Feb/Mar 2008

Nowhere is real-time information more valuable than in the massively expanding home shopping market. IKEA launched a new proof of delivery system at the same time as its transactional Web site, and has been reaping the rewards

It's less than two years since IKEA launched its Internet shopping Web site in the UK, but the service is growing fast. It is now available in 70 per cent of UK postcodes, and this year the company expects the operation to handle four times the volume it saw during its first year.

Its launch coincided with the roll-out of a new electronic proof-of-delivery gathering system, which the company had already decided it needed for existing home delivery volumes, but which was to become a key element in the e-commerce environment.

All UK distribution is handled by IKEA Distribution Services, and its deputy customer distribution manager, Don Marshall, says his company was determined to improve the accuracy and quality of customer deliveries.

 

'Our paper-based system was wholly inadequate, and this resulted in large numbers of errors,' he says. 'As stock got mislaid or returned to the warehouse undelivered we found ourselves replenishing large volumes of stock without understanding why, and our data became increasingly inaccurate.'

Central to the e-commerce operation are large bulky items such as furniture and kitchens, and in orders where there are so many individual items, there is always a risk that some items may be mis-picked or not delivered.

'The cost of a second delivery to supply missing or damaged items is high,' Marshall says, 'so a paperless mobile solution that provided real-time information about the progress of a delivery was crucial to the success of the e-commerce business.'

The core of the new system is Nucleus IS, an advanced 'ePOD' (electronic proof of delivery) data capture solution from Zetes. This works in association with wireless handheld computers and printers, providing a direct interface with IKEA's existing home delivery management system, HDi, from software house Axida.

The ruggedised computers are from Motorola's MC9090 series, and are mounted in the delivery trucks using Motorola cradles and chargers. Initially these were fitted in 30 trucks, but the figure was due to reach 60 by the end of last year.

In service

At the start of their shift, drivers download delivery data from Axida's HDi system on to their mobile computer, which presents them with a list of visits. For each visit the mobile computer shows customer details, the address and any additional notes stored against the visit.

When the driver arrives at the customer address he uses the mobile computer to scan all the items marked for delivery or collection, and checks that the correct items are delivered or collected. Exceptions are recorded against any items that can't be delivered or collected. Once all the items have been accounted for, a summary is displayed on the screen and the customer is requested to sign on it.

A hard-copy customer receipt is then printed from a mobile printer, and the signature and visit result are sent back to HDi via GPRS. The in-vehicle printers also enable drivers to label damaged and returned goods with a warehouse barcode as they are loaded back into the truck.

Scanning every item on and off the delivery vehicles at the customer premises is delivering numerous benefits, says Marshall. 'For the first time, we can create an audit trail of every item loaded on a truck. At any point in the day we are now able to say which products have been successfully delivered and which require further administration.'

Once the information on non-delivered or damaged items has been sent back to HDi, IKEA customer services staff can make alternative arrangements with the customer or arrange for replacement items to be shipped. And all this happens before the truck even gets back to the warehouse.

Paradoxically, after the implementation of the ePOD solution, IKEA observed a substantial increase in errors on delivery. But Marshall explains this was merely because the new system was highlighting the failings of the previous paper-based system.

'It was only with the launch of the automated ePOD system that we began to recognise the true volume of our delivery errors.' In reality, IKEA has seen a huge increase in the number of correct deliveries, and is benefiting from increased supply-chain visibility.

Benefits

Customer satisfaction levels are also higher, says Marshall, as the company is able to deal with non-delivered or damaged goods more quickly and efficiently. In contrast with the days or hours it would previously have taken, IKEA's customer service team can now contact customers within minutes of receiving their delivery in order to deal with any missing or damaged items.

'And it's easy for delivery drivers to check that every item on the vehicle for a particular customer has indeed been delivered,' he adds. 'When you are delivering a flat-pack kitchen, it's not hard to overlook a small packet.'

The success of the project has led IKEA to consider the potential of the ePOD solution at a global level. And on the Zetes side, it has prompted the company to investigate ways of replicating the solution for other online retailers. Whilst the IKEA system does have bespoke elements, Zetes says it can be easily easily be adapted for use by other companies without changes to the core concept.

In the words of Zetes' UK managing director, James Hannay: 'In today's rapid transaction environment, online buying is growing at explosive rates, and having access to real-time information has become an essential part of delivering a good customer service.

'ePOD is key to better resource management, reducing operational cost and improving customer service.'

PANEL

IKEA, and the growth of online sales

IKEA has offered its stylish, functional and well-designed furniture at highly competitive prices since 1943. There are now more than 250 IKEA stores in 35 countries.

In recent years Internet retailing has come to be been seen as a key to enhancing the company's growth, especially given the planning constraints on opening new stores. IKEA began to roll out an e-commerce platform in selected areas of the UK in 2006, initially offering 4,500 items, and it expects to extend availability to the whole country during this year.

IKEA Distribution Services, its sole contractor in the UK, delivers product to homes from what is known as the Central Distribution Centre (CDC) in Peterborough, and its management decided back in 2004 that they needed a full track and trace solution in order to provide increased visibility of the stock right through to its arrival at customers' homes. This set the company in good store for its subsequent e-commerce roll-out.

Zetes Industries is a leading pan-European specialist in the auto-identification market. It has a presence in the UK and ten other European countries, and is based in Belgium. It employs 600, and has a turnover of more than £100 million.