Why is order management important?
Shoppers have come to expect seamless omnichannel experiences and fast, low-cost shipping in an environment where delivery costs are rising and supply chain disruptions threaten inventory levels. Order management enables omnichannel retailers to ship from locations closest to the customer, such as their existing stores, reducing the shipping distance thereby reducing cost and carbon footprint and increasing delivery speed. It also enables retailers to access inventory from across their fulfillment network to fill orders.
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What is the order management process?
Order placement
A shopper enters an e-commerce site or marketplace and selects a product. The website calls an inventory API and displays whether the item is in stock and, in some cases, the number of items in stock. The shopper adds the item to their cart.
Order processing
The order management system (OMS) performs the required tasks associated with order capture and confirmation, prior to sending it to fulfillment. This pre-fulfillment workflow includes payment authorization, capture, refund and void, fraud rules detection, address validation and credit card security verification. It is the transactional phase of the order that acts as the gate to the fulfillment phase.
Inventory adjustment
Once an order has been submitted and processed, the inventory for the items purchased is consumed. The order management system adjusts the inventory to reflect the consumption of stock.
Order fulfillment
Order fulfillment is the process of picking an item off the shelf on the sales floor, backstore or distribution center then packing it in a box or envelope to be shipped or to be collected by the customer. For an item to be fulfilled, it needs to be routed to a fulfillment location (e.g., a store or DC) where an associate is alerted to it through an interface like a store fulfillment application or a WMS.
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Ship-from-store
Ship-from-store reduces costs and delivery times by transforming your stores into localized distribution centers. Shipping products from the retail location closest to the customer increases inventory turnover and encourages retailers to stock more inventory in stores, which increases in-store sales. An OMS can automatically route orders to retailers’ shops for store-based retail fulfillment. Intelligent routing monitors each store’s capacity and inventory levels and sets up stores’ business rules to meet each retailers’ needs. With an easy-to-use product fulfillment application, store associates efficiently and accurately fulfill all types of omnichannel orders. This application can also provide the store associates with fulfillment workflows, invoice shipping and label printing, and remedial routing actions.
Benefits of ship-from-store fulfillment:
- Expedites delivery times.
- Cuts shipping costs.
- Reduces markdowns and clearances.
- Eliminates out of stock scenarios.
Ship-to-store
Ship-to-store is a BOPIS (buy online pickup in-store) solution that pleases shoppers and engages store resources. BOPIS lets retailers quickly prepare the right product for an in-store pickup. Whether sourced from the distribution center, 3PL or another shop’s inventory, an OMS routes orders from the optimal sources to the pickup location. Ship-to-store ensures every store has every item that shoppers want. Even pop-up stores can carry a full inventory portfolio — virtually.
Benefits of ship-to-store fulfillment:
- Uses retailers’ internal delivery network.
- Reduces stagnant warehouse inventory.
- Flexible order fulfillment for non-conventional products.
- Prevents oversold store inventory.
Ship-from-distribution center
Ship-from-distribution center (Ship-from-DC) is the most common fulfillment strategy. When retailers use ship-from-DC, online or digital orders are routed to their warehouse for fulfillment. It is the default shipping method for retailers without order management optimization capabilities. The ship-from-DC model, when used alone, fails to utilize the cost saving opportunities of other shipment models. Applying ship-from-DC as the only rule is not a sound practice. Instead, it should be one of multiple options the order management solution considers for order fulfillment.
Buy online pickup in-store
Buy online pickup in-store (BOPIS or click-and-collect) is omnichannel retail’s most powerful fulfillment channel. BOPIS gives retailers the option to use existing store inventory to deliver online orders. Click-and-collect increases cross-channel sales, basket sizes, foot traffic and customer loyalty — including using merchandise from small pop-up stores. BOPIS gives shoppers the flexibility to buy online and choose a store pickup location of their choice. Customers get to physically see, touch, feel and sense the merchandise before taking it. Should the size be incorrect, they can change it right there at the store.
BOPIS can help retailers:
- Save on shipping costs.
- Reduce return rates.
- Increase sales (58.8% of shoppers buy more goods while in-store).
- Improve customer satisfaction.
- Strengthen loyalty and drive repeat purchasing.
- Expand basket sizes.
- Drive upsell opportunities.
Reserve online pickup in-store (ROPIS)
Reserve online pickup in-store (ROPIS) is very closely associated with BOPIS. However, with ROPIS, the customer does not purchase the goods online or through digital channels. Instead, they reserve the item for purchase in-store. Some argue this is not as effective as immediately locking in purchases. Although true, certain categories are more conducive to a ROPIS sale.
