IHL Group found that companies having greater than 10% growth are 208% more likely to have Order Management Software in place than laggards. That’s not just a coincidence. What is OMS? It’s what got these companies out of survival mode and into long-term growth and profitability mode.
To be clear, an OMS is not a WMS. Learn about the difference here: What is a warehouse management system?
So what is an order management system, anyway?
Simply put, an order management system is a system framework that performs a variety of valuable tasks in managing and tracking customer orders from initiation to fulfillment.
An OMS centrally coordinates real-time data around order processing, inventory management, shipping, invoicing, planning, and performance monitoring. It assists businesses with strategic order allocation and fulfillment by providing a holistic view of the entire supply chain ecosystem.
Businesses selling via multiple channels or locations can reliably monitor stock availability and track inventory movements across multiple touchpoints based on information that’s highly accurate and easy to access. This drives next-gen operational efficiency, speed, precision, and cost savings, significantly reducing stockouts, backorders, overstocks, and poor customer experiences.
What is the right time for an OMS?
Once a business has its warehouse management operations in order, it begins to explore new strategies to scale order fulfillment, going beyond simply executing inventory.
Typically, that curiosity happens after they realize their warehouse operations are not on par with their long-term growth goals due to several problems, which we all can agree are reaching fever pitch:
- Unsustainably high demand and order volume
- Customer service issues that have lofty consequences
- Rising operational costs and labor problems
- Or simply the desire to offer new sales channels and buying options
How do you solve these challenges and set up your business for long-term profitability moving into the next decade? Scaling fulfillment for omnichannel will take more than that Y2K-era supply chain system can handle!
Order management’s role in omnichannel
An OMS system assumes that the warehouse’s basic puzzle pieces of executing omnichannel fulfillment are on auto-pilot. It means moving beyond reactionary questions, like: “How much inventory do we have? Where is it located? What can we automate in the warehouse?”
The question then becomes more strategic with OMS: “How can we improve, scale, rinse and repeat to grow profitably?”
Order management is the vital catalyst to scaling omnichannel, which should be top of mind for you right now. Compelling omnichannel statistics prove this point:
- Businesses that market in 3+ channels earn a 287% higher purchase rate than those using a single-channel campaign
- Companies with an omnichannel engagement strategy retain 89% of their customers, compared to 33% for those with weak omnichannel strategies
- Multichannel consumers spend 4X as much as store-only consumers, and 10X more than digital-only consumers
We’re GROWING. Now How Do We GROW FASTER?
Order management is the turning point for companies looking to parlay their successes into larger growth initiatives and bring their omnichannel vision into clear focus. OMS and distributed order management system (DOM) automate and streamline customer touchpoints into a single lens of truth. Having a coordinated view across the enterprise enables a unified buying experience while streamlining all the activities involved in receiving, processing, fulfilling, and tracking orders.
It’s the secret sauce behind companies that are—for the first time—giving Amazon real, head-to-head competition. A prime example is Shopify. The company started in 2004 as an online snowboard gear shop and is now a $10 billion commerce ecosystem that shockingly surpassed Amazon’s online traffic in Q2 2021.
Shopify now receives more online traffic than Amazon. The average number of monthly unique visitors for ecommerce sites powered by Shopify reached 1.16 billion, compared to Amazon’s 1.10 billion visitors during the same period. Proof that companies of any size can win.
Related article: Why you need an integrated Shopify OMS and WMS solution
What order management capabilities matter?
Our work with some of the fastest-growing businesses has revealed these top 5 OMS system capabilities as table stakes for rapid, sustainable growth, massive cost savings, and seamless data flow:
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- Automated Fulfillment – Eliminate manual processes to boost efficiencies, reduce errors, and empower workers.
- Drop Shipping – Reduce time-consuming communication with drop-ship partners and guesswork. Find the optimal drop-ship method of the day, directly in the system.
- Right Inventory Management by Channel – Represent the properly configured available inventory levels for every item, from various inventory sources.
- Automatic Order Routing – Properly route orders and ensure availability in situations like alternative fulfillment sources, split orders, and exceptions.
- Pre-Ordering – Understand items available for pre-order without going into the ecommerce system. This boosts sales, profitability, and brand reputation.
Let’s dig deeper into why each of these OMS features is important, and what you can do.
Automated order fulfillment
What manual decisions should I automate to empower workers?
