This is a guest post from the Flxpoint team. Flxpoint is an enterprise ecommerce operations platform that enables merchants and brands to unify and automate every aspect of their ecommerce operations, and scale without manual processes or custom development slowing down.
When asked about the biggest daily challenges they face, 43% of retailers ranked inventory management as number 1. That being the case, a distributed order management system can effectively help businesses address this.
In this article, we’ll introduce what a distributed order management (DOM) system is, walk through the benefits of DOM, and the key characteristics you should consider when choosing one.
What is an order management system (OMS)?
An OMS is a platform that lets you structure and automate purchasing and fulfillment processes not only for you, but also your customer. It streamlines your business so products can easily find their way to your buyers.
Given how complex and intricate eCommerce is today, your OMS should be multifaceted and have the ability to handle business processes such as:
- Receiving orders and processing payments,
- Managing your inventory and its locations,
- Tracking your suppliers for purchasing and receiving,
- Shipping and tracking customer orders,
- Overseeing customer service, such as product returns and refunds,
- Generating sales and inventory reports,
- And providing forecasts.
With it, you should also be able to monitor everything from sales to fulfillment, plus glean insights that allow you to develop and measure key performance indicators (KPIs) which can aid in formulating strategies for your business.
What is distributed order management (DOM)?
DOM, meanwhile, is an approach that involves optimizing fulfillment so that you’re not only delivering customer orders in a timely manner, but also sustaining minimum expenses — a cost reduction that’s felt by you and your buyer.
This method works via a DOM system, which enhances your overall supply chain by automating aspects of your business operations such as:
- Order routing, splitting, and shipping
- Inventory management, forecasting, and reordering
Overall, DOM systems streamline your business without negatively affecting the customer experience — which is its most vital characteristic.
Why to use a distributed order management system
Here are the crucial benefits you can get from utilizing a DOM system.
1. Enable multi-channel selling
Consumers nowadays want the ability to buy products from various channels. 73% of them shop through more than one and 64%, meanwhile, move across devices to search for what they want and complete their purchase.
Also, according to a Shopify report, businesses that sell on multiple channels generate 190% more revenue than those who only rely on one — which is a massive difference. However, doing so can be very complex and a DOM system simplifies it in various ways.
Track inventory by sales channel
Multi-channel selling isn’t easy, or possible, if you don’t have a system to track orders against inventory — especially if your channels share a pool of inventory. Supply chain executives, in fact, said that managing inventory across channels is their company’s third-biggest challenge.
With a DOM system, you can keep track of your inventory levels for each of your channels. That ability makes it easy to do the following:
- Update and refresh your stock across channels
- See which products or SKUs perform best for each channel, allowing you to allocate inventory accordingly
- See which items sell the most according to region
Automate order fulfillment
A DOM system not only unifies your sales channels, but also your supply chain. It even automates and handles order routing, splitting, and shipping — which streamlines fulfillment overall. Here are other things a DOM system can do for you:
- Process payments for different destinations and currencies
- Transmit order information to distributors or 3PLs
- Automatically print shipping labels for in-house fulfillment
With all of these handled, your customers on each channel receive their purchases in as little time as possible.
2. Minimize human error
With all the automation a DOM system can provide, you can eliminate repetitive tasks — like manual data entry — which are prone to human error. Also, automatically collecting, uploading, and syncing data into a system frees up time for high-value work.
In fact, according to a survey, almost 60% of workers estimate they could save six or more hours a week with automation. They could use that freed-up time for other priorities, like helping your business grow its revenue.
3. Optimize your inventory management systems
A DOM system offers you digital connectivity, which provides real-time updates and insights into your inventory, allowing you to see the full picture. It makes inventory management easier and lets you:
- Set inventory thresholds, so you’ll be alerted when certain products hit specific levels — which also tells you when you should restock or stop purchasing.
- Get a glimpse of where your products and customers are, allowing you to strategically locate and streamline your distribution and delivery system.
- Identify bottlenecks in your operations, so you can optimize your inefficient processes and automate manual ones.
Another vital characteristic of this connectivity is the abundant data you’ll be able to tap into — and that carries over into the next benefit.
4. Get detailed insights into your business
A DOM system’s end-to-end visibility and traceability can give you access to plentiful information such as:
- Which workflow stage your inventory is in. Let’s say you know your goods are in the order fulfillment stage. This lets you provide customers information about their purchase.
- How your goods move. You see which seasons and geographic locations specific items are moving fastest, giving you an idea about consumer behavior.
- Your inventory levels for each channel. This allows you to stay on top of how much you have on-hand.
The plentiful information your DOM system provides also lets you see which of your channels perform best and the trends they have, allowing you to make data-driven strategies and decisions.
