E-fulfilment at Adori AG
Based on the example of the Adorishop B2C online shop, this case study illustrates the benefits and the integration of a logistical concept to supply collection points as an alternative to supplying the customer directly. These collection points, socalled PickPoints, can be located at filling stations or other businesses with long, customer-friendly opening hours for instance. The PickPoint service is provided to webshops and customers as a service of PickPoint AG.
The first part of the case study introduces the Adorishop and the operating company, ADORI AG. The second part comprises a comprehensive explanation of the pick-point service. It includes extensive discussion of the functions, processes, integration, technical implementation architecture and success factors in the development and integration of the PickPoint solution.
1. The company
ADORI AG is a full-service provider of e-business solutions. Its range of services for companies covers the areas of content (content management systems), commerce (shop solutions), community (integrated customer platforms) and fulfilment (logistics, billing and other services). The broad range of offers enables comprehensive development of e-business solutions. An example of an e-commerce solution in the B2C area is the Adorishop.
Todayâ€™s ADORI AG and its online shop Adorishop resulted from the activities of TeleCD. TeleCD was established in 1992 and was present as a recorded audio bearer service with a shop initially in the Teletex segment, later in the internet. Its activities were expanded in 1995 and its shop expertise was offered on the market as a service. The first shopping solution was installed in 1996 with the online shop FOCUS.
In 1999, the company changed its name to ADORI AG. It joined the ranks of the Neuer Markt new-technology index in 2000. Meanwhile, ADORIâ€™s main area of business is in its e-business activities in the B2B area. Its shop, based on the long tradition of the TeleCD shop, today exists as its own area of business and as the companyâ€™s reference shop under the www.adorishop.de domain. It is one of Germanyâ€™s top-five largest online shops.
Industry and market
ADORI is active as an e-business service and solution provider in the B2B/internet service segment and as an online shop operator in the retail segment. The Adorishop is oriented to end consumers and as a B2C online shop competes with Amazon.de, Mediantis.de, Primus-online.de and bol.de. Since the online shop does not represent ADORIâ€™s main area of business, the shop itself receives little advertising on the market. Nevertheless, the shop is successful and boasts high acceptance among customers.
The Adorishop primarily offers entertainment products such as books, CDs, videos, film posters and computer games, but electronic devices and gift articles are also part of the offer portfolio. With this offer, ADORI addresses a large group of end consumers interested in books and entertainment in the internet.
2. e-Business vision and e-business strategy
As a â€śproof of conceptâ€ť, the Adorishop primarily serves as a representative example of a functioning e-commerce presence for potential partners. In the future, too, itâ€™s planned to offer the shop as a platform for the integration of innovative e-commerce concepts. Additionally, it is to remain an important and valuable mainstay of sales for ADORI.
The following remarks introduce the Adorishop e-commerce solution. The choice of collaborators leads to the description of the PickPoint AG logistics solution at the centre of the rest of the case study.
The offererâ€™s e-commerce concept
With the Adorishop, ADORI operates a model shop to vividly demonstrate its own range of business activities. In order to put innovative concepts into practice, ADORI integrated the PickPoint solution in its own Adorishop at an early stage. This is meant to ensure that two fundamental goals are achieved. On the one hand, the (end) consumer of the Adorishop is to be offered an additional service. On the other, ADORI seeks to gather experience with the PickPoint service in order to be able to offer it to B2B customers together with its own range of services.
Scope of services
The Adorishop is a modern online shop with well over two million articles and extensive links between the separate products. That means that the names of authors, actors or performers always have a link to enable an immediate search of all articles assigned to each name. Furthermore, links are stored for every book to related subjects or genres that make it easier for customers to browse article records. There is also a range of genre-specific search functions that lead customers quickly to the article theyâ€™re looking for.
Each article has a detailed view that displays any customer assessments of the product, film actor indexes and title lists of recorded music. In the latter, excerpts of the title can be listened to.
The customer can always see the quantity and value of the articles in the shopping cart. A mouse click is enough to begin the order process, provided that the customer has already set up an account at Adorishop. The order process specifies the fulfilment modalities. That means the customer can opt to have the order delivered to his/her home address or to a pick-up point in the vicinity.
