Don't Get Smacked by FTC's

Editorial

Don’t Get Smacked By FTC’s "Board" of Education

Imagine looking through the morning’s mail and finding a letter from the Federal Trade Commission. What would roll through your mind? Lots of ugly scenarios, probably. But hundreds of executives are likely to find an FTC "education" letter in the near future, thanks to their failure to deliver on a promise — the promise their Web site made to customers that their supply chain would deliver orders on time.

After the last holiday season, the FTC fined more than 100 e-businesses that let marketing hype get the best of their logistics judgment. These companies promised faster fulfillment than they could provide. You’d probably recognize some of the guilty parties that the FTC spanked. The list includes eToys, macys.com, and KBKids.com. These companies actually got two swats: one was the fine, but the other was the public humiliation they received in the media. Contrary to the old saw, all publicity is not good publicity.

As you’ll read in this month’s lead feature on logistics execution systems (LES), these promise/delivery disconnects don't have to happen. The Internet is more than a pipeline to customers. It's a link between supply chain partners that can give visibility to inventory flows. There’s no reason for any point in the chain to be ignorant of what’s "available to promise," or ATP. More and more LES vendors offer ATP functionality in their packages.

In a press release put out recently by the ARC Advisory Group, ARC’s director of supply chain solutions Steve Banker said: "Under ATP, to achieve strong performance, two things are necessary: a strong warehouse management system [WMS] with real-time inventory information, and the integration of the WMS with the on-line ordering system. It is amazing how few on-line retailers have achieved this. I fully expect another round of FTC fines."

Bricks-and-mortar retailers like to err on the other side of ATP. They’ve been around enough to understand the consequences of poor customer service in a highly competitive field. When they take on an LES project, they tend to take ownership of the software. Pam Davey, senior consultant with Sedlak Management Consultants, cites the Pleasant Company as an example. When they were looking for a WMS a few years ago, on-time delivery was a given. But it was also interested in its products’ appearance and presentation to the consumer. They wanted products to fit nicely in the shipping containers, so the WMS had to handle cartonization.

They went with a package from Celerity Solutions, but they did a fair amount of customization. Why did they bother with a package if they were going to customize it anyway?

"Privately held companies are never happy with a generic solution," Davey told me. "They are used to doing things their way and are not real flexible about modifying their procedures."

As a result of this "Type-A" approach to supply chain management, Pleasant has been able to efficiently process more orders, and consistently stays current with seasonal spikes in demand. It has also avoided extra freight charges for expedited shipping.

Pleasant does pay a price, however, in choosing to modify its WMS package so heavily. That makes incorporating future upgrades more difficult.

The best lessons from both schools of thought: Do your WMS homework, but don't drop out of school once you’ve aced the assignment.

By Tom Andel, editor

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