You can make forecasts, then plan, purchase, and allocate inventory accordingly. From there, you can develop tactics for maximizing profitability and minimizing your costs.
What to look for in a distributed order management system
Here are the key competencies you should look at before selecting a distributed order management system.
DOM systems are ultimately designed to bridge your different sales channels and inventory sources — which means connectivity is everything. Does the order management system integrate or work with the tools you use in your business?
Let’s say you have an eCommerce website and also utilize an ERP system. Your DOM system’s ability to properly connect with these two can effectively reduce the need for any manual input and human errors, which can also eliminate any future issues.
Also, when selling through multiple channels and using various tools, your data will be coming from different sources. Proper integrations ensure that the data you gather from all these sources is not only correct, but also aligned.
Basically, a DOM system should meet your business needs. Here are some common questions you should ask when choosing a system: “How many orders and inventory locations can the DOM system keep track of?” or “What are the limitations of the software?”
If the answers you get don’t fit your requirements, it’s time to look elsewhere. To give you more specifics, however, here’s a quick breakdown of crucial features you should consider.
For this aspect, your system should provide you a consolidated view of your inventory across channels — which simplifies managing and monitoring your stock. It should also have order routing algorithms, allowing you to fulfill orders through the best facilities and shipping options.
Overall, you should have access to data across inventory management and fulfillment so you can maximize profitability, minimize costs, and get orders to customers on time.
It should be able to handle your business’s points of sale — both online and in-store. If you’re selling internationally, also make sure your system can support orders and currencies for countries you sell in.
Your DOM system should be able to consolidate your customer’s information and activity — like their purchase history. This gives you insights on consumer behavior, allowing you to provide a more tailored service.
Try to find a DOM system with integrations that also simplify your accounting processes. The ability to feed data — like your income, liabilities, and expenses — straight into your ledgers and journals frees up lots of time and reduces the risk of any human error.
3. Real-time updates
Providing up-to-date product information and availability to you and your customers is a must for every system. It’s not useful or sustainable if you don’t have real-time updates, especially as you scale. Without real-time data, you’ll be facing the risk of running into two key issues:
Prevent overselling or stockouts
This can happen when an item is already sold out, but your system didn’t update inventory counts in real-time. Since it isn’t marked as out of stock, your customer will end up ordering an item you can’t fulfill — which ruins their experience and your brand’s reputation.
If you don’t have enough inventory, you won’t be able to serve both new and existing customers. Overselling and stockouts are such a huge problem, in fact, that they cost retailers $1 trillion every year.
Having too many goods on-hand, however, can also damage you financially. This increases the probability of you stockpiling old or aged inventory that depreciates and loses value over time. You’ll also incur storage fees which, depending on your fulfillment solution, can get expensive.
Amazon FBA sellers, for instance, have to pay a monthly fee for inventory storage. This monthly expense accrues as you store more items. In addition, there are also long-term storage fees and overage fees that Amazon charges.
4. Ease of use
To see if the DOM system is easy-to-use, ask yourself the following questions:
- Can your team learn to use it?
- Do you employees need to have technical know-how?
- Is the user interface intuitive or does it cause confusion (which will cause mistakes)?
If you can get a positive response to these three questions, then the DOM system you’re looking at is a superb choice. This means, if you have to train yourself and your team, all you’ll have to worry about is learning the system itself.
Your employees will no longer have to undergo training for learning manual processes and requirements, freeing up lots of time. And since your system automates these, it also effectively minimizes any chances for human errors.
5. Good customer service
When things go wrong — how good is this tool at helping you detangle issues and troubleshoot? A system that enables you to handle such instances is vital for ensuring that they don’t happen again.
For example, are there any bottlenecks in your inventory management or fulfillment that led to your customer’s order arriving late? Your DOM system should allow you to pinpoint and address such issues.
Besides that, your system should be able to support omni-channel returns and exchanges — when they receive a damaged or wrong item for instance — allowing you to offer a seamless customer experience.
Wrapping up – A DOM system streamlines your business, but it should be a good fit
A distributed order management optimizes many aspects of your business operations. By doing so, it also reduces costs and maximizes your profitability without having a negative impact on the overall customer experience.
Just make sure that, before choosing a DOM system for your organization, you consider your business’s needs and see if the system fits these key criteria:
- It should seamlessly integrate with your channels and business tools, thus unifying a large chunk of your operations.
- Besides features for inventory management, your DOM system should possess key competencies for sales and customer service.
- Your chosen system should feed you data in real-time, allowing you to avoid inventory issues such as stockouts and overstocking.
- Lastly, it should be straightforward and intuitive — therefore minimizing any chances for human errors, plus saving time and resources you could spend for training.