The good news: Offering fulfillment is a powerful way to attract and retain
customers. It can be profitable if companies take simple steps and adopt wise
processes.
The bad news: It's complex. Fulfillment can include myriad
tasks such as order processing, physical labor, transportation and distribution
management, supply-chain management, database management, digital asset
management, digital printing via FTP transmission, web site design and
management, and customer service.
Despite its complexity, fulfillment is an expanding market. More than 60
percent of respondents to a recent survey by Paramus, N.J.-based non profit
group The National Association for Printing Leadership (NAPL) said demand for
fulfillment, mailing and inventory management services is increasing. (Only
digital printing and electronic prepress services received a higher percentage.)
Respondents expected fulfillment revenues to grow from 3.7 percent of their
annual sales to 5.1 percent during the next few years.
Fulfillment is an excellent example of ways distributors and manufacturers
emphasize adding value instead of selling products. But companies offering
fulfillment wan to make money, not just add value. Print Solutions spoke to five distributors,
a manufacturer and a consultant who have climbed the right steps to fulfillment
success. They point to nine principals that will help companies offer quality
service, retain and gain clients, and make profits from
fulfillment.
Quality depends on accuracy. A quality assurance program puts systems and procedures in place to ensure the least number of mistakes possible when completing the vast number of services that comprise fulfillment. At least 13 types of fulfillment services exist: database management, lead tracking, rebate and coupon redemption, premiums, returns, special events and conferences, point of purchase, franchise, contract packaging, kitting and assembly, and on-demand printing.
C. Clint Bolte, a printing consultant for the past 19 years and principal of C. Clint Bolte & Associates, Chambersburg, Pa., says, "You have human beings working for you, but clients may expect 100 percent accuracy. The [quality assurance] program positions the distributor as a thorough individual--a tenacious, analytical businessman, and the client thinks he's got to be good." Distributors should let customers define quality, Bolte says. For instance, does the client expect a product to be shipped and distributed in 72 hours or less?
Cliff Bregstone, president of Addison, Ill.-based distributorship CBI Corp., says quality differentiates a distributorship from competitors. The company recently adopted Six Sigma, a program developed in 1987 by Motorola Inc. Six Sigma is a methodology focused on eliminating mistakes, waste and rework to improve effectiveness. Firms that achieve Six Sigma quality have only 3.4 defects per 1 million opportunities--nearly perfect quality. One of CBI's goals is to make 3.4 mistakes or fewer in every 1 million pieces mailed from its fulfillment operation, Bregstone says.
Dennis Pottebaum, CDC, president of Hamel, Minn.-based distributorship Quality Resource Group Inc., says fulfillment accuracy can be achieved by something as basic as "counting it right, packing it right and distributing it right." The company inspects shipments twice before distributing them.
"If you don't have quality, you don't have reputation," says Michael O'Hara, Ph.D., chairman and CEO of McLean, Va.-based distributorship AB&C Group, and DMIA's 1986-87 president. For the past 25 years, his firm has followed a disciplined approach to ensure accuracy. Once every 10 shipments, employees check boxes for necessary components. For bar coded shipments, they use a scanner that detects errors if a box contains incorrect items or quantities.
To fully understand clients' needs, develop a questionnaire with as many as 50 questions to know exactly what each client wants. Know what products need to be stored, the number of SKUs required, necessary order volumes and average order sizes, as well as each client's requirements for dedicated customer service representatives, return processing, storage and database management.
Distributors say talking to clients about their companies' internal issues is valuable. Distributors gain a better understanding of the companies' current problems and can figure out ways to better handle each fulfillment project. The point is to find each client's pain and say, "This is what we can do to make it better," O'Hara says.
Renton, Wash.-based manufacturer Kaye-Smith has offered fulfillment services since 1992. Alex Smith, the company's COO, says it's the distributor's responsibility to discuss clients' problem areas, but warns that such messages should be handled carefully. "We all want to achieve a better way, but it takes careful analysis and a lot of client meetings before the customer's undocumented processes become clear," he says.
Bolte says once a fulfillment project is underway, distributors should maintain close communication with the client. He suggests that distributors hold quarterly business reviews with each one. Fulfillment managers should discuss project statuses and inventories, costs incurred during the past three months and project direction during the next three months. "Quarterly business reviews bring everybody above the forest and give a bigger perspective," Bolte says.
Many services in the printing industry don't require contracts, but distributors strongly encourage signing 2-, 3- or 5-year contracts with clients on fulfillment jobs.
Kevin Austin, president and owner of Rohnert Park, Calif.-based distributorship Golden Pacific Systems Inc., says a contract spells out the client's and distributorship's expectations, and details how they'll be met. Each contract should be a mutual agreement that clearly states the roles of each side. For instance, the contract should say if the client will provide a mailing list and database to the distributorship, and how and when the distributorship will use the information. "The purpose of a contract is a mutual agreement of expectations, and if you don't have it written down, there are bound to be misunderstandings and problems," Bolte says. "If these misunderstandings lead to the client choosing to leave you in favor of a competitor, it also helps in figuring out how you're going to execute a corporate divorce."
Contracts should be win-win situations for distributors and their clients, O'Hara says. Distributors can plan on working with clients for at least a couple of years, then concentrate on expanding services and gaining customers. Clients have the assurance of receiving quality service at a mutually agreed price.
Three-year contracts work well, Smith says, though ideal length can vary from one to five years depending on the nature of the work. Fulfillment involves start-up costs, and most distributors need two or three years to recover them. Once a project is underway, distributorships have the opportunity to perform at top level during the second and third year, Smith says. The third year is a good time to review the distributor/client relationship.
Sometimes, customers find contracts complicated and are unwilling to sign them, Smith says. It's the distributor's responsibility to answer the client's concerns by explaining that the agreement is mutually beneficial, he says. "The agreement doesn't drive the relationship; your performance does," Smith says.
Contracts should include a variety of issues such as pricing, delivery, minimum fees, credit terms, postage and freight costs, and materials. But distributors say specifications and requirements of fulfillment projects are dynamic and usually change. Distributors need to readjust costs to continue delivering, so each contract should include a clause for the distributorship to "re-price" when a change must be made to specifications, instructions, shipping method or packaging.
"If you're thinking that prices [of materials such as boxes] don't change, then the client is doing a better job of buying than you're doing of selling," Bolte says. "Something as small as a change in the minimum packing weight of cartons can dramatically change costs."
O'Hara says distributors lose money when contracts don't cover re-pricing. For instance, a client asks its distributorship to ship 20,000 coffee mugs. The distributorship is ready to ship the mugs, but the client changes its marketing plan and decides not to mail them. The mugs are likely to sit in the distributorship's warehouse as excess inventory. Distributors describe this situation as "FISH" (First In, Still Here). The distributorship's money is tied up in inventory costs, handling costs to receive and place the slow-moving products, and storage costs.
"You have boxes sitting in the warehouse, so how do you get rid of them when the specs change?" O'Hara says. It's important that fulfillment clients sign for specification changes--and that distributorships can change fees accordingly.