Retailers that use ROPIS often sell:
- Highly specialized or technical products.
- Big-ticket items.
- Merchandise which is difficult to return (such as furniture).
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How can companies optimize the order fulfillment process?
Optimizing the order fulfillment process means finding the most efficient and cost-effective way of fulfilling an order, while meeting the customer’s expectations of service. The distance that an order needs to travel impacts both the cost of delivery and time for delivery. Therefore, shipping an item from a location that is closest to the customer is the optimal way of fulfilling the order as the distance the order travels is shortened. When fulfilling from a store, the store acts as a mini distribution center. When there are many stores scattered across a geographic area, orders can be routed to the store closest to the customer, which optimizes fulfillment. Routing an order to a specific store requires a view of inventory availability in the store and a set of business rules. This is accomplished with a distributed order management system.
Barriers to implementing a distributed order management strategy
Resistance to change
A typical barrier to integrating a DOM strategy often includes a cultural or attitudinal resistance to change and the view that e-commerce is secondary to the brick-and-mortar store. The reality is that we are in an era of unified commerce. Digital and physical are equally important and that means that omnichannel fulfillment calls for leadership to embrace this new retail paradigm. It isn’t just the supply chain management side of the business, either. The retailer needs to reassess the customer experience so that their customers experience a seamless and streamlined buying journey. What results are more robust retail capabilities and new channels for revenue.
Misconceptions of time investment
Implementing a robust distributed order management system is not like implementing an ERP or complex WMS. It can be achieved in as quickly as 90 days and averages about four months for an implementation. If the OMS provides multiple REST APIs for integration, the implementation time can be decreased even further. That means a retailer can offer a full omnichannel experience by the next quarter.
Misconceptions surrounding complexity
An order management system for a mid-market retailer should not require a team of developers or IT support. An out-of-the-box OMS, with a robust REST API layer can not only be implemented within a few months, it can be easily configured to meet the evolving needs of the business and integrated to additional systems using APIs with minimal support.
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Order management trends
Store-as-warehouse
Distributed order management enables retailers to access inventory and fulfill from stores within their store network. This is accomplished using a cloud app for store fulfillment that comes with the OMS. While this app allows associates to see pending orders, fulfill them and print shipping labels, it has very light (or non-existent) picking and inventory management capabilities.
A store-as-warehouse system takes store fulfillment to the next level. It enables retailers to do actual inventory receiving and putaway when shipments arrive to stores, increasing store inventory accuracy. It can map the stockroom and/or sales floor to allow for directed picking using a handheld terminal. This is especially useful for big box or department stores that have large square footage, high number of SKUs and racks because it accelerates fulfillment times, increases productivity and helps enhance service level agreements (SLAs) for delivery and pick up.
REST APIs
As retailers look for new ways to optimize the customer experience, an OMS with a REST API layer can enable a retailer to build a unified commerce platform that can be easily integrated with multiple additional systems and scales with order volumes. It also makes data transfer instantaneous, which means “real-time” inventory is actually real time.
Why is an order management system important?
An OMS is a key defining feature of a modern omnichannel retail and a unified commerce experience. It is designed to solve the complexity of modern omnichannel retail fulfillment and provides a seamless shopping experience across physical and digital channels.
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get playbookHow does an OMS work?
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An OMS pools inventory across multiple nodes (stores, DCs, 3PLs, etc.) and provides online inventory visibility.
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When a customer places an order, the order data is transferred to the OMS.
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The OMS sends the order to be fulfilled from a store, DC, 3PL, drop-shipper (or combination) based on preestablished routing rules, which include inventory availability and customer proximity.
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Orders are picked and packed and either shipped to the customer or made ready for pick up by customers at a store, locker, DC, etc.
Who should utilize order management software?
The most common use case for an OMS is omnichannel retail: a retailer that has an online store and a physical store network. The OMS enables omnichannel retailers to fulfill online orders using stores (along with DCs) which optimizes inventory and also enables shipping from the location closest to the customer. An OMS also allows a retailer to offer click-and-collect service (BOPIS) and buy online return in-store (BORIS). The segments of retail that benefit from an OMS are specialty retailers, big box, department stores, hardware and even wholesale brands. DTC companies that have multi-node fulfillment will also benefit from having an OMS.
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“This implementation will enable us to stay at the forefront of omnichannel retail for years to come.”
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