Not everybody can be a retailer, but anybody can be an e-tailer. Smart logistics service providers are figuring out “relationship commerce,” which personalizes online fulfillment by taking out the bricks-and- mortar middleman. For example, there's a new e-commerce fulfillment provider called OpenSky. It gives consumers a more direct relationship with suppliers. By suppliers, I mean anybody- bloggers, editors, celebrities, any kind of social media personality you can name. Think Oprah, who has become quite a book seller. OpenSky helps these people create an online profile, upload product, manage inventory and have direct access to a network of sellers of those products.
OpenSky actually takes responsibility for the logistics discipline of these sellers. I asked Jamin Dick, vice president of supply and fulfillment for OpenSky, about the material handling and logistics challenges of this new online business model of his.
“It's much harder to control our supply chain,” he says. “Getting it right means treating our suppliers as extensions of our own company. We spend a lot of time evaluating their logistics, stock management, packaging and fulfillment capabilities. When they fall short we have to act as if it's us falling short and invest the time and money to fix it.”
The key concept here is complete visibility. OpenSky never takes physical possession of products, which means it depends on suppliers to keep them informed about their stock positions, replenishment orders and goods in transit. The company currently does business with 1,100 suppliers — each with different fulfillment capabilities. OpenSky tries to become the common logistics denominator.
“One of our ongoing projects is to provide a menu of solutions for suppliers to transmit on-hand, on-order and goods-in-transit information,” Jamin says. “On the outbound side we provide systems that automate every step of the order lifecycle. Even a small supplier can look like an EDI shop. That's what customers expect and it's absolutely table stakes for the kind of business we're doing.”
Want to know the dirty little secret about this business? It's really just good old-fashioned drop-shipping. It's where the retailer, or in this case, OpenSky, acting on behalf of its seller client, does not keep goods in stock, but instead transfers customer orders and shipment details to the manufacturer, who then ships the goods directly to the customer. What are the logistics lessons to be learned from this eBaying of America?
“Build systems your mother could use,” Jamin says. “Due to the inherent diversity in a drop-ship business you need systems that are very easy to use or you'll consume way too much time training and handholding.”
That said, how would a unique company like OpenSky benchmark its performance?
OpenSky doesn't benchmark itself against eBay or Amazon where speed of service is key. In fact, as Bryan Jensen writes in the previous article, benchmarking is only effective if you're realistic about who you are. Chasing after performance benchmarks that are completely irrelevant to your operation is a waste of time. Focus instead on benchmarks that are bona-fide targets for your operation and should be pursued to elevate it to higher levels of performance.
OpenSky does that by associating itself with assortments of uncommon goods.
“Customers are willing to wait a bit longer than they would for a Kindle from Amazon,” Jamin observes. “So we focus on making the experience more memorable and special than trying to deliver it in 48 hours.”
An experience can be the hardest product to package. It's also the most valuable.