Signed, sealed, delivered

• 11 August 2009

If you've ordered more than a few products from online stores, you probably have your own horror stories about etailers which have dismally failed where the rubber hits the road - getting the physical product delivered.

Under these circumstances, you probably complained, expected special treatment, told all your friends about it on Twitter or Facebook and almost certainly never shopped with that retailer again.
How do you ensure your customers don't have similar nightmare experiences when dealing with you?

Depending on the scale of your operations, there is a range of options worth considering.

If you're only turning over a few products a day, you'll probably do fine with picking items out of your inventory and sending them in Express Post envelopes. As volume increases, you may be better off developing a relationship with a courier company. At the higher end, there are external companies which will outsource the delivery and warehousing of your products.

Swift and shift

Janet Leach, owner of online retailer Arterystore.com, found delivery a major frustration with her experience as a customer.

"When I was ordering products from a popular online design store, their delivery was very unreliable," she explains. "When I was starting my own business, I thought I could deliver better service by using an overnight express courier. Customers really appreciate the service and the speed."

Arterystore.com works with a range of different courier companies for small overnight parcels, larger items and international deliveries.

"I decided from the outset that I would subsidise the overnight courier," says Leach. "It costs me more than the $10.50 I charge customers to send anywhere in Australia overnight. However, because I don't have the same outgoings as a physical store, I felt I could give something back to the customer."

Leach keeps all her inventory on site and uses MYOB accounting software to manage stock levels.

"There's a bit of fiddling around, but it works," she explains. "We're growing steadily but we're not big enough to contemplate any other way of doing it at the moment."

Outsource and save

Once your delivery volumes have increased to the point where it's a full-time job just getting the products out to customers, it's time to consider outsourcing, says Tony Wallis, marketing and operations manager at marketing firm Zinc. Zinc ships between 200 and 500 customer orders of branded merchandise each month.

"We managed our own warehousing and transport but we weren't experts in it and we didn't do it very well," he admits.

Around mid-2008, Zinc started looking for a way to improve its deliveries and reduce the amount of time spent managing the courier companies.

"Dealing with couriers is a nightmare," says Wallis. "We were losing consignments going into particular areas and we were spending too much time replacing the orders and submitting claims back to the courier. We thought, ‘There's got to be a better way of doing it'."

“Because I don’t have the same outgoings as a physical store, I felt I could give something back to the customer”

Zinc now works with a freight management company which has relationships with couriers and other transport firms around the country. The freight company works as an extension of the Zinc team, booking transport and chasing up missing deliveries.

"It gives us the flexibility to use different carriers for different things," says Wallis. "Some companies specialise in cartons, for instance, but we often need to move bulk palettes. We usually use road, but it's more cost effective to get things to Western Australia by rail.

"Using a freight management company gives us the flexibility to choose the company with the right skills to get the job done."

Zinc put its warehousing out to tender at the end of 2008. Wallis says the biggest challenge was finding an outsourced warehousing firm that could integrate with the company's internal inventory systems, so customers could see stock levels in real time.

"We eventually found someone who had the same view on the technology part of it as we did and we were able to marry the two technologies together," he says.
In the past year, Wallis estimates the company has made significant savings by outsourcing its logistics functions.

"We've saved about $100,000 in courier costs, that's a combination of getting a better price and saving us time," says Wallis. "On the warehousing side, we've saved about $70,000."

Keeping it realistic

For lower volume deliveries, Leach suggests managing customers' expectations can go a long way to reducing delivery costs.

"After a few months of running the business, I found I was getting huge fees from the couriers because the customers were giving their home addresses and the couriers charged almost double the price for redeliveries," she says. "Now I tell customers on the login page that they have to give a delivery address that will be attended during business hours."

And a good way to reduce inventory costs is not to listen to your suppliers about how much to order, she suggests.

"You're often encouraged to spend more than you're comfortable with, but don't think you have a to take on a huge minimum order if you're just testing the waters," she says. #