(FORTUNE Magazine) – As flocks of fledgling Web merchants are finding out the hard way, there's lots more to successful e-commerce than mouse clicks. To see how much more, look at the most challenging corner of business-to-consumer Internet selling, where the customer wants the stuff not in a week or a few days, but within hours. Setting up a Website that displays wares and takes orders is less than half the job. The hard part is delivering the correct stuff promptly to the right party without going broke. Opportunities for routing inefficiencies, screwups--and alienating customers--are abundant. But the latest software purports to offer a path around many of the pitfalls.

Ironically, the appearance of e-tailers offering same-day delivery conjures up a nostalgic picture from bygone decades, when some stores delivered milk, bread, and produce daily to town dwellers. The lady of the house thought nothing of phoning in grocery orders until chain stores began drastically undercutting local grocers' prices and cars became more common. Today, setting a delivery time is more of a problem because the lady holds a full-time job.

Business-to-consumer e-commerce will reach about $39 billion this year, according to projections by Forrester Research in Cambridge, Mass. Forrester expects it to soar to $184 billion, or 7% of all retail sales, by 2004. A small but growing number of e-tailers are reaching for a slice of the rapidly growing pie by scratching the shopper's itch for getting things as close as possible to right now. Some of these companies are relying on outside firms to bring their wares to the customer's doorstep, pronto, while others are deploying their own truck fleets.

A close look inside two dot-coms born last year suggests how these quick-response companies are trying to avoid getting lost on the "last mile" of the supply chain, the one that leads to the homes, apartments, and offices where the customers are. Both companies are counting on specialized software to manage their time-sensitive delivery schedules. One goes beyond this by using global positioning system (GPS) satellites to keep tabs on the movement of its fleet, which consists of specially outfitted trucks designed to ensure that perishable goods arrive in appetizing condition.

Though Sameday.com of City of Industry, Calif., is an e-tailer itself, it primarily handles inventory and delivery for a fast-growing roster of Web merchants in the Los Angeles area--more than a dozen at last count. Founded in May 1999 with backing from Idealab, a venture capital firm in Pasadena that takes an active role in running its Internet startups, Sameday.com maintains a warehouse in which client companies' toys, books, CDs, apparel, software, and gift items account for most of the stock. While individual e-tailers wage ad campaigns to promote their Websites and take orders from retail customers, Sameday.com is the fulfillment company behind the scenes that actually packs up their goods and rushes them to purchasers.

As the company's name implies, delivery within selected metropolitan areas is promised by 8 P.M. the same day you place a Web order, as long as you do so before 2 P.M. In addition to L.A., Sameday is serving San Francisco, Chicago, and New York, and plans to expand into five other cities this year.

"If consumers are to leave the malls in droves, they will want the almost instant satisfaction they get by buying goods in person," says Sameday.com CEO Alex Nesbitt, a former Boston Consulting Group partner. Sameday.com's revenues have been growing 200% a month, says Nesbitt, who predicts that the company will break into the black at a volume of $100 million in annual transactions around the middle of 2002.

A chain of events starts at Sameday.com when somebody sits at a home PC, scrolls through the offerings of one of its e-tailer clients, and decides to order, say, an arrangement of artificial orchids. As the customer proceeds through the online ordering process, a number of delivery options pop up on the screen. For example, the customer could click on delivery windows from 2 P.M. to 3 P.M. or from 6 P.M. to 7 P.M., or perhaps indicate that the precise time doesn't matter as long as it's sometime today, or maybe even tomorrow. Before the customer makes these choices, computers have already checked out Sameday's available delivery times in his part of town.

At or near the chosen hour, customers in the L.A. area are visited by one of 25 Ford and GMC vans in Sameday's fleet. Orders of $50 or more are delivered free; smaller ones carry a $6.95 service charge. Sameday hands off orders from outside the metro delivery area to carriers like UPS and FedEx for delivery the next day or later, depending on the customer's wishes.

