This article by Etail’s CEO Michael Anderson was originally published by Multichannel Merchant.
Omnichannel commerce is now a basic competitive requirement. It allows merchants to better understand their customers and deliver a seamless and personalized experience. But enabling customers to buy from anywhere, pick up from anywhere and return to anywhere is an operational challenge. So is ensuring customers receive orders on time and in full for the lowest possible cost.
Traditional order management systems (OMS) – which were designed long before omnichannel existed – aren’t flexible enough to support multiple channels, fulfillment methods, locations and return points. Instead they operate in silos, connecting only single channels to single inventory sources. This limits inventory visibility throughout the supply chain. When merchants don’t know how much inventory is available and where it is located at all times, it is difficult for them to make and keep delivery promises or route orders to optimal fulfillment locations.
Benefits of a DOM System
To overcome these challenges, merchants can either integrate their disparate systems and data sources or deploy a Distributed Order Management (DOM) system. According to Gartner, merchants are increasingly investing in DOM. If you’re not considering doing the same, you should. Here are three good reasons why.
- DOM lets you collect orders from any channel and use rules to dynamically decide how they should be sourced and shipped. Optimal routing decisions are made for you based on many changing factors such as inventory availability at each supply chain location, channel-specific minimum and maximum quantities, customer service level requirements, lowest total delivered cost and more. Said differently, DOM allows you to create margin points post-sale by identifying and acting on fulfillment cost-saving opportunities. Orders automatically flow to the supplier or warehouse location closest to the end customer. Sometimes this saves a few cents per order, but other times it’s a few dollars. In categories where margins are razor thin, this cost savings can really start to add up, especially if you’re processing hundreds or thousands of orders per day.
- DOM provides a real-time data hub. It integrates internal data sources with external data sources. It bridges the gap between the front-end sales side of your business and the back-end supply side. All your inventory and order data lives in one place, eliminating the need to transfer, reconcile, and consolidate data from different sources. Manual workarounds, which are neither sustainable nor scalable in the long run, are no longer necessary. With DOM you have one comprehensive database – a single source of truth.
- DOM optimizes inventory allocation – not just order fulfillment. Similar to how orders are optimally sourced and shipped, DOM uses predefined logic to decide how inbound inventory should best be allocated. New inventory can be received weeks or sometimes months after issuing a purchase order. DOM decides how much should go where based on some of the same factors used to dynamically route orders: Current inventory availability at each supply chain location, channel-specific minimum and maximum quantities, in-transit inventory, demand forecasts, promotions and more.
Best-Of-Breed Vs. All-In-One Approaches
When selecting a DOM one of the biggest decisions you will face is whether to go with an all-in-one system that includes DOM or a best-of-breed solution. There are pros and cons to both approaches. Best-of-breed allows you to replace one system at a time – your OMS in this case – instead of replacing all your systems at once.
This approach costs less upfront and gives you the luxury of choosing the best DOM, but it also puts the integration burden on you. Integration costs can be higher than the cost of the system itself. Plus, the connections are almost never as seamless or stable as they are made out to be. Employees may be needed to support some processes, which increases operating expenses – putting your business in a less competitive position down the road.
All-in-one systems that include DOM cost more and take longer to deploy, but they provide the end-to-end integration, data centralization and data integrity that process automation requires from day one.
Regardless of which approach is used, many merchants lack experience implementing DOM. Unplanned delays, expenses and compromises can occur. Going live on time and on budget requires diligent internal analysis and collaboration. All relevant stakeholders must be engaged to understand how a DOM implementation will affect current legacy systems and operations.
Be Prepared for Transition Challenges
Don’t underestimate how disruptive this transition will be. Inventory management and order fulfillment requirements must be gathered and codified. Current and future state workflows must be mapped out to define and control project scope. Your end-state design should be channel-agnostic and provide end-to-end inventory visibility and real-time updates. Move away from channel-specific fulfillment processes and toward a scalable and flexible cross-channel model. Resist the urge to let current legacy system constraints impact your decisions. Focus on your customer’s order fulfillment expectations first, and industry trends second.
The bottom line: DOM is about the customer. Improving the customer experience must become a top priority if it hasn’t already. Many merchants that have relied on product offerings or pricing to stay relevant now believe future competitive advantage will be based solely on this. If you don’t enable customers to search for, order and receive products when and how they want, they’ll buy from another merchant that does.
To improve the customer experience while driving operational efficiency, end-to-end sales to supply chain integration is required. Having a single view of your business creates a win-win situation. You can meet customer expectations by better allocating inventory and fulfilling orders on time and in full for the lowest possible cost.