Given that ADORI offers both the shop software and the corresponding services as its own products on the market, it was not necessary during the establishment of the Adorishop to collaborate with other service providers in the areas of IT and internet services. However, partnerships do exist with software producers, for example, an alliance with Oracle, whose database is used and is also installed in customer projects.
Fulfilment is equally part of the range on offer at ADORI. Inventory management, stock picking and billing for Adorishop are independently managed. ADORI sole cooperation in the area of fulfilment is with providers of transport services. This includes the partnership with PickPoint AG that is at the centre of the following observations.
In September 2000, ADORI integrated the PickPoint solution into the Adorishop. This choice was made because the PickPoint AG offer to deliver orders to a pick-up point in the vicinity of the end customer represents a practical addition to simple online ordering.
Following a successful test phase, ADORI also offers the PickPoint solution in the context of its own service offering in the fulfilment area. Meanwhile, the Classic Online, Tunnel, Pop and Folk Music shops use the PickPoint system.
The fulfilment solution to deliver parcels to pick-up points offered by PickPoint AG is described in more detail below.
3. Fulfilment solution
PickPoint AG provides a logistics service with pick-up points (â€śPickPointsâ€ś). The aim is to simplify the logistics process for end customers by letting them have their internet order delivered to the PickPoint for pick-up rather than to their homes. This gives customers more flexibility in when they take receipt, especially if theyâ€™re unable to take delivery of their parcels personally during the day.
The service offered by PickPoint AG for online shop operators represents a combination of transport, storage and a payment solution. A logistics partner of PickPoint AG (framework agreements exist with the likes of Deutscher Paket Dienst (DPD), United Parcel Service (UPS) and the logistics service provider TNT) delivers the goods from the shop operatorâ€™s warehouse to the PickPoint where the parcel is stored until the customer picks it up. If requested, the customer can also pay for the parcel at the PickPoint. In this case, PickPoint AG shall assume collection for the shop operator. It should be noted that the shop operator can also use a logistics partner of its choice to deliver to the PickPoints. Adorishop uses DPD as PickPoint partner and draws on the complete PickPoint service including payment.
The fulfilment partnerâ€™s solution
With its PickPoints, PickPoint AG provides the Adorishop with an alternative solution that the customer can select as an alternative to the normal standard dispatch using a door-to-door parcel service provider. If the customer opts for PickPoint delivery during the order process, s/he first has to register with PickPoint AG if not already a PickPoint customer. Otherwise, login follows. This is done in a popup window provided by PickPoint during the order process in the Adorishop. Since ADORI has signed a corresponding agreement, the customer can also pay for the delivery using the PickPoint payment service at the PickPoint. All s/he has to do is select COD payment in connection with the PickPoint delivery option.
Once the order has been sent, the logistics partner delivers the goods to the PickPoint. The customer is informed by e-mail or text message when the goods arrive at the PickPoint and then has ten days to pick them up. PickPoint AG shall in addition send a reminder e-mail/text message to the customer if the goods have not been picked up after five days. If the customer has still not picked up the goods after ten days, the parcel is returned to the sender and the customer receives an e-mail with a payment request for the cost of return. Collection by customers is made against signature and presentation of an identity card. PickPoint payment is possible in around 80% of all PickPoints and can be made in cash and, in many cases, by credit/Eurocheque card.
Typical PickPoints are located in easily accessible businesses with long opening hours. Given their convenient location, filling stations are particularly suitable and make up 80 per cent of PickPoints. Others are solariums and fitness studios, video stores and kiosks. Locations are decisive in selecting the PickPoints. The aim of the PickPoints (there are presently about 1700 of them) is to be present â€śon the customerâ€™s wayâ€ť, i.e., to cover strategic point on large arterial and access roads used by the customers on their way home each day to enable them to collect their packages.
An additional service to the PickPoint solution is online tracking of parcels for delivery to the PickPoints. After logging in to the PickPoint AG website, customers can view the status of all PickPoint deliveries at a glance â€“ regardless of the shop they were ordered from.
