as inappropri-

ate automation can result in expensive,

inflexible solutions that can not adapt to

changing fulfillment needs.

Regardless of automation, agents and dis-

tributors might consider these fulfillment

strategies:• Segregating large and small items into

different picking facilities• Utilizing trans-shipment locations to

transfer stock into smaller vehicles fordelivery

• Holding fast-moving items at local

replenishment facilities and slow-mov-ing items centrally

• Different lead times and availabilitypolicies for different products

Direct Channel (B2B and B2C)Direct channels range from “low-cost

direct,” where the emphasis is on reducing

the customer and the supplier’s transaction

costs, to “high-value interactive,” which

focuses on increasing the breadth of service

provided to the customer. In both cases,

customers can place and track their orders

with a supplier.

Where the service and delivery require-

ments are similar to traditional channels,

fulfillment will typically be through the

existing fulfillment network. Where

requirements are significantly different, new

fulfillment solutions are required. This is

especially the case where a direct channel is

being used to bypass existing distributor,

wholesaler, or retailer channels. Specialist

fulfillment services are emerging to meet

this need; however, they are relatively

immature and there are no clear leaders.

Exchanges and Auctions (Primarily B2B)While transaction volumes are still very low

among the enormous variety of B2B market-

places that have emerged in the past 12

months, the pressure is on for these

e-marketplaces to turn their attention to the

fulfillment solutions required to support the

anticipated transaction volumes. In these

solutions, real time is key in two key areas:

confirming availability of fulfillment capac-

ity and providing a price for delivery.

Digital Transaction Hubs (B2B)These hubs, which focus on reducing the

cost of integration between buyers and sell-

ers, differ from trade exchanges in that par-

ticipants in the former routinely buy and sell

product from one another. They do not

require the buyer/seller matching capability

provided by exchanges. Digital hubs let

member companies collectively outsource

fulfillment activities they do not consider to

be a part of their core competency or a com-

petitive differentiator. Through outsourcing,

the member companies can achieve enor-

mous economies of scale that individually

would have been impossible.

Integrated Fulfillment

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low high

low

high

E-Procurement DigitalHubs

MutualPartnership

DirectDistributors/Agents

B2BE-Marketplaceand Auctions

B2C+B2B

ImportanceBuyer-to-Buyer

Importance ofSeller-to-Buyer

Figure 1 – E-Commerce Channels (Source: Accenture)

Integrated Fulfillment

able to an enterprise creates a concomitant

complexity in that enterprise’s supply chain.

This emphasizes the importance of carefully

aligning three key aspects of the enterprise

and fulfillment providers before embarking

on a vision of integrated fulfillment.

Merging operational excellence with e-

commerce opportunities is the first key

aspect. Such excellence is not to be taken

lightly. To be successful, e-retailers must

embrace an almost Zen-like “back-to-basics”

approach to delivering their products to cus-

tomers on time, at the right quality, and at

the right cost. This approach is fundamen-

tally the same as it has always been:

• Segment customers according to needs• Customize the logistics network• Integrate demand and supply plan-

ning• Integrate product, information, and

financial flows through the supplychain

• Differentiate the product closer to thecustomer

• Source strategically• Use supply chain spanning perform-

ance metrics

What’s changed today are the new tech-

nologies that broaden the possibilities in

achieving this operational excellence. For

example, in the electronics and high tech

industry, supply chain collaboration tech-

Conversely, a provider of fulfillment serv-

ices need only integrate into the digital hub

– not the individual member companies – in

order to provide services to all of the mem-

ber companies. Thus connected, the

provider can offer value-added services,

such as inventory, transportation, and sup-

ply chain management, at a cost and on a

scale previously unimaginable.

In balancing the aforementioned channels

with an e-fulfillment solution, the e-com-

merce enterprise must consider factors such

as speed of implementation, degree of cus-

tomer contact and operational control, relia-

bility and flexibility of service, and initial

and ongoing costs. On top of that is one of

the most critical considerations: how best to

combine an enterprise’s capabilities with

those of chosen supply chain partners. Such

business relationships include the use of

spot shipments, consolidators, market-level

logistics services providers, as well as devel-

oping a fixed relationship with a fulfillment

service provider. The advantages of each of

these relationships depends upon the degree

of specialization required, and whether

shipments are bulk or less-than bulk.

The Three Keys to Integrated FulfillmentThe variety of distribution channels avail-

nologies make outsourcing manufacturing

and distribution to the best-in-breed

provider possible. In the automotive indus-

try, automakers and their OEM suppliers

now have visibility to demand and inventory

in the dealership network, thereby letting

the manufacturers postpone final assembly

until an order is received.

