Article by contributing writer Md Asif
Order management didn’t escape the impact of the COVID-19 pandemic. According to Statista, order management was largely affected by labor shortages and increasing returns. As online shopping took off and orders and returns snowballed, businesses had to find ways to handle the deluge.
The response of most businesses was reactive and not preemptive. According to Forrester, the pandemic push for e-commerce brought with it bootstrap order management tied to legacy ERP – as systems grow, bloat, or break, it becomes harder to manage, coupled with rising expectations for order management coming from digital-first natives that expect a more B2C order experience.
Now that businesses are alert to the strains this shift has caused for their systems, they’re starting to use a more strategic approach to handle order management woes. Read on to find out why you may have to opt for an order management system (OMS) to take care of increasing orders and the resulting fallout.
What is an order management system (OMS)?
An OMS system manages orders originating from different sales channels and locations. It uses software to streamline and automate the entire sales cycle, automating the processes that result from a sale – including fulfillment, inventory adjustment, tracking – as well as returns or exchanges of orders.
An OMS makes this straightforward by combining inventory and order data in a single location and integrating it with every other system of the business.
How an OMS works for you
An OMS streamlines all orders and order processes and facilitates the fulfillment of those orders. It is invaluable for businesses that receive orders from different channels, by linking to the inventory to keep it updated as orders happen. The system extracts information necessary for payment and shipping processes, streamlines the processes, and updates order shipping status. The software also handles returns and refunds.
Amazon’s free two-day shipping is an excellent example of an OMS at work.
Bootstrapping order management
Since the rise in e-commerce, especially since the pandemic, many companies have simply added some sort of order management functionalities to their Enterprise Resource Planning (ERP) systems. This solution can and has worked for businesses that don’t have to orchestrate an extensive distribution network.
This solution is simple and doesn’t cost much initially. However, it’s not an optimal solution for the volumes of orders online retailers have to navigate these days. ERP systems were not designed for order management; they were designed to manage manufacturing processes. In fact, the original software was called Material Requirements Planning (MRP).
Differentiating an OMS from an ERP
An ERP has a wider application than an OMS. The software forms the structure that runs the entire business. It facilitates all processes integral to the business, including finance, human resources, manufacturing, supply chain, services, procurement, marketing, and more. It’s a system that facilitates the automation of business processes, streamlining both customer-facing and back-office functions.
An OMS, on the other hand, is focused specifically on the features and processes of sales, orders, inventory, and fulfillment.
What limitations does an ERP have?
In terms of managing orders, an ERP has the following drawbacks:
Cheap Now, Expensive Later
While it may seem cost-effective to bundle order management with an ERP, you may end up spending more money to customize the system so it works for your business.
Extensive Technical Support
Configuring an ERP to operate as an order management system is complicated and the customization can be a real headache. Even tasks that should be relatively simple can take up weeks of valuable time. If you are willing to use a system for order management that was not designed for the task, your IT team is in for a difficult time that will cost the firm time, money, and other resources. As time goes on and systems grow, your codebase and workflows could become a tangled, unmanageable mess.
Customer Experience
Customers have come to expect a smooth and increasingly nuanced buying experience. By not employing an advanced order management system, poor customer experience can lead to a loss of sales as customers become disenchanted with a process that is not streamlined. An EPR doesn’t have the functionalities to ensure that the sales journey proceeds smoothly. Orders may get lost and inventory faults may creep in, leading to customer dissatisfaction.
Risk to the SOR for Financials
An ERP can pose a risk to the SOR (System of Record) for financials if it is not properly implemented. An ERP can be a SOR for financials, meaning it acts as the most accurate and reliable source of data for financial reporting and analysis. Customizing an ERP to give it enhanced order management capabilities, can compromise the ERP as a source of data for financials.
Limited Integration
An ERP is not well-suited for an OMS role, especially for tasks that require flexibility and integration. For example, an ERP may struggle to handle different payment methods or to support omni-channel strategies. Adding these and other capabilities is complicated and cumbersome. On the other hand, an OMS with an API framework and system independence can perform these tasks more easily.
Other Solutions and Workarounds
In addition to leveraging their ERP to handle increased orders and swelling inventory, some companies have leveraged their storefront software suite. However, this solution has its own drawbacks. The added capabilities are not robust enough and it are limited in terms of scalability.
Other businesses have tried to build their own in-house OMS. While some IT teams have the expertise to build an OMS, most lack that specific expertise. But the biggest danger is that the attempt can lead to a Franken system – not really fulfilling the duties of an OMS or ERP.
The solution is a dedicated OMS.
The Case For an Order Management System
An order management system is important because the software automates many processes related to orders, inventory, and shipping, reducing errors, saving time, and improving customer satisfaction. According to one survey, 96% of customers consider “fast delivery” to mean same-day delivery and 80% of shoppers surveyed want same-day shipping, while 61% want their packages delivered within 1-3 days of placing an order. B2C and B2B customers alike want increasingly granular details on their order status – where it’s coming from, if it’s processed, shipped, and how many stops until it’s delivered.
