Until recently, fulfillment was the grubby side of eCommerce, best left to the traditional players. But, then, well-publicized B2C fulfillment failures, especially around the 1999 holiday season, focused attention sharply on the fulfillment gap. In many cases, the fulfillment solutions could not support the delivery expectations set by the new direct channels. The resulting failures significantly dented consumer confidence in eCommerce.

Since then, eFulfillment has become a hot topic. The major prizewinners in the eEconomy will be those that meet the fulfillment challenge. eFulfillment includes activities such as telemarketing operations, customer service, warehousing and shipping, procurement and inventory management, processing, and disposition of returns. A large number of eFulfillment solutions have emerged to focus on the B2C Fulfillment challenge.

The situation is further complicated by the emergence of B2B. Although 12 to 18 months behind B2C in terms of maturity, B2B eCommerce will soon account for much greater value than B2C, most observers believe. If the challenge of B2C fulfillment was great, the B2B challenge is even greater. The variety of B2B channels is very large, and the fulfillment requirements of these channels are still being defined.

It is already clear that supply chain synchronization will be a key feature of B2B. Enabled by emerging supply chain visibility, workflow management, and decision-support tools, supply chain synchronization integrates the supply chain across a network of participants. eFulfillment is insufficient to describe the range of fulfillment capabilities required to deliver supply chain synchronization.

What's required is "integrated fulfillment," Accenture's response to the challenges of supply chain integration. Integrated fulfillment combines the following elements:

• Warehousing, transport, and customer service solutions designed to deliver operational excellence in fulfillment.
• New kinds of relationships between supply chain participants to enable the creation of supply chain networks.
• New technologies and services to support these supply chain networks.

Integrated fulfillment combines eEconomy opportunities with a back-to-basics focus on operational excellence. Ultimately, companies that can deliver their product to their customers in time, at the right quality, and at the right cost through the new eCommerce channels will be successful.

Central to integrated fulfillment is the need for new kinds of relationships and services to meet the needs of networks and individual firms.

Traditional relationships between fulfillment partners are increasingly under strain. Users are demanding new kinds of service, and service providers are seeking new ways to extend their offerings and compete. However, the relationship between providers and users of fulfillment services remains primarily arm's length.

Key characteristics of new kinds of relationships are:

• More collaboration between service providers and users.
• Win-win commercial arrangements.
• A true understanding of core competencies and reassessment of activities that can be outsourced.
• Arrangements that support the provision of services to networks as well as individual companies.

Both providers and users of fulfillment services need to change significantly. For service providers, integrated fulfillment demands skills and capabilities that are a long way from those of traditional carriers and third-party logistics providers (3PLs). For fulfillment service users, a substantial cultural shift is required if they are to participate in fulfillment networks that could include competitors.

Technology is no longer the primary constraint. The ability to change, to develop new kinds of relationships, and to implement new solutions will be the key differentiators.

The ingredients of operational excellence are fundamentally the same as they have always been:

• Segment customers according to needs.
• Customize the logistics network.
• Integrate demand and supply planning.
• Integrate product, information, and financial flows through the supply chain.
• Differentiate the product closer to the customer.
• Source strategically.
• Use supply chain spanning performance metrics.

New technologies, however, have created many more options in the way that these objectives can be achieved. For example, in the electronics and high tech industry, supply chain collaboration technologies are increasing the ease with which manufacturing and distribution can be outsourced. In the automotive industry, manufacturers now have visibility of demand and inventory in dealerships and are much more able to postpone final assembly until they receive an order. The continued development of supply chain planning solutions such as i2, Manugistics, SAP, and Aspentech, are increasing the opportunities for planning integration. eProcurement solutions are changing the way that indirect and, increasingly, direct materials are sourced.

Integrated fulfillment will lead to new ways to exploit the opportunities provided by new technologies, including:

• Developing new fulfillment networks and make/buy strategies.
• Designing and implementing robust and flexible processes and facilities.
• Developing organizational roles and responsibilities appropriate to the new environment.
• Designing performance metrics that drive synchronization.

