OMS and ERP, it’s apples to oranges
When it comes to order management technology, you have a choice to make: use the OMS module in your ERP (Enterprise Resource Planning) or opt for a dedicated order management system (OMS). Although you might think your ERP’s OMS module can handle the job, think again.
If your business revolves around omnichannel commerce or direct-to-consumer order fulfillment, you already know you need an OMS to meet your customer’s expectations regarding their purchase consistently:
IHL Group found that companies having greater than 10% growth are 208% more likely to have order management software in place than laggards. An OMS is how companies get out of survival mode and into long-term growth and profitability mode.
If you need more evidence of why an OMS is important, check out this article: Order Management Solutions – When to Let Modern Tech Take Over
The complex and fast-paced demands of multichannel commerce necessitate a robust OMS application dedicated specifically to that task. Here’s why.
ERP is not built for real-time order management
ERP systems originated in the manufacturing industry. Although originally built to oversee manufacturing processes, ERP was later expanded to include finance, accounting, operations, and customer relationship management. Companies outside manufacturing began using ERP as a system of record for essential information such as financials.
Two major limitations
Because ERP was built as a business application, this type of system has 2 major limitations in handling the external interactions required to support multichannel commerce.
- Batch-data processing. Financials do not have a reason to be updated as instantly as a warehouse team, customer service team, or consumer needs. Scheduled updates to transactions or inventory records, even with just a few minutes of lag, are detrimental to customer experiences.
- Apps required for connectivity. ERP data interactions with sales channels or other applications like inventory management require additional software known as middleware to act as a communication bridge or data translator for information exchange. Those extra layers of software integration slow down data exchange and inhibit your ability to keep inventory information fresh and reliable.
OMS must show what’s available immediately
Less than real-time information is a huge problem because multichannel commerce requires rapid and immediate engagement with multiple customers simultaneously on separate sales channels. If an online buyer wants a certain product, your system must know immediately whether it’s available to fulfill the order.
Modern OMS management gives midmarket firms a real-time view into all their inventory across their network of warehouses and stores. They can immediately assign an online order to the optimal location for prompt, lowest-cost delivery. They also show whether the desired item is on hand regardless of its location, so you aren’t overselling what you promised customers, but can’t deliver.
ERP is not built for multichannel commerce
ERP systems existed long before the advent of multichannel and omnichannel commerce. Their inventory solutions were not intended to support the complexity of retail involving online, marketplace, and store channels—often a combination of these at the same time.
Differentiation becomes very hard
It’s a problem if you want to provide a differentiated multichannel retail strategy. Let’s say you want to support different order configurations or have order lifecycle workflow preferences by sales channel or order type. Offering that differentiation would require customizing your ERP or accepting the use of WMS workarounds that are not scalable beyond the immediate problem you just encountered.
OMS: configure, scale, and go
But that’s not the case with an OMS that enables omnichannel and multichannel commerce.
Unlike ERP, a dedicated order management system enables you to easily:
- Configure different workflows for the order lifecycle, order routing policies, and rules by sales channel and/or order type.
- Set up different inventory safety buffers by sales channel and create safety buffers at multiple levels of your item catalog.
ERP needs clean data
An ERP OMS system requires clean data because it tracks finances. To avoid fouling up the system of record, someone needs to cleanse the order management data before it enters the system.
However, data coming from sales channels is often “clean.” It contains human errors, system errors, missing data, and duplicates.
Correcting data errors
You’ll need to install middleware to identify and correct data errors and inconsistencies. The information sent to the ERP’s OMS must be accurate, complete, and relevant. This type of middleware can be very expensive.
Spare the middleware
On the other hand, a dedicated OMS spares you the expense of middleware for ERP data validation. It applies a rule set to recognize data issues from orders and fix them immediately.
ERP OMS solutions require customization
As you can see, if you want to use your ERP for OMS, you’ll need to make some system adjustments and customizations. That means doing the work yourself (who has the IT staff for that???) or hiring a systems integrator (who has the budget for that???). A modern OMS platform like Deposco invests an extensive, in-house professional services team to help you simplify your supply chain every step of the way. Get a demo
High development costs
Those ERP OMS system customizations will entail extensive development costs. Special software code must be written to articulate the specific business requirements, which must be spelled out before any software customization begins.
So, hopefully, you have an in-house team of experts who can capture those requirements in exact detail. Otherwise, you’ll be forced to do the job again after the customization doesn’t do what you thought it would.
Maintenance and updates, you’re on your own
There’s also the issue of maintaining third-party software. If you do the ERP OMS customization using an outside vendor’s software, keep in mind that you’ll have to stay current when the vendor updates their software (often done in response to the ERP’s platform updates.)
Since you did the customization work, you’re responsible for proactively monitoring and making third-party updates. Spoiler Alert: third-party integrations change with surprising frequency!
Future changes
One final thought. Omnichannel commerce is still evolving. Although ERP providers revise their applications every 2+ years in response to market changes, you’ll be responsible for any future enhancements.
Learn more omnichannel strategies and trends in this special report by Industry Dive!
Modern OMS with ERP, the easy way
Don’t get us wrong. A cloud OMS enabling omnichannel commerce is not intended to replace your ERP. Modern OMS systems let you keep your ERP for financial management and get the full benefits of a dedicated order management system that works alongside your ERP.
This lets you manage real-time inventory to meet the rapid pace of multiple online customer orders and provide efficient direct-to-consumer order fulfillment.
A dedicated OMS syncs online and even physical store inventory information with a clear picture of product availability anytime. So you can keep your customers always updated on order status and delivery.
Lastly, a dedicated OMS sends critical, clean transactional data to your ERP so the ERP can do what it does best: manage your accounting and financial reporting data.
Related: Inventory fulfillment in ERP vs. WMS – What’s the difference?