Introducing the PickPoint solution entails no investments on the part of the shop operator, since all necessary systems are maintained by PickPoint AG. Linking up an online shop to the PickPoint systems only takes a few hours because the solution manages without proprietary extensions.
Adorishop merely incurs easily calculable, variable costs per parcel that can be directly passed on to the customer (incumbent on the shop operator). Costs are between DEM 3 and 6 per parcel depending on size and weight. However, over 80% of parcels sent via the internet â€“ and most of those from Adorishop â€“ are small parcels of low weight (such as books and CDs) that are billed at DEM 3. A fixed portion of this amount is passed on the PickPoint operator.
In addition to the costs for using the PickPoint service, the costs incurred using PickPointâ€™s logistics partner DPD must also be added. From Adorishopâ€™s point of view these do not represent additional costs, since delivery costs are also incurred when delivery is made directly to the customerâ€™s home or when another logistics partner is used.
A percentage of the total amount to be collected is additionally charged for the use of the payment service (PickPoint payment). It fluctuates within the range of charges for credit-card payment and is thus considerably cheaper than a postal cash order. The shop operator can also pass on this charge to the final customer.
4. Implementation and operation
Following the introduction of the PickPoint solution from an economic point of view, there now follows a precise explanation of proceedings from the standpoint of PickPoint AG. It comprises the interaction between the participants (ADORI AG, logistics partner (DPD), PickPoint AG, the PickPoints and the customer) and the flow of goods and information. It is concluded by a technical consideration of the solution and its integration into the Adorishop.
The PickPoint solution was conceived to offer customers an alternative logistics process that dispenses with the customerâ€™s physical presence at the point of delivery. In using the solution, it is important that besides the desired effect in the pick-up, there are very few changes. All the customer has to do is select a PickPoint and, if applicable, select the option for PickPoint payment. Finally, confirmation is awaited, signalling that the delivery has been made to the PickPoint. The process ends for customer when the goods are picked up and, if applicable, paid for at the PickPoint.
For ADORI, as operator of the Adorishop, the integration of the PickPoint solution also changes very little. The selection of logistics type has to be integrated into the online ordering process and thus made available to the customer. This involves a popup window opening for the customer to select the PickPoint from a list provided directly by the PickPoint server. A communication connection must, moreover, be realised so that PickPoint AG can be informed of any new orders and dispatches of parcels for PickPoint customers. The overall process complexity is balanced by PickPoint AGâ€™s central systems and its interaction with the logistics partner and the PickPoints. The PickPoint process is illustrated in Fig. 4.1.
The process can be described in detail as follows: First, the customer selects the PickPoint solution as desired logistics alternative during the order process in the Adorishop. This involves calling up a popup windows directly from the PickPoint systems server to enable either login into the PickPoint system or the customerâ€™s new registration. Once logged in, the customer chooses a personal PickPoint. ID and address data and then transmitted via an interface to the Adorishop.
Once the order process is complete, PickPoint AG is informed of the new order by a delivery advice note. If necessary, the goods are procured by ADORI and then picked, while the logistics partner DPD is informed that the parcel can be collected. Once DPD has collected the goods, the Adorishop informs the customer by e-mail that the parcel has been dispatched and then PickPoint AG by way of the delivery journal. PickPoint AG then forwards this information to the respective PickPoint. This involves transmitting a parcel number and details of the customer who is authorised to pick up the parcel. The PickPoint then expects delivery by DPD. Delivery to the PickPoint is transmitted to PickPoint AG by both DPD, the logistics partner and the PickPoint istelf. PickPoint AG then informs the customer by e-mail and, if the customer entered a cell phone number when ordering, a text message informing him/her that the parcel is ready for collection at the PickPoint and quoting the parcel number.
If after five days PickPoint AG has received no message from the PickPoint regarding collection of the parcel by the customer, the customer is reminded again using the above methods. To pick up the parcel, the customer needs the last four digits of the parcel number, identification (ID card/passport) and must sign for it. The PickPoint then informs PickPoint AG that the parcel has been collected. PickPoint AG, moreover, issues a monthly invoice to the webshop operators and reimburses the logistics and PickPoint partners.
