Supply Chain

SUPPLY CHAIN INTEGRATION 59
As a result of going online, click-and-mortar firms have changed
their approach to stocking inventory. High-volume, fast-moving
products, whose demand can be matched accurately with supply based
on long-term forecasts, are stocked in stores, whereas low-volume,
slow-moving products are stocked centrally for online purchasing.
The low-volume products have highlyuncertain demand levels and
thus require high levels of safety stock. Centralized stocking reduces
uncertainties by aggregating demand across geographic locations and
thus reduces inventory levels. The analysis implies that these retailers
use a push strategy for high-volume, fast-moving products and a pushpull
strategy for low-volume, slow-moving products.
Of course, the move frombrick-and-mortar to click-and-mortar
stores is not an easy one and may require skills that the brick-and mortar
companies do not have.

60 CHAPTER 3
E X A M P L E 3-11
Wal-Mart has always prided itself on its distribution operations. Thus
it was a huge surprise when the company announced that it planned to
hire an outside firm to handle order fulfillment and warehousing for its
online store,Wal-Mart.com, which the retailer launched in the fall of
1999. Fingerhut Business Services filled orders behind the scenes at
Wal-Mart’s cyberstore. Indeed, with a background in handling individual
orders, Fingerhut has emerged as a major provider of third-party
distribution services to other retailers and e-tailers interested in home
delivery. Fingerhut provided Internet order fulfillment,warehousing,
shipment, payment processing, customer service, and merchandise returns
for Wal-Mart.com when the service was launched.

3.4.5 Impact on Transportation and Fulfillment
This review of the evolution of supply chain strategies in various industries
suggests the following insight: The Internet and the associated
new supply chain paradigms introduce a shift in fulfillment strategies:
fromcases and bulk shipments to single items and smaller-size
shipments and from shipping to a small number of stores to serving
highly geographically dispersed customers. This shift also has increased
the importance and complexity of reverse logistics.

Table 3-2 summarizes the impact of the Internet on fulfillment
strategies. Specifically, the new developments in supply chain
strategies arevery good news for the parcel and LTL industries. Both
pull and push-pull systems rely heavily on individual (e.g., parcel)
shipments rather than bulk shipments. This is especially true in the
B2C area, where a new term has been coined: e-fulfillment.
Another impact of e-fulfillment on the transportation industry is
the significant increase in reverse logistics. Indeed, in the B2C arena,e-fulfillment typically means that the supplier needs to handle many
returns, each of which consists of a small shipment. This is true because
online retailers need to build customer trust through generous
return terms. Parcel shipping is already set up to handle these returns,
a major issue in B2C and in many cases in B2B commerce. This is a
challenge for the LTL industry, which traditionallyhas not been very
involved in door-to-door services.
e-Fulfillment logistics requires short lead times, the ability to serve
globally dispersed customers, and the ability to reverse the flow easily
from B2C to C2B. Only parcel shipping can do all this. Indeed, one important
advantage of the parcel industry is the existence of an excellent
information infrastructure that enables real-timetracking. Thus the future
looks promising for the parcel shipping industry and, in particular,
for those carriers and consolidators who work to modify their own systems
to integrate them with their customers’ supply chains.
SUPPLY CHAIN INTEGRATION

61
Table 3-2 Traditional Fulfillment versus e-Fulfillment
Traditional Fulfillment e-Fulfillment
Supply chain strategy Push Push-pull
Shipment...