When businesses have multiple channels for sales, like an e-commerce shop, marketplaces, dealer portals, and brick-and-mortar stores, any lag in inventory updating, shipping details, or order processing has the potential to wreak havoc.
You can meet these demands by leveraging customer order management software that automates many of the tasks related to orders and order fulfillment.
Why Business Leaders Should Consider Using an OMS
For many businesses, especially those that handle high-volume orders across multiple channels, capturing, tracking, and fulfilling orders have become a nightmare. And constant returns are adding to the challenges. A dedicated OMS will be useful because it:
- Tracks the Inventory Level of Each Channel
- Managing inventory across different channels is an immense challenge for merchants. An OMS helps merchants manage inventory across multiple channels, whether the sale originates from point-of-sale (POS) software, the brand’s e-commerce store, or BOPIS (buy online, pickup in-store). An OMS will update inventory levels across all sales channels and indicate the best-performing product numbers of each channel and duly replace them.
- Automates Order Fulfillment
- An OMS uses software to replace manual processes with prebuilt workflows that automate most fulfillment processes, including:
- Inventory management
- Orders and transactions
- Omnichannel fulfillment
- Return and exchange management
- An OMS uses software to replace manual processes with prebuilt workflows that automate most fulfillment processes, including:
- Speeds up Deliveries
- An OMS monitors stock across multiple warehouses, noting which one is the closest to the customer. The system picks the closest warehouse that has the item in stock, to get it packaged and shipped in the shortest possible time. Considering that about 36% of online shoppers opt for same-day delivery, the shorter it takes to process an order, the quicker it can get delivered.
- Handles Reverse Logistics
- Returns have become a real headache for both offline and online businesses. About 30% of items ordered online are returned, compared to less than 10% of in-store items. The smart handling of reverse logistics can ensure that companies retain customers after a return experience. If it runs smoothly, repeat business is more likely. A dedicated OMS can help with this nagging problem by moving the returned items from the customer through the supply chain to the merchant or the suppliers. For this purpose, the system can automatically print return labels. The system will also keep customer service teams updated on the shipping details.
- Facilitates Marketing and Customer Segmentation
- An OMS is a handy source of information that retailers can use to segment their customers for marketing purposes. For example, with the information gathered from the OMS, merchants can segment their customers according to their location, average order value, or other details. Customer segmentation enables personalization, which tends to yield higher conversion rates.
- Integrates Order and Financial Data for Business Insights
- Most b2b order management software can integrate with other back-office functions like finance and shipping modules. The platform integrates information from the accounting software and inventory and sales data, providing merchants with crucial business insights, without the need for any manual data entry. Uncovering optimal shipping patterns, or where to focus on decreasing order returns can only be done when accurate, timely data flows from a centralized system.
Benefits of automated order fulfillment using order management software
E-commerce order management software creates a unified system for dealing with orders from different sales channels. Specifically, an OMS:
- Is an agile and flexible tool that supports and enables company growth
- Reduces costs, including shipping costs
- Reduces manual and repetitive work
- Avoids order mistakes and improves accuracy, ensuring customer satisfaction
- Provide real-time order status
- Enhances speed and efficiency
- Contributes to customer satisfaction
- Keeps pace with the business and scale as it grows. Prevents overstocking and stockouts
- Simplifies reverse inventory
- Enables personalization, enhancing marketing efforts
Choosing the Best Order Management Software for Your Business
There are many order management systems available on the market, all with their own particular advantages and disadvantages. The best order management software has at least the following features: centralized order management, inventory management, fulfillment and shipping integrations, customer management, and the ability to integrate with the sales channel.
Look out for an OMS that has the following capabilities:
Order Fulfillment
Some OM tools can automate the entire order fulfillment process. You send your inventory to the warehouse, and they will pack, deliver, and manage the returns.
Inventory Management
Make sure the OMS can sync inventory across all your sales channels in real time. It should keep your inventory up to date. A good OMS will provide stock reports, assist with warehouse management, expiry management, and stock planning.
Integrations
Choose an OMS that seamlessly integrates with your existing tech stack. If an OMS requires you to alter your backend structures, give it a miss – it will just waste a lot of time and resources.
Analytics and Reports
An OMS should generate comprehensive reports about inventory levels, the status of orders, order fulfillment, and shipments across all your sales channels.
Omni-channel
If you sell on multiple platforms like your website, online marketplaces, and physical stores, choose an OMS that will integrate your orders and order processes into one dashboard, so you have access to data about your customers, orders, inventory, fulfillment, and shipping across all sales venues.
Shipping Tracking
Be sure to choose e-commerce order management software that makes it easy for your customers to keep track of their orders.
Make the right decision for your company
You may have discovered by now that an ERP is not the optimal order management solution for the manufacturing industry. Skip ahead of the crowd by getting rid of legacy software and moving on to an OMS that is scalable and will suit your future state – BEFORE it becomes a problem.
TMG has helped guide strategy, vendor selection, and project design for many of our clients. Contact us today to continue the journey toward digital transformation.