If the customer fails to pick up the parcel within ten days, it is returned via DPD to the Adorishop. Costs of return dispatch are billed to the customer by e-mail at the rate of DEM 12. If the customer has meanwhile withdrawn from the sale agreement, the costs of return will be credited to his/her account.
The customers can log into the PickPointâ€™s website at any time during the delivery process to check on the deliveryâ€™s current status. The system recognises the following phases: (1) notified (order from the Adorishop accepted), (2) dispatched (logistics partner has parcel), (3) delivered to PickPoint, (4) collected, (5) on return path (if the customer has not collected the parcel in time).
If the customer also chooses PickPoint Payment during the order process, the parcel must be paid for at the PickPoint. Payment can be made using the options for settlement available at the respective PickPoint. The customer is also informed of the options during the order process in the PickPoint popup window. PickPoint AG receives the amount paid from the PickPoint and forwards it to ADORI after deducting the PickPoint charges. Actually, a monthly settlement between the PickPoints and PickPoint AG takes place in which payments received are balanced against the PickPoint reimbursements, thus producing a squaring of payments position.
The PickPoint software solution is an in-house development implemented by Interconcept GmbH, KĂ¶nigstein (www.i-concept.de). The solution covers the entire technical process illustrated in Fig. 4.1 and ensures data exchange between the partners, tracking and communication with the customer.
First, integration [system integration] of the PickPoint system into a webshop must be guaranteed. In this context, three areas must be considered.
- Front-end integration: Coupling of the webshopâ€™s order page with the PickPoint systemâ€™s end-consumer module to realise the communication with the end customer. The popup solution already mentioned can be selected for this or broader adaption and integration into the webshopâ€™s look and feel.
- Back-end integration: The webshopâ€™s inventory control should produce a standardised delivery of all relevant information regarding the delivery route from the warehouse to the final consumer.
- Furthermore, it must be ensured that parcel labels with the PickPoint address and the PickPoint parcel number must be printed when stock picking.
Once the PickPoint has been selected by the customer, the PickPoint server transmits the process ID (parcel number) relating to the order and the address data of the selected PickPoint in hidden fields on the webshopâ€™s order page (see Process (1) in Fig. 4.2). There the data for the customer are transparently allocated to the other details of the customer order. The optical data reprocessing for the customer devolves upon the webshopâ€™s free order-process design.
Fig. 4.2: Visualisation of the PickPoint systemâ€™s front-end and back-end integration
The back-end integration and the link-up with the logistics partner is based on the exchange of text-based files via FTP. This method is simple and flexible to adapt to the systems of various partners. For example, it involves calling up once a day the â€śdelivery noticeâ€ť files on the Adorishop server (with new incoming orders) and â€śdeliveryâ€ť (with the dispatched orders) (see Process (2) in Fig. 2). The same method is used by the logistics partnerâ€™s systems to obtain the information on current delivery stati and PickPoint deliveries.
Communication with the PickPoints to relay parcel and customer data and delivery information functions in both directions, either by fax (with OCR at PickPoint AGâ€™s end) or via direct use of an internet front end by the employees of the respective PickPoint.
Architecture of the technical platform
The PickPoint system is based on two Linux servers: a webserver and a database server with an Adabas D database. The HTML files are dynamically generated via PHP connection. Database queries were realised with standard SQL queries in C++. A complete backup solution exists for the entire solution. Fig. 4.3 illustrates the PickPoint systemâ€™s technical platform and the software module.
Fig. 4.3: Outline of the PickPoint system architecture
Now that the shop and fulfilment solutions have been described, the following aspects of maintenance and profitability of the webshop complete the examination. In conclusion, the following chapter describes the success factors to be considered in the development and integration of the PickPoint solution.
