SPECIAL REPORT: Costs: Fulfillment

Keeping the Promise

Integrating CRM into fulfillment can be a costly proposition

Want a customer-centric fulfillment operation? Then be prepared to invest time and money.

One of the biggest investments is, of course, software. According to Paul Soboda, vice president of Richmond, VA-based fulfillment consultancy Curtis Barry & Co., companies will need to implement systems for order management and data mining, as well as software that can help move products quickly from shelf to shipping.

The cost can vary widely. Sometimes CRM software can cost only “a couple of hundred thousand dollars,” says Bala Cynwyd, PA-based fulfillment consultant Bill Kuipers. “But when you factor in things like integrating the package into a company's existing systems, hiring and training people, the cost can run into the millions.”

Part of the way companies are making fulfillment more responsive to customers' needs is by having information on their Web sites about the availability of inventory and shipping options, notes Chris Long, vice president of strategic marketing at OrderTrust, in Lowell, MA.

His firm's Order Management System, which can link together information from several suppliers into one centralized hub, costs between $25,000 and $50,000, depending on the amount and level of transactional data the company wants to capture. Systems like these — that link with front-end CRM systems — do everything from capture orders, to format data, check inventory in real time, and relay orders to warehouses automatically.

Next, there are internal warehouse management systems whose prices can range between $50,000 and $5 million. The lower-priced machines regulate pick-and-pack operations. But the higher-priced ones capture data, and work with it to predict when inventory will be needed and respond to other customer needs.

Then there are automated fulfillment devices that can make customers happy since they circumvent human error. They have other saving graces. “Automated fulfillment costs firms only about 20 cents to $1 per unit in shipping,” says Long. Manually operated systems typically cost firms $3 to $5 per unit to ship.

Despite the onset of these systems, labor is and remains one of a fulfillment operation's highest costs. Soboda recommends that newer and smaller companies farm out their fulfillment unless they have a large amount of capital to set up an operation, which can cost in the range of $10 million.

But as always, the bottom line remains the same: making customers happy.

“No amount of frequent flyer miles is going to make a difference,” says Long, “if people don't get their products or get them on time.”