Let's say it's an average morning and the e-tailer sites are racking up orders, most of them from customers who want their stuff the same day. As the 2 P.M. deadline for accepting the day's orders approaches, Sameday has a challenge: How on earth can it figure out which trucks should take which routes to get all the items delivered with any semblance of efficiency? And how will it deal with disruptions like a van's breaking down? One word: software.

Cheetah Software Systems of Westlake Village, Calif., supplies the fleet-dispatch and tracking package that runs Sameday's delivery operation. Cheetah was started by South African-born computer scientist Bobby Darroll, who came to Hollywood in 1985 to work in special effects for movies. He later saw a business opportunity in the inability of delivery services to predict with any precision when they would be able to bring a washing machine, or whatever, to a customer who had taken off precious time from work to wait for it at home.

"I became interested in the business of predicting time, because everybody wants to know when and where," says Darroll. Why didn't anybody supply this? he wanted to know. Using math models from the field of operations research, he had previously written software for Total Oil in South Africa that figured out which items to put on which trucks, and in what order, to keep the company's service stations stocked.

The software Cheetah supplies to Sameday.com consists of two parts. The first is a wireless Internet tracking program called Cheetah Tracking, which stores each day's orders on a Net server the drivers can access by punching individual PINs into wireless data phones they carry in their vans. Each driver's handheld phone displays a list of the stops on the day's route. Clicking on the first stop brings up the address, the recipient's name, and a description of the item being delivered. The device also displays turn-by-turn driving directions for reaching each stop. As a final backup, each van has a hard copy of the Thomas Guide for L.A., a book of detailed street maps that legions of area residents rely on for navigating the sprawl.

When a driver arrives at a drop-off point, he enters "arrive." Then he enters the name of the person who accepted the package. Finally he clicks "depart" and heads to the next stop shown on his wireless gadget. Back at Sameday's warehouse, the fleet dispatcher can log on to the tracking server to see which stops the drivers have completed as they proceed along their routes. The company uses an automated telephone system to call each customer confirming the delivery's expected arrival time. If a driver is running late, the customers likely to be affected are called and, by making number selections, given the option to accept, reschedule, or even cancel their deliveries.

The drivers follow itineraries generated by a second chunk of software called ArcLogistics Route, developed by ESRI in Redlands, Calif., a leader in geographical information systems, or GIS. ArcLogistics' task is akin to solving the age-old math exercise known as the traveling salesman problem: figuring out how to visit a bunch of cities while driving the fewest miles. Performing intelligent routing for delivery fleets consisting of dozens of vans making hundreds of stops makes the traveling salesman problem look like a walk in the park.

As orders come into Sameday.com from e-tailer Websites, ESRI's software first performs a step known as "geocoding," or figuring out where a customer's home is on the map. When an order with a delivery address comes in, the program tries to match it with a point on a street-network database that describes the delivery area.

Sometimes this works on the first try, and the match gets rated a perfect 100. At other times a score of 70 or 80 may result when the database shows both a north and south Main Street, for example, while the customer has indicated neither. This may require a phone call to clear up the ambiguity. Or maybe the customer has provided a cross-street reference that is not recognizably unique. In a worst-case, no-match scenario, the software defaults to the small area described by the zip-code-plus-four in the address and alerts the driver that he will have to ask for directions upon arriving at the zip's middle, known to cartographers as the "centroid."

Once the customer addresses have been geocoded, the software goes into a routine called "intelligent routing," which strings together delivery stops not as the crow flies, but using knowledge of intersections, one-way streets, and other factors that affect how long it really takes to get somewhere. "Around San Diego, where the residential areas are built atop mesas separated by canyons, a trip that looks like four miles when you draw a straight line on a map can turn out to be a 16-mile drive on the actual roads," says Don Weigel, ESRI's ArcLogistics product manager. Additional factors that must be considered include the delivery-time windows customers have requested, the size and weight capabilities of different trucks, and other elements, including the cost of driver overtime.