Why it matters
As many as 80% of customers will pay more for a better customer service experience. Meanwhile, 75% of customers have stopped using an organization’s services because of a poor one. Not empowering the correct staff, such as customer service or warehouse employees, to make key decisions leads to customer frustration. Not to mention the loss of labor, which is difficult and costly to replace.
Automated, real-time visibility into customer orders creates a consistent and seamless shopping experience, faster fulfillment times, and decreased labor spend. That’s because there’s no need to manually review each customer order.
What OMS does to help
Enable workflows that empower staff to make decisions based on interactions with customers. The proper staff must be able to take manual action, when necessary, to ensure that orders are correctly reviewed and validated.
Order management systems use business rules to handle the heavy lifting of evaluating customer orders as they come in. This accelerates fulfillment times, reduces errors, and redeploys labor investments toward more strategic activities that create value for customers.
For example, staff can configure automated rules to determine the optimal order fulfillment method. Armed with the right data at the right time, employees can play an active role in offering multiple fulfillment options – such as buy online ship direct, buy online pick up in-store (BOPIS), buy online return in-store (BORIS), exchanges and returns – pleasing both customers and your bottom line.
Drop shipping
How do I start drop-shipping orders?
Why this matters
Without an order management system in place to maintain drop-ship partner data, you must depend on user-driven manual processes. These include tasks like emailing drop-ship partners or third-party logistics (3PL) partners, to determine if an item can be drop-shipped and from which partner.
Communicating with drop-ship partners typically takes place via email, a process way too slow for today’s omnichannel consumer standards. As a result, you may carry more inventory, pay higher shipping prices, or see slower fulfillment times because your visibility into additional options is limited.
What OMS does to help
Enable real-time order fulfillment data in the cloud. Staff can quickly compare drop shipping options (what products can be drop shipped, when, and from what partner) and determine the best method. The OMS system then sends products straight to the consumer from the manufacturer, distributor, or supplier.
Connecting drop-shippers with an order management system through an EDI connection provides inventory visibility into additional fulfillment options. This automatically validates all options and dramatically improves order fulfillment.
For example, let’s say an item can be fulfilled by 3 different drop-ship partners. The order management system automatically shows which partner offers the cheapest or fastest shipping. If an item is in stock at a store, it may be better to fulfill the order from there. The OMS system may also divide multi-item orders amongst stores, DCs, warehouses, or suppliers automatically to ensure the best possible cost and speed.
Right inventory by channel
How do I make sure I have the right inventory represented by channel?
Why this matters
Processes that were traditionally set up for wholesale operations must now be re-examined to handle Direct-to-Consumer (DTC) workflows.
Maintaining available inventory across different channels is extremely difficult because each channel’s inventory needs to be maintained individually. Legacy order fulfillment and ERP workflows keep your staff in spreadsheets all day, while still turning up errors and poor decisions. Plus, these processes only offer visibility at a CASE level, while today’s consumers are often placing orders at a single-unit (EACH) level. Get more consumer-direct fulfillment strategies in our DTC Central hub.
Orchestrating orders with a manual, user-driven process will breed inaccuracies, overselling, backorders, and customer frustration. When you consider a BRP report, which found that 63% of consumers are likely to stop shopping for a brand after just ONE unsatisfactory experience, the risk is too costly.
What OMS does to help
Automate communications to the sales channel’s commerce system(s) to represent the properly configured available-to-sell inventory levels for every item, from various inventory sources.
See what’s available (at all times)
Order management systems and DOM systems facilitate inventory segmentation where available-to-sell quantities can differ between sales channels based on configured rules. They show the most up-to-date available inventory quantities to your customer base, calculating what’s available and pushing that up to the appropriate sales channel(s) via the cloud or your website.
Here’s a great example of how retailer Psycho Bunny built an omnichannel fulfillment network in stores, trimming 3 days from order processing times and increasing available inventory by 20%.
Sell on multiple channels
Inventory segmentation is one of the most important areas where you can benefit from the enterprise-wide visibility provided by order management and DOM software. Segmentation allows you to sell on multiple channels like Shopify and Walmart to target allocation of inventory to certain channels.
For example, you could allocate more inventory to the Amazon channel around their Prime Days.
Or, allocate to a specific store or geography where sales are higher, to gain a competitive advantage. See an example with Vinyl Me, Please
Automatic order routing
How do I automatically route orders to ensure availability in complex situations, such as alternative fulfillment sources, split orders, and exceptions? Am I routing orders properly?