The technical solution described above is completely maintained and operated by PickPoint AG. In addition, PickPoint AG maintains an external sales forces (currently ten strong) to service and acquire PickPoints and webshops. For the webshop operator (ADORI), only the integration in terms of the front-end connection and back-end interfaces presented arise. Equally, the logistics partner must set up FTP interfaces. For their part, the PickPoints have to provide suitable storage space available and ensure acceptance, distribution and communication with PickPoint AG (fax or internet access). The PickPoints are contractual partners of PickPoint AG; the parcels are insured via PickPoint AG.
As already made clear in the cost survey, only small investments and variable costs arise for the webshop operator. The costs can be passed straight on to customers. The integration of the PickPoint process represents a profitable extra service for webshops like the Adorishop. Depending on the shop and time of year, between 5 and 20% of customers will use a webshopâ€™s PickPoint service. A significant portion (up to 50%) of these users are made up of new customers placing the PickPoint solution in a clear position to acquire new customers for a webshop who, because of the unfavourable delivery situation, have previously not or only infrequently used e-commerce offers. An added effect is the positive image resulting from the innovative character of the logistics service.
5. Success factors
The solutionâ€™s specialities
The PickPoint solutionâ€™s special feature is its offer of new logistics options to customers. From the webshop operatorâ€™s standpoint it can be integrated into the existing service offering as an alternative to existing delivery options at no great cost, thus offering the customer a valuable additional benefit.
Unique selling proposition
PickPoint is the only open and independent logistics system with collection points on the German market. Systems using a similar approach are generally either tied to certain webshops or catalogue retailers, as is the case with Hermesâ€™ collection points of the Otto mail-order house, or to a logistics service provider as is the case with Deutsche Postâ€™s new box system.
In addition, the PickPoint system dispenses with large investments in terms of the collection points as is the case with systems using collection boxes. Box systems are additionally faced by the difficult choice of location (approvals, rent etc.). PickPoint partners, by contrast, are easier to convince of the systemâ€™s advantages given that besides its direct financial benefit, it also leads potential new customers to the PickPoint.
With the help of the PickPoint delivery, the online shop can now animate even those customers who previously were unable to make purchases in the internet because of the necessity of personally taking receipt of a parcel or collecting it from a post office. All customers now have the option of arranging delivery at PickPoint of their choice. They can then pick up their parcel on their way to or from work, for example, even outside of post-office opening hours.
It has become obvious during the development of the PickPoint solution that network effects must be surmounted. Customer acquisition is easier if many PickPoints and webshops with PickPoint link-up already exist. Because the more widespread the PickPoint system is, the more advantageous it is for customers to register. It follows that webshops are more likely to signal their readiness to integrate the PickPoint solution if customers and PickPoints already exist and the system is thus already established. Its establishment, meanwhile, is only possible with the involvement of webshops. Because of this circumstance, it is of paramount importance that integration of the PickPoint service into a webshop incurs the absolute minimum in investments. This was taken into account during the set-up of the central information system and in designing the extremely simple interface integration.
The development of the PickPoint system was initially approached by acquiring PickPoints that we were able to win over with the vision of early membership in what will later become an extensive supply network. Since then, the existing network of PickPoints has made the acquisition of webshops and customers easier.
In addition, the introduction of a PickPoint â€śtokenâ€ť creates a further inducement for customers, since the PickPoint service can be used independently of the partner shops, too. If requested, the customer receives the token directly from PickPoint AG. In effect, it represents an alternative delivery address made up of the customerâ€™s personal user identification, his/her name and the address of the selected PickPoint. The customer can use this address to have any order delivered to the PickPoint. In this case, however, tracking and PickPoint payment are not available.
It was also revealed during the integration of the PickPoint solution that the placement of the PickPoint option within the order process represents a significant success factor in its successful integration into the webshop. The choice of PickPoint should not be made too late (for example, only once an alternative delivery address has been entered) because the customer may become confused and cancel the transaction. It also proved important to incorporate a map when selecting a PickPoint. Without a map, customers found it difficult to locate the PickPoints in their area. It would of course be ideal if the webshop informs the customer of the existence of the PickPoint service from the onset â€“ especially if completion of a purchase depends on it.