Mercedes Retools its Fulfillment Operations
In 1999, auto manufacturer Mercedes found itself in an unusual position: Its customers were unhappy.
In short, customers and dealers were clamoring because their merchandise hadn’t been shipped or was out of stock, or they had received the wrong products. For months, the company’s fulfillment operations had been building into a dreadful back-order situation.
In addition to offering automobiles, Mercedes is a catalog and in-store retailer of car accessories and luxury Mercedes-branded merchandise for consumers and dealers, as well as a supplier of parts to its dealerships. Fulfillment has always been done by a third party, and in August 1999, backlogs reached a critical mass of 9,000 outstanding orders. At that point, Mercedes officials began hunting for another fulfillment provider.
“We had a parts distribution center bursting at the seams trying to handle automotive accessories, and also carry a small number of auto accessories [for the] catalog,” says Glenn Rizzo, department manager for automotive and personal accessories at Mercedes. “Dealers and customers told us they didn’t have confidence that when they ordered a product it would show up at the right time. It made us go looking for a new fulfillment partner.”
Mercedes also was in the midst of expanding its sales channels to include an online store and a larger consumer catalog. The catalog division had grown from a $5 million to an $8 million business in just five years, and the company hadn’t even tapped the Internet as a sales channel yet. Wanting to approach the problem comprehensively, Mercedes officials realized they needed to tackle their current fulfillment dilemma before adding more demands.
“Our business had grown so fast that we had to catch up on technology,” says Rizzo, noting that the company’s growing pains were beginning to affect its image. “It is very important for our organization to maintain the highest image and brand reputation. Clients expect that. Ultimately, [the fulfillment situation] was hurting our brand.”