IT Briefcase Exclusive Interview: In the New Age of Ecommerce, Fulfillment is the New Battleground

When it comes to online retail, setting accurate and acceptable expectations for delivery can mean the difference between a sale and a lost customer. It is no longer enough to provide vague ranges of delivery days or order processing times. Amazon has raised the bar of customer expectations with fast, accurate, and inexpensive delivery. Further, they have created an e-commerce environment where fulfillment, beyond price, is the differentiator.

As a retailer/e-tailer, how can you compete?

The time is now for companies to step up and support businesses who are struggling with the “Amazonification” of the fulfillment chain where there are rising costs and rising expectations on delivery times. This starts with having the right technology in place to exceed the needs of customers.

Arun Rao, Founder and CTO at GrandCanals explains:

• Q: Tell me a little bit about GrandCanals. What makes the Fulfillment Intelligence Cloud stand out from the competition?

A: GrandCanals helps companies that aren’t called Amazon.com, create online shopping experiences just like Amazon.com. Our Fulfillment Intelligence Cloud (FIC) is the first pure-play SaaS fulfillment analytics solution that helps eCommerce-focused companies visualize and optimize their fulfillment chain. It allows companies to understand and remove the stresses in their fulfillment chain by normalizing, visualizing, and analyzing fulfillment data. The FIC also suggests changes to improve the fulfillment chain and monitors internal processes and proactively reports exceptions to help companies react faster. The net result is a better eCommerce experience for customers and higher sales.

• Q: How did this idea of a cloud-based, fulfillment and supply chain analytics solution come about?

A: Before the eCommerce revolution changed the pace and nature of fulfillment stresses on a company, fulfillment did not change very much. In today’s online economy however, product life-cycles are shorter, consumers demand fast and free deliveries and more competitors mean profit margins are squeezed. In such a situation, companies (traditional retailers and new-age e-commerce companies) that don’t change their fulfillment strategy proactively and continuously optimize costs and margins, usually don’t make it. Amazon can do this, but if you aren’t Amazon, what can you do? You typically don’t have billions of dollars and dozens of data scientists to help. Amazon’s shipping costs as a percentage of total costs is 12%, but for most companies it’s 35%. GrandCanals was formed to address this problem by providing a cloud-based service that automatically identifies and makes improvements. The FIC uses data science and optimization algorithms to analyze customers’ fulfillment data and monitor problems to provide insights and help the executive manage-by-exception. Further, customers can also take advantage of our experts to answer questions and take advantage of the ever-increasing functionality in the platform.

• Q: Why are companies/IT specialists hesitant to move data to the cloud?

A: 10 years ago, I would have said that they were hesitant. But nowadays, they aren’t. That said, fulfillment data is sensitive and contains proprietary pricing details that is often the secret to their success, and executives are rightly reluctant to share this outside their organization. Additionally, logistics data contains shipping history with (sometimes) personally identifiable information (PII) about their consumers. But this isn’t unlike CRM data or corporate financial data, which are now readily accessible in the cloud with services such as Salesforce and Netsuite. They just have to be secured appropriately. The Fulfilment Intelligence Cloud was built with security in mind at every level – and we ensure that data is encrypted at rest as well as in transit with strict access controls.

• Q: In terms of online shopping, how and why have customer expectations changed in as recently as the past 12 months?

A: Amazon.com, and the rise of ecommerce, have dramatically changed the environment for business-to-consumer (B2C), business-to-business (B2B) and third-party logistics (3PL) organizations. Today, ecommerce sales account for nearly 10% of total retail sales and are growing at almost 24% each year — far faster than traditional brick and mortar sales. At the same time, buyer behaviors are rapidly changing. Millennials, the first digital native generation, now outpace baby boomers in combined buying power for the first time in history and 70% of worldwide spending will be done by millennials by 2020. They want fast, cheap, and convenient delivery of their purchases. If not, they won’t complete the online purchase. Innovative companies, such as Amazon.com, are raising customer expectations on fulfillment speed and convenience, making it difficult for other companies to compete. In this new ecommerce world, ensuring fulfillment meets customer expectations is a critical source of competitive advantage.

