Distributed Order Management in Retail: More of a necessity than trend
16 Nov 2018 Distributed Order Management in Retail: More of a necessity than trend
The omnichannel revolution is rolling in the retail sector in numerous ways, providing enormous opportunity, but also posing equal number of challenges from time to time.
eCommerce market in India is set to grow the fastest within Asia Pacific region at a CAGR of over 57%, according to a report by Forrester. Online retail sales in India are expected to grow by 31 percent to touch US$ 32.70 billion by end of this year, led by Flipkart, Amazon and Paytm Mall.
This robust growth certainly looks like a significant opportunity, but let’s be clear – at the end it’s a zero-sum game. The consumer has limited disposable income to spend which means that to a great degree the growth in on-line spending will simply be matched with the reduction in sales at some retailers’ brick and mortar stores.
So, the stakes for retailers are really high. That fact, combined with the breath-taking pace the omnichannel world is evolving, means myriad strategic and tactical decision need to be made, usually to pre-empt the consumer expectation and staying one step ahead of the curve.
- In comes Distributed Order Management as a saviour for retailers
Distributed Order Management (DOM) is one of the key areas where retailers are making investments. In fact, DOM technology has really become the center of the omnichannel universe and have by far become more of a necessity than a trend for many retailers. For readers, who are not acquainted with the term ‘Distributed Order Management’, here is the explanation. DOM is a system that manages inventory and orders across multiple stock points in a single supply chain. As supply chain beyond asserts, DOM is the “best way to achieve… a single, global view of all inventory available in order to intelligently source the line item components of that order, ensuring that the business can meet both current and future customer demand while optimizing inventory, logistics and asset utilization”.
The traditional order management systems that most retailers use were basically configured to link to a discrete number of specific stock points or warehouses. This in course limits inventory visibility as well as the options brands have in fulfilling the items. It also fails to account for deliveries and associated services that are increasingly part of the customer order and fulfillment process. Without a comprehensive visibility of the entire inventory, including logistics requirements, it is nearly impossible to provide an accurate promise date to the customer, or schedule orders to alternative fulfillment locations.
- Leveraging on the real-time view of inventory across multiple channels
Customer experience excellence can only be achieved with accurate and timely information. Given the prevalence of omnichannel consumption where the customer demands order from anywhere, fulfill from anywhere, this is especially relevant. Different sales channels are often supported by distinct systems resulting in difficulty in sourcing accurate order information in a timely manner. As brands maintain multiple databases of order information, they are forced to manage by individual channel, rather than across channels. Distributed order management system can solve this problem as it aggregates orders from multiple channels and provide a single view of inventory across these channels.
- Keeping your order and inventory management flexible for your physical and digital customer
As eCommerce grows, so too do the ways in which the brands interact with their customers. By granting global visibility across supply chain, retailers give their customers a true “complete” order promise, watching a product move from manufacturer to its customers door every step of the way.
If the order is not stocked in a warehouse, the supplier is alerted with a notification to ship more product to refill for the brand automatically. If the order gets stuck somewhere in the chain, the retailer need not phone each link to find where the problem arose, the technology manages that all for the brand.
- A tech friendly model that supports automation
- A central view of inventory that lets you order in each link of the chain, as well as in-transit. This is different from traditional order management that has you pigeon-holed to what’s only in the warehouse;
- Complete customer information such as their address, payment information, and other data necessary to provide the best product delivery service possible;
- And, most importantly, the capability to instruct logistics personnel across distribution centers, suppliers and stores with how to most effectively carry out the physical aspect of the fulfillment process.
With all of its fancy algorithm and software, distributed order management streamlines brand’s supply chain information so that the retailers can focus on their business and in keeping the customer happy. A Gartner report in 2015 defines a true DOM system as having four components:
The brands need to keep these factors in mind while weighing their DOM options. After the brand chooses their preferred solution, it’ll be important to re-train their logistics people on how to use it effectively. It is also important to make sure that the team knows how to troubleshoot any issues that arise in the software.
Finally, sometime the need for a DOM solution is dictated by the brand’s heterogeneous IT environment – that is, a company that has multiple ERP and supply chain solutions. This heterogeneity prevents brands from presenting “one face to the customer”. Hence, it is not uncommon for customers buying from a large brand to experience a cumbersome ordering process in terms of not finding the right style or product across all channel. Brands need to understand that customers cannot be restricted to a particular channel in order to interact with their product. They can choose the channel they prefer yet making it imperative for the brand to be accessible at that particular channel. One solution to this problem is to implement one global instance of an ERP. But implementing a new global ERP can be difficult to cost justify, difficult to scale, and may turn out to be highly disruptive to the existing business.
Stock keeping unit proliferation, increasing number of sales channels the customer has access to, the continued growth of eCommerce fulfillment – all of these trends are making order fulfillment even more complex. Distributed Order Management solutions plays a critical role in helping brands efficiently and effectively deal with this complexity. However, for DOM to play a more telling role in the retail ecosystem, it must evolve into a more comprehensive solution that incorporates high level of visibility across the entire network, including activities of the various vendors that drop-ship orders to end users.
The solution also needs to handle inventory re-balancing, or the movement of inventory to the right locations and according to demand; dynamic orchestration and collaborate across suppliers. Inventory protection logic in DOM can help improve the customer experience by ensuring inventory in store isn’t committed to online customers or sold out to in-store shoppers. However, setting up protection rules in DOM can be time consuming, so one area of DOM evolution is in systems that self-adjust to demand and supply patterns. The focus should be primarily in strengthening the customer experience, whether it’s fulfillment for online orders or in-store workflows. Brands often miss the boat thinking too much on processes from a transactional view-point. Rather, the leaders in omni-channel think about the customer’s journey first and work backwards from there. They need to think through: ‘What does the customer need here, and how can I make the experience seamless and convenient for them?”.
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