Why this matters
Without automated order routing, user decisions on where to route an order for fulfillment are driven largely by “tribal knowledge” and subjectivity. There’s no optimal way to confirm inventory availability across all fulfillment sources without manual actions.
Here, exception handling requires legacy communications via email/phone between different teams within the organization, such as customer service and warehouse staff. The more complex your fulfillment network, the harder it will be to properly route orders, and the bigger the impact.
What OMS does to help
Intelligent order routing unlocks huge bonus points with customers. The ability to fulfill orders from alternative sources, such as retail stores or third-party partners, with centralized and automated communication every step of the way, will become table stakes as you scale.
Order management systems with order routing use configurable business rules to determine the optimal fulfillment source for the lifecycle of an order, from order placement to shipping.
You can also easily manage order exceptions, such as a price mismatch or inventory discrepancy, to fulfill orders seamlessly by the planned ship date. If an order must be split and shipped from separate sources, events-based order orchestration kicks in to provide visibility and tracking for both shipments, managed as a single customer order.
A best-in-breed OMS offers coordinated visibility into order routing results. So you can tweak routing rules and keep improving over time.
Pre-ordering and pre-selling inventory
How can I enable pre-ordering to better understand demand early and improve inventory management?
Why this matters
Manually managing pre-orders means that the availability of pre-ordered items must be done directly within the commerce system(s). Without a clear picture of demand for items before pre-ordering or inventory arrival, it’s nearly impossible to understand demand or get ahead of the promises you make to customers.
On the flip side, having a reliable picture of demand for the item(s) before ordering or inventory arrival allows you to confidently say, “Yes, we can” more often, rather than, “Sorry, we couldn’t”.
What OMS does to help
- Pre-ordering or pre-selling is a great strategy to:
- Generate buzz for new products
- Secure capital early if you are accepting a down payment
- Improve the results of a promotion
- Offer discounts to strengthen customer loyalty
A great example came out of our work with Feature, a Las Vegas-based sneaker and clothing boutique. They were able to mitigate overselling and chargebacks while increasing order accuracy by 125% using advanced order management capabilities.
With pre-ordering, you can configure inventory availability so that items without inventory on hand can still be represented as available to sell. This lets you allocate and fulfill inventory for pre-orders more efficiently upon arrival at the warehouse.
An OMS built for omnichannel
Most companies know they need to implement these top OMS system capabilities, stat. But they are simply too busy, short-handed, or underwater with orders to deal with a big IT project. Or, the thought of adding yet another bolt-on to their already taxing ERP or legacy WMS system is overwhelming. It doesn’t have to be.
Order management and DOM solutions fast-track these 5 OMS capabilities for companies that want to strike while the iron is hot.
Benefits of an integrated OMS
When you consider the impact of legacy solutions in the next 5 years, your ERP is no match for order management system software in the mid-market. Create rapid, measurable growth by automating fulfillment, drop shipping, right inventory by channel, automatic order routing, and pre-ordering. Plus, it’ll make your job easier!
What is OMS doing for high-growth businesses?
- Ultra-reliable, up-to-the-minute data to balance inventory available to promise + inventory available to sell
- Virtually error-proof order pick pack ship tasks
- Huge labor savings – scale orders by 4X to 9X without adding staff
- Confidence that products will be delivered as promised, no matter where they are ordered or fulfilled
- Customers can track order status in real time
- Fast and consistent fulfillment times – under 24 hours
- Ongoing cost reduction and staff productivity improvements via supply chain data analytics, tailored to your business
Order management: effortless and fully integrated
True order management is a supply chain software platform that helps your business easily see what inventory you’ve got, where it is, and where there’s new demand for it. Before you set out to look for an OMS partner, it’s important to understand what it takes to make growth work:
- Supply Chain Simplified: Seamlessly connects all touchpoints of an order to improve decisions and speed workflows. From the time a customer places an order to when the product hits their door, and everything in between.
- Rapid Value: One team that makes sure you ask the right questions to effectively address top bottlenecks and priorities, like labor management. The partner should meet regularly with your teams, providing analytics and recommendations that improve decisions and accelerate value.
- Platform for Growth: Focus on scaling with adaptive, built-in “extras” like software integrations to remove the frustrating and costly process of managing disparate systems and unwieldy data exports for systems not built to sync with each other. This includes WMS, ERP, legacy supply chain systems, shipping carriers, order tracking, POS, and even customer-facing systems such as e-commerce order fulfillment software.