• Q: What are some of the pitfalls that online retailers and ecommerce companies must avoid?

A: It’s easy to see. Just take a look at the customer experience between Amazon and any other eCommerce website. In a recent survey, 50% of online shoppers stated they abandoned their shopping cart due to a lengthy delivery times or when no delivery date was provided. So you are hurting sales if you aren’t offering 2-day shipping or telling customers when to expect their delivery. Further, 58% of those surveyed stated they abandoned the shopping cart because shipping costs made the total purchase more than expected. So, don’t surprise customers. Free shipping can also be used to increase sales. 93% of those surveyed said they added items to a shopping cart to qualify for free shipping.

But solving these pitfalls is hard to do without technology. For example, how do you find the best dollar amount by which to offer free shipping? It’s hard to do this in manually or in Microsoft Excel, but this type of complex analytical problem is easy for the Fulfillment Intelligence Cloud.

• Q: Can you give us a specific example of a GrandCanals deployment and why it has been successful?

A: Grove Collaborative rapidly expanded during the past year and went from shipping 300,000 packages in 2016 to a projection of more than 750,000 packages in 2017. As a direct-to-consumer company, they desired a faster/ more intelligent way of reporting on fulfillment metrics while maintaining resources committed to keeping their customers feeling special as they grow. By leveraging the Fulfillment Intelligence Cloud, they:

– Saved over 25% in shipping costs per order going forward
– Recommended location for second warehouse to decrease the total costs of shipping and meet rising customer expectations on delivery times
– Delivered immediate insights into fulfillment cost drivers such as shipping costs per order, which previously took 3 hours per week to obtain, thus saving nearly 1,000 man-hours of financial analysis per year

• Q: What advice would you have for a business looking to move their fulfillment and supply chain analytics to the cloud?

A: Fulfillment analytics (when done right) can provide an executive a valuable decision support system at both, the transaction level (i.e. how best to serve their customers for each order that comes in), as well as at a strategic level (i.e. what warehouses, modes and carriers work most efficiently, as well as how to keep costs low as their company grows).

While this can be done in-house with a team of experts, when a company moves fulfillment analytics to the cloud (with the right provider, of course), they can multiply this advantage multi-fold. This is because a cloud provider looks at the fulfillment and supply chain problem not just for one company (as the in-house team would), but can apply expertise and knowledge gathered by solving similar problems for many customers. Cloud solution providers like GrandCanals typically have a Data Science centric approach that learns from history and recommends solutions proactively for things like:

– An evolving concern (e.g. trending late deliveries in the Northeast),
– Projected business situation (e.g. unexpected growth in Australia or Florida causing cost overruns) or
– A predicted problem (e.g. dropping order volumes impacting shipping costs).

Such solutions and recommendations can not only inform executives and help them make the right decisions, but also provide a closed-loop solution by feeding these “executive-approved” solutions into execution systems like TMS and WMS to rapidly adapt to a changing business situation.

A tighter integration with a cloud-based Fulfillment analytics solution will (like Amazon does today) help companies deliver solutions that meet and exceed their customer’s expectations while (unlike Amazon’s FBA) keep margins, customers and profits in-house.

About Arun Rao

Arun Rao is a resourceful and passionate technologist with extensive experience designing software solutions, leading IT departments, managing technology professionals, systems and a variety of technologies in both, enterprise environments and technology start-ups. Currently, Arun is the CTO and co-founder of GrandCanals, a global distribution optimization and marketplace platform, based in Los Gatos, California.

Previously, Arun worked as the IT Director at Flextronics (NASDAQ: FLEX) where he managed B2B Data Integration with business partners for several years, designed IT strategies and directly managed various programs and functions. Arun has also worked in various technical and management capacities at venture-backed technology start-ups in the Silicon Valley and in the consulting industry as well as co-wrote a position paper on “RFID applications in Manufacturing” in 2005 (published during the SME conference in St. Louis, MO). In the early part of his career, Arun worked at Baan (now part of Infor) where he was the Lead Technology Consultant for EDI and B2B solutions in the Asia region and managed partner certifications and training.

Arun has an MBA from Pennsylvania State University and a bachelor’s degree in Electronics & Communications Engineering from Mysore University.