Imagine the power of being able to make money even after you’ve made a sale.
That’s the idea behind distributed order management – often referred to as DOM.
In this series of videos and articles, we’ve talked a lot about taking a yield management approach to inventory planning.
Yield management focuses on how to get the most profit possible out of the inventory that is available right now. DOM is the key to accomplishing that because the objective of DOM is to route an individual order to the most cost-effective location for fulfillment.
DOM is a point-in-time profit maximization tool. When an order comes in, DOM is aware of all fulfillment options and all inventory available for sale wherever it might be located. Then DOM automates evaluating all fulfillment scenarios before selecting the best combination of available inventory and fulfilment method in order to yield the highest profit while meeting the required delivery timeline.
While the ultimate goal is to achieve the lowest total cost of fulfilment, DOM’s definition of “effective” can also take other variables into consideration. Additional variables could include:
- Alternative suppliers for the product
- Available fulfillment methods
- Carrier availability, their service levels, and shipping rates
- The option of shipping the order complete or splitting it into multiple shipments
- Other business rules such as favoring preferred suppliers with tiered rebate programs which might not offer the lowest unit cost, but overall would increase margins once the tiers are achieved.
The logic behind DOM is straight forward. When an order is received, DOM considers:
- Where is inventory available right now?
- Based on decision rules, what are all possible solutions to fulfill the order based on where inventory is located?
- What are the delivery costs for all possible solutions?
- Which is the best solution that results in the lowest cost while meeting the order’s required delivery date?
Then DOM automates the workflow to actually place the order.
While DOM is focused on processing orders in real-time, it also produces a wealth of information for forecasting and inventory location planning including SKU velocity, regional demand and purchase timing.
The result? You actually are making money after the sale through:
- Reduced fulfillment cost
- Lower overall stock levels
- Higher inventory returns
- Increased ROI on inventory
- Increased cash flow
You can learn more about distributed order management and how it works in the video that accompanies this article: Distributed Logistics for Digital Commerce: Distributed Order Management. It’s part seven of an eight-part series on Distributed Logistics. To get started with the series, click here to view the first video Distributed Logistics for Ecommerce: A Change in Paradigm and Why it Matters