An aging vehicle fleet and expanding product categories contribute to unrelenting SKU proliferation. And the introduction of slow-moving products is out-pacing the A-movers. There simply isn’t enough space or money to justify stocking full lines. So, distributors carefully examine their local vehicle and product category mix, line by line, and chose what to carry in stock and what to leave at the factory distribution center. When demand occurs for the non-stocked items, they are Special Ordered or Drop Shipped to the customer from the manufacturer/supplier. “I don’t have it but it’s in my Master Warehouse”, is an acceptable answer and allows your sales people to say “yes” more often and be the one-stop source that keeps customers coming back.
In a study of wholesale order activity conducted by GCommerce, it was learned that Drop Ship or Special Orders represented 80% of the PO transactions, while contributing only 20% of the revenue and accounting for 80% of the operating costs. That math is upside-down and doesn’t make the accountants happy. And if the special order tail of the demand curve is getting longer, what’s the answer to efficiently processing special orders? Many suppliers have customer portals and allow their direct distributors to check inventory and place order on these secure web sites. But, that places the burden squarely on the distributor and it’s impractical to manage the security login and unique navigation of dozens or hundreds of web sites.
So, most distributor sales people turn to the phone and call-in special orders. Of course, this requires more than one call because they have to confirm availability and get an estimate of the shipping charges and delivery date. Then check back with the customer for authorization to place the order. Then call the supplier back to place the order and create a record in the business system to track the order through the receipt and payment process. Whew! It’s no wonder that it can require 30 minutes or more to order a $10 widget. A distributor who pays his salespeople by commission recently complained that if the telephone hold time at the factory was excessive, the salespeople would hang-up and tell the customer the product was no longer available, rather than waste time on hold.
Automation and integration of the special order process is essential if this growing segment of transactions is ever going to be profitable. Most distributors and retailers have support for electronic document exchange, or EDI, in their business systems. They can send electronic orders and receive acknowledgements, shipping notifications and even invoices. But, unless they make use of a unified commerce platform, special orders will continue to be a one-off process that grinds all of the automated processes to a halt.
There are a number of elements that go into automation of special orders. First, buyers have to be presented with a single online interface that allows access to many of their suppliers. For the same reason that counter sales people prefer to use the fully integrated full-line electronic catalog, a special order web site requires one login and learning one method of navigation, regardless of the product line being searched. A single interface is easier to use, and contributes to faster use and fewer mistakes.
An effective special order solution must have robust product information as well as current or near real-time inventory availability. Product information, including images and product attributes can help ensure that the correct product is being ordered. These are “special” orders, after all, and the buyer may have no prior experience with the product. The product information helps them appear knowledgeable to the customer and order with confidence. Of course, the solution must have accurate and reliable inventory information, updated multiple times daily. Synchronization between the inventory and product data is essential. Otherwise, there could be inventory for products that are no longer available or saleable products with no inventory data. Gaps, omissions, stale data and other error conditions need to be managed constantly to prevent placing orders that cannot be filled.
Carriers such as FedEx and UPS offer integration programs that can quickly return several alternative rates and delivery times based on the weights and dimensions of the items being shipped. Once the order has been placed, the carrier’s tracking number is a critical piece of information for tracking the product and confirming delivery. The more these components are integrated, the more useful the solution is to the buyer.
To make full use of the distributor’s EDI capability, the solution should manage acknowledgement documents that confirm the order was received by the supplier. Electronic shipping notification confirms the product is on its way and includes the carriers tracking number. And an electronic Invoice completes the procurement cycle, enabling automated 3-way match of the document and saves the time and effort of manually keying special orders into the business system. For special orders to be profitable, they can be no less efficient than a large replenishment order to place and manage through to payment.
Successful distribution businesses apply every available technology to the cost-effective management of orders with hundreds of line items valued at thousands of dollars. Why is it common practice to reach for a phone to order one item for $50? Commerce platforms that automate the complete special order process are available to automotive distributors and retailers today, and should be deployed to turn the math of special orders right side up. The portion of business that draws on factory fulfillment of the long tail products is only going to grow. With the use of a unified commerce platform, special orders can be a positive line on your income statement.