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Fulfillment: moving toward a 24-hour standard.

During a direct-response panel we moderated recently, Philippe D'Argent, vice president of Dell Computer's Southern European operations, told an illuminating tale about the impact of response time on Dell's European PC sales. As a cost-cutting move, Dell decided to move French fulfillment operations to a factory in Ireland. The move added a modest three days to Dell's delivery time for customers in France--but that extra turnaround time, says D'Argent, caused Dell's French sales to plunge by an eye-opening 20%. (Dell promptly moved back to a depot in Paris.)

Now, Dell isn't a software company, and French consumers have a reputation for somewhat quirky behavior. Nevertheless, there's a message here. Especially in commodity markets, we're convinced that immediate availability belongs right at the top of any list of competitive factors. Response time--an admittedly unglamorous metric--may turn out to be just as important to a lot of customers as price, good reviews, packaging, and sexy technology.

That's certainly not the conventional wisdom, of course. The reseller channel has always done a reasonably good job of getting products into the hands of impulse buyers and users with tight deadlines. But a growing percentage of users now bypass the channel and deal directly with developers themselves. For these buyers, slow delivery is almost always a negative factor--sometimes even a deal-killer. (Borland vice president of sales Doug Antone, who spoke on the same panel as Philippe D'Argent, says he's found that "the longer we take to fill an order, the lower the future upgrade rate becomes.")

That sounds like common sense, and we've found that most large software companies have figured out that 24- (or, worst case, 48-hour) turnaround is the right standard. But we're still surprised by how many companies don't see the point of hustling to fill orders. The other day, for instance, we saw a WordPerfect video that showed a customer service rep promise that a phone order would go out in "seven to ten days"--a response time that WordPerfect apparently thinks is good enough to show on a promotional film. And WordPerfect is far from the worst offender. Major promotions, especially those that rely on outside fulfillment houses, routinely take up to six weeks to get software into the hands of buyers.

In fairness, achieving consistent 24-hour turnaround can be a tough management problem. Order entry and shipping systems often don't mesh properly, turf wars erupt, the finance department gets nervous (will we get ripped off if we ship before the buyer's check clears?), and "urgent" shipments to resellers regularly get bumped ahead of single-copy orders. And, unlike Dell, few software companies can really track the revenue loss from slow fulfillment. So the return on investment can be hard to demonstrate.

But our prediction is that software buyers will soon begin to expect the same 24-hour turnaround time that the best consumer and business direct-response marketers now routinely achieve. In fact, the proliferation of electronic and CD-ROM distribution schemes (which finally seem to be catching on) promises to make even 24-hour fulfillment seem relatively slow. When that happens, the most nimble companies are likely to capture more and more sales and market share. And the laggards will fall further behind.
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:immediate availability important competitive factor
Date:Aug 10, 1993
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