The software takes an initial crack at finding a routing solution for the day's deliveries by applying a "greedy algorithm," which clumps delivery stops together according to their proximity. Then the software reattacks the puzzle, swapping stops using a technique called a "tabu" search, which figures in all those canyons and one-way streets. When combinations of stops are sampled and found to be worse than the original plan, they are ruled out. By crunching thousands of alternative combinations of stops, the program hits upon some that save time and distance. The best combinations are incorporated into an improved routing plan, which can end up being 10% to 20% more efficient than the original. Sometimes an optimized route will contain a stop or two that the greedy algorithm had originally assigned to another driver.

Once all this calculating has taken place, the result is displayed as a map on the dispatcher's computer showing different-colored routes with numbered stops for various trucks to follow. These are embellished with details like rivers, doughnut shops, or whatever landmarks the user prefers. Driving instructions for getting from point to point can be called up when needed both by dispatchers and by the driver with his mobile data phone.

As the day progresses, the Cheetah system may have to cope with a problem such as a van stuck in traffic. Sameday's dispatcher can use the Cheetah system to try out various remedies and predict their impact on costs and service quality. Maybe the smart move is to send a second van to an exit ramp to meet one stuck on a freeway and offload some of its merchandise. Or perhaps the gridlocked van's load isn't very time-sensitive, and it's best to let the driver complete his route without tying up another vehicle. Ultimately the dispatcher will make a choice based on a combination of intuition and the software's advice.

Nowhere do the logistical acrobatics of fast e-tailing create more potential anxiety than in the online grocery business. Punctuality is only part of it. Keeping products fresh and appealing can be the difference between getting repeat orders and never hearing from a customer again. One company stepping up to the challenge is Groceryworks.com, which started delivering groceries in the Dallas area last December. Groceryworks sprang from the mind of attorney Kelby Hagar, 29, who left his job at a Dallas law firm armed with seed money to pursue his obsession: overcoming the aggravation of grocery shopping.

Hagar's business plan crossed the desk of Gary Fernandes, who rose to be vice chairman during a long career at EDS, which he left in 1998 to form a venture capital firm. "I looked at a few hundred proposals, and this one stood out for a couple of reasons," says Fernandes. "Research says the market for Internet home fulfillment of periodic consumables may be as much as $700 billion. And there's no established leader, so you don't have to get involved with conquest marketing."

Fernandes came on board as CEO of Groceryworks at the urging of Hagar, who is chairman. The startup's mission is to sell goods at prices that compete with an area's upscale supermarkets and deliver them the same day at no extra charge. Fueled with $50 million in venture capital, the privately held company has moved quickly into the Dallas market, targeting two-earner households with incomes above $50,000. To date, Groceryworks has served about 20,000 customers, who must place a minimum order of $25, with orders growing about 10% a week, and it expects to start kicking out profits this year. Houston is the next city on the company's list, executives say, with other cities to follow.

Groceryworks uses routing and scheduling software supplied by Roadnet Technologies, a United Parcel Service subsidiary that is part of the UPS Logistics Group. Because perishability is a major issue, Groceryworks' delivery trucks use signals from GPS satellites to calculate their locations and transmit them so that headquarters will know the precise position of each vehicle.

Getting the delivery operation up and running required a herculean effort in designing and outfitting specialized trucks. The man charged with doing this on short notice was Dan Denton, director of transportation logistics. A 15-year food distribution veteran with an MBA, Denton came to Groceryworks from Frito-Lay. Last fall he was given just 12 weeks to acquire an initial batch of 20 trucks in order to meet the startup's rollout date for home delivery.

Denton test-drove several brands of "box" trucks, finally settling on Nissan diesels because he thought they were well built. He also liked their tight turning radius, which can be important when navigating residential neighborhoods. The one feature Denton wasn't happy with was the available standard bodies; none fit his vision of what was needed.

Working with Hayes Truck Leasing, the Dallas dealer that supplied the Nissan diesels, Denton consulted Mickey Truck Bodies, a custom fabricator in High Point, N.C., that builds bodies for large beverage fleets. Denton had spent a lot of time in an office hallway about the same width as a truck aisle, taping up cutout templates of the kind of shelving he wanted. The racks, he insisted, had to be readily movable at low cost to meet the needs of the business as it evolved.