In the past, fulfillment solutions were relatively straightforward. Service providers assisted individual firms. The services provided were relatively easy to classify (for example, 3PL, haulage, freight forwarding, parcel carrier).

Supply chain networks create the opportunity for completely new kinds of services; new technology provides the means of delivery. We have classified the new services into three groups:

• eMarketplaces. Services that match buyers and sellers of a product or service and/or provide a mechanism for setting a price.
• Infomediaries. Services that provide information throughout a network that supports synchronized decision making at the operational, tactical, and/or strategic levels.
• Flow management services. Services that manage the flow of transactions through the network. An extension of this capability is the provision of supply chain planning services (for example, TMS, WMS, Demand Planning) to network participants.

Exhibit 1 contrasts the traditional and emerging fulfillment solutions.

There are a wide variety of eCommerce channels, as shown in Exhibit 2. Two primary drivers that determine the type of channel that emerges are the importance of the buyer to the seller and the importance of the seller to the buyer. Each type of channel (described below) has different integrated fulfillment requirements.

Mutual Partnership (B2B)

In this situation, both the supplier and customer are strategic to each other's business. Often, these relationships have been supported by automated reordering solutions via EDI or the Internet for some time. In this case that vendor inventory management services are most likely to emerge. The fulfillment solution required to support this channel could include the following:

• Monitoring of material levels at customer locations via telemetry.
• Use of kanbans to support JIT replenishment.
• Replenishment direct to assembly lineside.

The nature of the physical fulfillment is varied and can include bulk, pallets, and tote bins. The emphasis is on high logistics availability to support rapid/JIT replenishment.

eProcurement (Primarily B2B)

In eProcurement, products are frequently supplied from multiple supplier locations to a single customer location. A wide range of possible product characteristics will influence the fulfillment solution required. However, typical MRO items that are replenished via eProcurement solutions are amenable to a consolidator solution, which consolidates items from multiple sources into single deliveries.

Agents and Distributors (B2C and B2B)

There are two broad categories of fulfillment models in the agent/distributor environment: stocked and stockless. The fulfillment solution required to support the stockless environment is similar to the eProcurement model described above.

Frequently, however, agents and distributors need to maintain stock in order to meet requirements for delivery lead time. In this case, the fulfillment solution must support the rapid assembly of many small orders from a frequently large number of stocked SKUs. Automated picking using sophisticated materials handling systems can be appropriate in this environment. But automation should be adopted cautiously, because inappropriate automation can result in expensive solutions that cannot adapt to changing fulfillment needs.

Delivery can be via parcel carriers, specialized third parties, or owned fleets. Fulfillment strategies can include the following:

• Segregating large and small items into different picking facilities.
• Trucking orders to transshipment locations where they are transferred into smaller vehicles for delivery.
• Holding fast moving items at local replenishment facilities and slow-moving items centrally.
• Using different lead times and availability policies for different products.

Direct Channel (B2B and B2C)

In this environment, the eCommerce channel provides an alternative way for customers to place and track orders. The nature of direct channels range from "low cost direct," where the emphasis is on reducing the customer's and the supplier's transaction costs, to "high value interactive," where the focus is on increasing the breadth of service provided to the customer.

Where the service and delivery requirements are similar to traditional channels, fulfillment will typically be via the existing fulfillment network. Where requirements are significantly different, new fulfillment solutions are required. This is especially the case when a direct channel is being used to bypass existing distributor, wholesaler, or retailer channels. Specialist fulfillment services are emerging to meet this need, but they are relatively immature and there are no clear leaders. However, 3PLs and mail order catalog companies are well positioned to capture this space.

Exchanges and Auctions (Primarily B2B)

Many and various B2B marketplaces have emerged over the last 12 months in almost every sector. In the majority of cases, transaction volumes are still very low. Having established the functionality to introduce buyers and sellers and set transaction prices, however, many marketplaces are now turning their attention to the fulfillment solutions required to support anticipated transaction volumes.

