Fulfillment is the future of ecommerce.
Consumer expectations for fast, accurate and flexible order fulfillment have skyrocketed, reaching the point where many shoppers base their opinion of your brand and their customer experience mainly on how well you meet their fulfillment expectations.
Distributed Order Management (DOM) has emerged as a pivotal component in the complex world of ecommerce order management and fulfillment. DOM is the linchpin of the entire fulfillment process, ensuring products reach customers efficiently, as promised and profitably.
A Distributed Order Management system is a specialized software solution designed to optimize and streamline the end-to-end order fulfillment process by effectively managing orders from multiple sources and distributing them across various fulfillment centers, suppliers, or stores in a network.
Consumers judge your brand by their fulfillment experience. DOM is a powerful tool for driving customer satisfaction – and bottom line profitability
Once viewed the domain of only the largest, most complex online sellers, Etail pioneered creating powerful, affordable DOM platforms for mid-to-large size ecommerce brands.
We’ve learned a lot working with customers on what it takes to successfully choose, implement, manage and improve a DOM platform. In this blog post, we’re going to dive into the world of Distributed Order Management and explore six best practices that can help your business master DOM, achieve excellence in ecommerce fulfillment, and drive growth and profitability now and in the future.
Let’s get started.
1. Get Moving
Time is not on your side. The fulfillment experience is the major component of the customer experience, with some 90% of online shoppers saying their delivery experience accounts for at least half of their total online shopping experience. That’s why your competition is investing in the systems and processes needed to support a best-in-class fulfillment experience. Some 52% of ecommerce executives surveyed said that they had already invested in new or improved order management platforms, while 43% said fulfillment process improvements – often leveraging new or enhanced systems – were a priority in the coming 12-18 months. (Saddle Creek Logistics). The implications for your business are simple: competitors are prioritizing investments in their fulfillment capabilities, and they will take market share from sellers that don’t.
2. Define Your Requirements
DOM implementation can range from the very simple to the mind-numbingly complex. For example, a seller wanting to meet consumer demands for free, fast shipping may discover just placing their product in two or three 3PLs scattered around the country puts their product near most of their customers – cutting shipping time and expense. At the other end of the spectrum, some brands are looking to create a dynamic ecosystem where any location, be it a retail store, distribution center, partner facility or even supplier is connected and capable of fulfilling an order.
Which is right for you? The expert ecommerce consultants at Gartner suggest defining your requirements in terms of fulfilment complexity along two dimensions.
Demand complexity – Where and how quickly do your customers expect to receive their online orders? Shipped to their doorstep? Available for pick-up? Delivered to remote locations like lockers or job sites?
Supply complexity – Where can you fulfill orders from? Your warehouses and DCs? Third party partners like Amazon FBA or 3PLs? Retail stores? Suppliers and drop shippers?
We’ve found a third dimension that often helps tightly define DOM requirements.
Product complexity – What products will benefit the most from being included in your initial DOM implementation? Not all products need to be available for fast or free delivery. It is often better to focus on a limited selection of products, then expand. Also, some products may have unique packaging or other shipping requirements which need to be included in your DOM placement strategy.
Gartner suggests distilling the results of your analysis into scenarios which can be used to evaluate vendor offerings. Creating scenarios, rather than just listing product requirements, helps better differentiate product offerings among vendors and highlights how each vendor would approach the problem as part of your workflows, rather than just as a checklist of product features. (Gartner)
3. Build for the Future
Sellers sometimes make the mistake of skimping and settling for lower-capability platforms because they seem to be easier to build and use. But you should build on a DOM platform that allows for the capabilities you’ll need into the future. Perfecting your model will take time. And no one can predict the future of ecommerce (did you foresee the COVID-fueled ecommerce bump and resulting fulfillment capacity crunch…yeah, we didn't either). The best practice approach? If you can’t foresee the future, at least make sure you can integrate with it. Choose a platform that provides the integration flexibility to work along with – not replace – WMS, ERP and other systems and also supports the third-party partners you may need to drive growth or meet unexpected developments.
4. Consider Additional Functionality
DOM is a component of many advanced order and inventory management systems. But when evaluating platforms, look beyond just order and inventory management functionality for other components that can work with DOM to optimize orders, maximize margin and deliver better inventory utilization.
For example, the Etail platform includes advanced DOM capabilities plus additional capabilities such as:
Dynamic Pricing: Pricing shown to individual shoppers is modified to reflect the actual total cost of fulfillment. The goal? Never take an order you can’t profitably fulfill.
Dynamic Listings: Listings shown to individual customers are modified to reflect regional inventory availability. Don’t take orders where there is no inventory to profitably fulfill them.
Cartonization: Cartonization works with DOM to automate optimizing the packaging of products for shipment. It involves determining the most efficient and cost-effective way to pack items into shipping containers such as cardboard boxes, envelopes or mailers. Etail cartonization algorithms also “shop” available carrier rates – including negotiated rates – by fulfillment location to determine the most cost-effective way to ship the product. The goal is to minimize shipping costs, reduce the environmental impact and ensure the safe delivery of products to customers.
5. Break Down Silos
Optimizing your fulfillment experience is not just a project for operations or the supply chain alone. You’ll need to partner with internal teams from across the business – from merchandising to plan assortments, to supply chain planners to get the right inventory, to warehouse management where the fulfillment workflows actually need to happen. And advanced DOM solutions like Etail provide dynamic pricing and marketplace listing capabilities tied to regional inventory availability and fulfillment cost – which provides Marketing with a whole new toolkit for optimizing listings and profitability. But getting everyone on the same page regarding your DOM project can be tough. Check out our eBook “Selling to the Team” to learn how to get internal stakeholders behind your project.
6. Monitor. Maintain. Improve
At its heart, DOM is basically automated decision making; deciding what fulfillment option makes the most sense to optimize profitability on each individual order as it is processed. But how do you know that your DOM system made the right decision? With most DOM platforms, you can’t. Which leaves you no way to monitor, improve and optimize traditonal DOM systems.
That’s because almost all DOM platforms share a fundamental flaw in how they report and analyze data: they only report on what actually happened, not what should have happened.
Let’s say, for example, you stock a product in New York and in California. You get an order from Oregon for two-day delivery. But the product is out of stock in California, so the order is shipped – at expediated shipping rates – from New York. Traditional DOM analytics would record that the order was “successfully” shipped from New York. In fact, it might also replenish inventory in New York based on this mistaken demand!
Etail recently introduced Ideal Order –an ecommerce analytical tool that automates understanding fulfillment opportunity cost. Ideal Order measures every ecommerce order against nine fulfillment metrics to produce an Ideal Order score for that order.
But Ideal Order also runs a simulation on every order to determine what should have happened if every factor had been ideal and calculates the cost difference for each factor. So in our example, Ideal Order would record the successful shipment from New York – but also highlight the additional of not being able to fulfill the order from California. Adding up the results and analyzing by SKU, location, functional area, carrier and other factors reveals how well DOM is operating and exactly what is causing net income to leak from your ecommerce operations.
That means you’ll be able to pinpoint the optimal inventory location and stocking quantity by SKU to meet demand and improve results from DOM. Plus Ideal Order examines other costs like carton usage and carrier costs so you can spot additional areas for improving net income.
Selecting and implementing an ecommerce Distributed Order Management system requires a strategic, whole-systems approach. By following these DOM best practices, you can ensure that your chosen solution aligns with your business goals, enhances your customer experience, and contributes to overall profitability.