Denton says Mickey Truck Bodies listened instead of preaching, as some other body builders did, and agreed to a quick production schedule. Hayes Truck Leasing married the completed bodies to the Nissan diesel chassis and got the trucks delivered on time. The cabs have air conditioning to keep the drivers comfortable and presentable-looking, and the truck has a chilling system that keeps the box at about 50 degrees Fahrenheit. Denton decided against a full-blown refrigeration unit capable of maintaining three separate temperatures for the frozen, chilled, and dry goods in the box. That would have doubled the cost of each truck, he says, while adding noise that might not be appreciated in the suburbs.

Tinkering in Hagar's garage with dry ice and rectangular plastic "totes," Denton arrived at a fascinating solution to the problem of cheaply controlling the temperature of perishables en route to a customer. He sent his proposed solution to the labs of dry-ice supplier BOC Gases, which developed shallow, insulated trays nicknamed "pizza boxes." Filled with dry-ice snow and placed atop totes filled with bags of chilled or frozen groceries, the ultra-low-tech method keeps the food's temperature stable for about eight hours at a negligible cost per tote.

The totes and pizza boxes have been such a success that Groceryworks expanded its Dallas fleet to 45 trucks by adding more Nissan diesels with no refrigeration at all. "To date we haven't had a single thawing problem, and this dramatically lowers the cost of running our fleet," Hagar says. The company now has 500 more trucks on order to prepare for its expansion into Houston and beyond.

On average, Fernandes says, customers order once a week. The cost per drop-off keeps decreasing as more people in a neighborhood become customers. When online shoppers place an order on the Website, they choose from delivery windows that are posted based on how the day's fleet obligations are shaping up. The trucks start rolling at noon and circulate in the neighborhoods until 10 P.M., dropping off groceries. On Saturdays and Sundays the drivers put in shorter, five-hour days. Starting in the morning hours, stock pickers in the freezer, refrigerated, and dry-goods sections of the warehouse assemble customers' orders, bagging them and placing the bags in totes according to temperature.

To hold down costs, Groceryworks has delegated much of the order assembly to local food distributors. Fresh meats, cold cuts, produce, baked goods, and prepared frozen entrees are among the foods the distributors handle. As customer orders flow into Groceryworks, requests for the relevant items are forwarded to distributors via a computer link, along with the deadline accompanying each order. Groceryworks' trucks periodically swing by the distributors and ferry items back to the main warehouse, where they are combined with other stuff from the e-tailer's own shelves to complete the orders.

Before departing on their routes the drivers perform a quality-control check, reconciling the bar codes on the totes lined up at their loading bays with the addresses on their route lists. To do this they use handheld Mobilcast computers, built by Intermec Technologies in Everett, Wash., that accompany each truck. In addition to scanning, the devices store the day's delivery plan, worked out by the associated Roadnet software, and can send and receive routing messages. The gadgets also "capture" the recipient's signature when a delivery has been completed and incorporate GPS receivers for keeping track of the trucks in real time. The drivers have cell phones as well for calling customers or their dispatcher.

As ambitious as all this sounds, Groceryworks is already talking of broadening its delivery service to include such product lines as garden supplies, dry cleaning, and prescriptions from pharmacies. That was another reason for choosing the pizza-box chilling system. "When this business goes from being just a grocery company to being a general home-fulfillment company, I won't want to freeze the other things we will be bringing our customers," Hagar says.

If they're going to lure shoppers away from the world of brick-and-mortar stores and hang on to them, the e-tailers will have to work ceaselessly to keep refining this logistics wizardry. The ideal model of delivery is already out there in the public imagination. It's the "transporter" from Star Trek, which materializes things out of a shimmery haze. Hold on to that thought, Web merchants, if you want to compete with the allure of impulse purchasing that stores have always offered.