The second key to realizing integrated ful-

fillment is in creating new kinds of relation-

ships and services. New relationships are

necessary because e-commerce is stretching

the traditional relationships between

providers and users of fulfillment services –

a relationship that remains primarily at

arm’s length. Some of the characteristics of

these new kinds of relationships are:• More collaboration between service

providers and users.• Win-win commercial arrangements.• A true understanding of core compe-

tencies and re-assessment of activitiesthat can be outsourced.

• Arrangements that provide services toboth networks as well as individualcompanies.

For service providers, integrated fulfillment

demands skills and capabilities far beyond

that provided by conventional carriers and

third-party logistics providers (3PLs). For ful-

fillment service users, integrated fulfillment

requires a substantial cultural shift if partners

are to participate in fulfillment networks that

could include competitors.

The fact is, technology is no longer the

primary competitive advantage to realizing

integrated fulfillment. Instead, the ability to

change, develop new kinds of relationships,

and implement new solutions will be the key

differentiators.

New and Emerging CapabilitiesThis brings us to the last key aspect of inte-

grated fulfillment. In the past, fulfillment

services were provided by individual firms

to individual firms. These services were rel-

atively easy to classify, such as 3PL, haulage,

freight forwarding, and parcel

carrier. No longer. Completely new kinds of

services are necessary because e-commerce

demands a dramatic change in the fulfill-

ment solution landscape. New fulfillment

capabilities are needed to support B2B2C

White PaperWhite Paper

Technology Enablers Technology Enablers

Traditional Emerging

FulfillmentService

Providers

FulfillmentService

Providers

eMarket

Intermediary

FulfillmentServiceUsers

FulfillmentServiceUsers

Supply ChainManagement

Service Provider

Figure 2 – The Changing Fulfillment Solution Landscape (Source: Accenture)

Integrated Fulfillment

and to better compete among emerging mar-

ketplaces. We have classified these capabili-

ties under three broad types of services.

Fulfillment E-MarketplacesFulfillment e-marketplaces match buyers

and sellers of a product or service, or they

provide a mechanism (including exchanges,

auctions, and reverse auctions) for setting a

price, or both. These marketplaces fall into

two categories: public and private. Public

marketplaces are open to any carrier or ship-

per that wishes to participate. Private mar-

ketplaces are restricted to member providers

and users, are typically constructed around

a specific synergistic opportunity, and they

tend to be focused on specific modes and

geographies. Public marketplaces are cur-

rently more prevalent, but private market-

places could rapidly gain traction as:• They are constructed around a specific

synergy opportunity.• They are focused on a specific

requirement.• Service providers are pre-vetted and

known by users.• All participants are committed to the

success of the exchange.

Infomediaries Infomediaries provide information through-

out a network that supports synchronized

decision-making at the operational, tactical,

and strategic levels. This information, pro-

vided to a community of users, ranges from

specific track-and-trace information to

industry trends, prices, and news feeds.

In the context of fulfillment, infomedi-

aries primarily focus on the provision of

track-and-trace information. And for good

reason: Not only does the information need

to be collated and presented in a format cus-

tomized to the needs of the user (arguably

the relatively easy part), it also needs to be

gathered at the point where the information

was created (for instance, at the loading

dock, in transit, or on the assembly line).

The practical challenges to capturing and

recording high-quality and complete track-

and-trace information across the supply

chain are great. Traditional approaches, such

as keyboard entry and barcode scanning, are

now being complemented by technologies

such as global positioning satellite, mobile

phone, and radio tagging. As these technolo-

gies mature, we can expect to see the range

of infomediary services continue to develop.

Flow Management ServicesFlow Management Services manage the flow

of transactions through the network. An

extension of this capability is to provide sup-

ply chain planning services (for example

transportation and warehouse management

systems, demand planning) to network par-

ticipants; that is, end-to-end order manage-

ment visibility throughout the entire order

life cycle. Such capability lets enterprises

outsource not only fulfillment execution and

scheduling, but also the management and

optimization of these activities across com-

plex, multi-partner supply chains. Just now

emerging within these flow management

services is custom business logic to identify

business exception conditions that alert

management to take action through some

Web-enabled communications tools.

Who’s Going to Win?With expertise in transport and distribution,

3PLs should be dominating the new world of

e-fulfillment. However, traditional logistics

companies are generally lagging in develop-

ing capabilities to support the dynamics of

B2B e-commerce. For many, managing con-

tracts, assets, and industrial relations have

been core competencies; they have less

experience with new requirements for tech-

nology, planning, and service development

competencies.

