A few weeks ago, I wrote about omni-channel and returns management. This was part of my sneak-peak into my upcoming omni-channel fulfillment and returns management strategy report. A common theme here at Logistics Viewpoints is to write about what we are currently researching. So, in conjunction with my omni-channel returns management research, I am also working on a new market study on omni-channel order management systems. This study is focused on those suppliers offering a distributed order management, or a distributed order management light version, enabling an organization to capture all information in the order management process across all relevant channels to fulfill orders in the most efficient manner.
I’ve written about the importance of a distributed order management system before, namely that it is the backbone of true omni-channel operations. According to my latest survey, 58 percent of respondents are currently using a distributed order management system, which unfortunately, is about the same percentage as the last few years. Why is a distributed order management system important? It allows an organization to capture all information in the order management process across all relevant channels. This includes the entry of the order, sourcing, payments, and fulfillment. It also spans all channels of sales operations. The benefit is that it doesn’t matter where an order originates. All fulfillment channels have access to the information and the retailer can appropriately allocate the inventory depending on stock levels, demand requirements, and timing of fulfillment.
But why is it under-utilized? The main reason is the integration issues that comes with an implementation. Based on our survey results, barely one-third of respondents indicated they have integrated their omni-channel channel operations at this point. When it comes to incorporating distributed order management, the technology complexities are incredible. There is not a simple integration point; there are layers of interaction points and a slew of business rules to bridge the gap. There are significant challenges from an integration standpoint, both in terms of technology and business processes, that are slowing the growth and overall expansion of omni-channel operations.
As part of the research process, I have been speaking with suppliers of omni-channel order management systems to get their take on what will drive growth in the market. Two of the suppliers I spoke to brought up similar points around the growing complexity of orders and changing customer expectations for choices and instant gratification. Martin Verwijmeren, CEO and Founder of MP Objects, stated: “One trend that is driving OMS growth is more complex orders. With more options for customers regarding order and delivery, organizations will continue to deal with greater variability and more complex order fulfillment. This makes flexibility in leveraging all supply chain network partners even more critical.” Flexibility is a critical part of an omni-channel OMS, as the retailer needs to be able to pull the order from the appropriate location, which will vary on individual orders based on the type of customer, the type of delivery they expect, and the most cost-efficient means to deliver.
Kate Milne, Product Marketing Manager at Salesforce Commerce expressed a similar sentiment around the complexity of orders and how customers’ expectations have changed. “Retail titans like Amazon and Walmart/Jet are setting new expectations for speed and ease of package delivery. Amazon’s acquisition of Whole Foods creates the possibility for every supermarket to become a distribution center, and might allow Prime shoppers to buy online, pickup in store, collecting a package while they go grocery shopping. Walmart created click-and-collect vending machines and dedicated premium parking for online orders, enabling shoppers to buy items online with precision and speed, and pick them up easily at the store. These are just two examples of the bar being set by leading big box retailers. Consumers are beginning to expect the same levels of service for all retailers; there is an expectation for choice and instant gratification. It’s critical for retailers to adopt a DOM that will allow them to offer omni-channel options, and optimize for speed of fulfillment.” This is another point that shows the importance of pulling inventory from the proper location to best meet the needs and expectations of customers. Without full visibility into inventory availability, as well as order information, this is simply not possible, and the customer will most likely be disappointed.
Another theme that is emerging is the use case for omni-channel order management in traditionally B2B companies. More and more brands are selling direct to consumers as well as to retail partners. This is another complexity that an OMS can help to solve. William Salter, CEO at Paragon Software Systems, pointed out how the changing complexities of B2C order fulfillment is bleeding into the B2B world. “Customer fulfilment demands in the B2C channel will start to become the standard in certain B2B channels, thereby encouraging growth of our OMS solution in the B2B market.” While the B2B application for an omni-channel order management system is still lagging behind its B2C counterpart, it is a market that is prime to grow.
The issues mentioned above are ones that I have thought about in the past and talked with suppliers about. However, there was one point from one of my conversations that I hadn’t really given much thought to, at least not in terms of an OMS. Seasonal items are always risky business for retailers. There is a very finite amount of time in which these items can be sold, and they lose their practicality once the season has passed. This results in heavy markdowns and liquidations. Fred Sattler, Business Developer for DSIA brought up an interesting point about the seasonality of items. “The lifecycle of an SKU is getting shorter and shorter, especially in e-commerce. The SKU is designed, received, and pushed to the market. It is very rare to find the same product six months later, so replenishment is nearly non-existent. Without re-stocks, it makes fulfilling from the appropriate location that much more important.”
In conclusion, omni-channel order management is becoming increasingly important, if not increasingly complex, as the world moves to a more integrated omni-channel environment. While the adoption rate is lower than it should be, omni-channel order management systems will need to come to the forefront of the omni-channel experience. There are a number of growth factors and trends that are driving the market, including the growing complexities of orders, the changing nature of customer expectations, the blurring of the lines between B2C and B2B, and the shrinking lifecycle of the SKU. With the e-commerce market poised for significant growth, so too is the market for OMS.