The ability to confirm availability of fulfillment capacity and to provide a price for delivery in real time is key to supporting B2B exchanges.

Digital Transaction Hubs (B2B)

Digital transaction hubs focus on reducing the cost of integration between buyers and sellers. They differ from exchanges because participants in a digital transaction hub routinely buy and sell product from one another and do not require the buyer/seller matching capability provided by exchanges. A number of leading chemical companies, including Dow, Dupont, BASF, and BP, are developing a digital transaction hub called Elemica. Once the transaction hub is established, individual members will need only to integrate into the hub to achieve integration with other players.

Digital transaction hubs will provide fascinating opportunities for innovation in fulfillment. The hubs will allow member companies to collectively outsource fulfillment activities that they do not consider to be core or differentiating. In this way, member companies will be able to collectively achieve economies of scale that individually would have been impossible. Conversely, a provider of fulfillment services that integrates into the digital hub will be able to provide services to all member companies. This will make it possible to provide value-added services, such as track-and-trace and supply chain flow management, at a cost and on a scale not previously possible.

Three types of new capabilities are emerging to support integrated fulfillment solutions: fulfillment marketplaces, infomediary services, and workflow management products. Exhibit 3 shows some of the major players in each of these spaces.

Fulfillment Marketplaces

A marketplace is a service that matches buyers and sellers and/or provides a mechanism to set the price at which a service is provided. This includes exchanges, auctions, and reverse auctions.

There is the potential to create marketplaces for a variety of fulfillment service offerings. Freight marketplaces have developed most rapidly. This space is currently very crowded, with more than 150 freight exchanges operating globally. Most of these exchanges focus on a particular transport mode, with some taking an industry and/or geographic focus. The exchanges perform a variety of value-added services, largely infomediary or workflow management services (described below).

There are two major types of exchanges, public and private. Public exchanges are open to any carrier or shipper that wishes to participate. Private marketplaces are restricted to member providers and users. Private eMarketplaces are typically constructed around a specific opportunity for synergy and tend to focus on specific modes and geographies. Public marketplaces are currently more prevalent, but private marketplaces could rapidly gain traction, given these advantages:

• 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

Infomediary services provide information to a community of users—ranging from specific track-and-trace information to industry trends, prices, and newsfeeds.

In the context of fulfillment, infomediary services tend to focus on providing track-and-trace information, which is no trivial matter. First, the information must to be collated and presented in a format customized to the needs of the user (arguably the easy part). Second, it must be gathered at the point that the information is created, be that in loading, in transit, or at the delivery point. The practical challenges to capturing and recording high quality and complete information at this level are great. Traditional approaches, such as keyboard entry and barcode scanning, are now being complemented by technologies such as GPS (satellite positioning), mobile phone location, and radio tagging. As these technologies mature, we can expect to see the range of infomediary services develop.

Flow Management Solutions

A number of solutions are emerging to focus on the management of supply chain flows and transactions. One example is Yantra's transaction management engine, which helps businesses manage order management transactions across complex, multipartner networks. These services enable firms to outsource not only fulfillment execution and scheduling but also the management and optimization of these activities.

The convergence of the vision and reality of integrated fulfillment is bringing abundant opportunities across the supply chain—to shippers, to carriers, and to the B2B eMarkets.

These opportunities for shippers include the following:

• Leveraging new workflow management and infomediary solutions to achieve new levels of supply chain integration.
• Filling spot fulfillment needs via public exchanges.
• Participating in private networks.

Opportunities for carriers include:

• Developing targeted eChannel strategies.
• Differentiating through the provision of infomediary and workflow management services.
• Targeting markets where differentiation is possible via services as well as cost.
• Participating in private networks.
• Selling marginal capacity via public exchanges.

Opportunities for B2B eMarkets include the following:

• Providing vertical, geographic, or mode-specific infomediary and/or workflow management services.
• Integrating with public and private logistics exchanges.

Those enterprises that do the best job of seizing these opportunities position themselves for long-term success in the emerging eEconomy.