To remain competitive, the traditional

3PLs must undergo significant organiza-

tional change. To date, many have created e-

commerce divisions, yet many of these are

not integrated with the rest of the business,

which leads to confusion about customer

ownership, varied service levels, minimal

knowledge sharing, multiple customer entry

points, and limited scalability.

In addition, and despite current narrow

profit margins, these companies will have to

invest substantially to integrate and scale

their e-commerce operations. Information

technology may be their biggest barrier to

success – many lack the latest in

client/server information systems. But there

are also non-technology limitations to over-

come. Most 3PLs have single-user or occa-

sionally dual-user operations, they use inter-

nal carriers, and have limited geographic

coverage. In addition, while closed-book

third-party agreements tend to work better

in the e-commerce environment, some 3PLs

only operate on an open-book basis.

Mail order companies have the potential

to create an end-to-end offering that

includes payments, call centers, and physi-

cal fulfillment. However, they will have to

improve their service levels to operate effec-

tively in an e-commerce environment.

Fulfillment houses are generally multi-user

enterprises that use multiple carriers. For the

most part, these operations are not particu-

larly technologically sophisticated.

Conversely, traditional catalog retailers are

generally technologically sophisticated, but

they face a market already saturated by

existing businesses and channels, plus con-

flicts with potential B2C customers. Despite

having an already extensive network of

home delivery, they still need to enhance

their fulfillment capabilities to meet the

demands of the Internet shopper.

Seizing the OpportunitiesThe convergence of the vision and reality of

integrated fulfillment provides abundant

opportunities for new, competitive services

across the supply chain. For shippers, these

include leveraging new workflow manage-

ment and infomediary solutions to achieve

new levels of supply chain integration,

filling spot fulfillment needs through

public exchanges, and participating in

private networks.

For carriers, integrated fulfillment helps in

developing targeted e-channel strategies,

establishing service differentiation (through

infomediary and workflow management

services), targeting markets where

differentiation is possible through services

or cost, participating in private networks,

and selling marginal capacity through

public

exchanges.

Last, for

B2B e-com-

merce in gen-

eral, the

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more on the web

The process of integratedfulfillment is discussed infurther detail in an interviewwith JC Penney’s Dave Evans,http://evans.ascet.com

Integrated Fulfillment

to consumers. Moreover, price differences on

the Internet are apparent, therefore e-fulfill-

ment costs have the potential to destroy any

competitive advantage an enterprise might

claim. (In addition, the variable costs associ-

ated with product returns may invalidate a

heretofore acceptable operating model.)

For all of these reasons, the fulfillment

strategy is just as critical in the development

of an e-commerce strategy as the choice of

product offering, marketing approach, and

website design. Apparently this message got

through to the online B2C store fronts oper-

ating during the 2000 holiday season.

According to results of Accenture’s second

annual U.S. e-fulfillment study, online U.S.

e-tailers developed strategies to address e-

fulfillment and supply chain issues. More

important, they improved their execution,

making great improvements in service levels

that consumers value. (Of note, 92% of the

attempted holiday purchases over the

Internet were successful this past holiday

season; in the 1999 holiday season, upwards

opportunities include providing vertical,

geographic, or mode-specific infomediary or

workflow management services, or both,

and integrating with public and private

logistics exchanges.

The bottom line: No matter which model

an enterprise selects, the enterprise will be

providing consumers with a new service –

often for free – while trying to maintain profit

margins. In the old world, picking items from

retail shelves, paying and packaging at coun-

ters, loading purchased goods into transport,

and delivering those goods to the home were

carried out by the consumer and were not

generally recognized as components of the

total shopping cost. With the exception of a

segment of consumers who value the con-

venience factor of home delivery and are pre-

pared to pay a premium for it, today’s con-

sumers expect their complete online

shopping experience to be competitively

priced with traditional retailers’ shelf prices.

The reality is that high e-fulfillment costs

will inevitably increase the sustainable price

of 25% of the attempted online holiday pur-

chases were unsuccessful.)

Such improvements come from rigorously

questioning the underlying logic of potential

fulfillment models. The success of any one

model will rely on the development of ware-

housing, transport, and customer service

solutions designed to deliver operational

excellence. Also key will be the establish-

ment of new kinds of relationships between

supply chain participants, such as increased

collaboration between service providers and

users, win-win commercial arrangements,

and a true understanding of core competen-

cies and re-assessment of activities that can

be outsourced.

Clearly, the approach to integrated fulfill-

ment has enormous implications for the

growth and profitability of any product-based

e-commerce venture and requires a strategic

selection that not only recognizes the need for

exemplary service performance, but that also

delivers a competitive cost advantage.�

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