by Rachel Go from Flxpoint – Enterprise Ecommerce Operations Platform
More than a third (34%) of businesses have shipped an order late due to unintentionally selling an out-of-stock product. These errors can be costly and hurt your business’s credibility, growth, and success.
You can avoid these issues though through a distributed order management system (DOMS). In this article, we’ll walk you through:
- What a DOMS is and its benefits
- Key considerations when choosing a DOMS for your business
- How a DOMS stacks up against other top order management systems
What is a Distributed Order Management System (DOMS)?
A DOMS improves your business’s supply chain by automating certain processes and upgrading aspects of your operations such as inventory management, including forecasting and reordering.
It also streamlines fulfillment workflows such as order routing, splitting, and shipping, allowing you to deliver customer orders on time consistently. These enhancements minimize your expenses so you can offer your customers cheaper shipping options.
Because ecommerce is so complex, your chosen DOMS should be well rounded enough to handle other activities such as:
- Payment processing and customer service (like refunds and product returns)
- Receiving and tracking customer orders
- Monitoring suppliers
- Generating sales and inventory reports
A DOMS must guarantee business efficiency—without negatively impacting the customer experience.
Benefits of Using a Distributed Order Management System
Maintain a Clear View of Your Business Operations
A DOMS provides visibility and traceability across your sales channels and supply chains. With it, you can easily monitor your profits, expenses, and your inventory’s movement. A robust system will also give you real-time updates and insights.
The resulting digital supply chain opens access to an abundance of data on your sales channels’ performance and trends. This transparency and information can drive your decisions and strategies like:
- Determine inventory thresholds that let you time your inventory purchases correctly
- Properly allocate your goods based on which items sell best on specific channels
- Identify strategic locations for your storage and distribution hubs
- Discern operational bottlenecks, then optimize and automate those processes
These tactics can significantly reduce your business’s expenses and increase its profitability, all while improving the overall customer experience.
Avoid Going Out of Stock
Overselling and stockouts pose major threats for many businesses. Insufficient inventory renders you unable to serve your customers effectively, which can lead to the loss of revenue, rankings on search engine results pages (SERP), and customer loyalty. In fact, going out of stock can cost retailers $1 trillion annually.
However, a DOMS helps you avoid these potentially fatal mishaps by helping you successfully manage your inventory’s supply and demand and anticipating how much you’ll need on hand.
Prevent Overstock
On the other hand, holding too much inventory can also hurt your business. The longer these items stay with you, the less valuable they become due to new versions supplanting them or general decay.
Another issue is that storage fees can easily pile up. For example, Amazon FBA sellers have to pay various fees to use Amazon’s storage and distribution facilities:
- FBA’s monthly inventory storage fees increase in price as you store and sell more.
- If your stored goods exceed a certain threshold, you’ll incur inventory overage fees.
- When your goods sit in Amazon’s facilities for too long, additional long-term storage fees are charged.
Other third-party warehouses and storage facilities have their own fees and penalties you risk accruing if you fail to manage your stock properly. With the transparency you receive from a DOMS however, monitoring how much inventory you have is simple so you can avoid the above issues and fees.
What to Look for in a Distributed Order Management System
Now that we’ve covered the importance of a distributed order management system, let’s go over the key capabilities these systems must have to make them so useful.
1) Track Orders Across Sales Channels
A robust system should be able to trace your orders precisely for every sales channel, across your entire buyer journey and beyond. This may necessitate a suite of integrations with warehouse management systems, sales channels and marketplaces, and supplier networks.
Having this visibility not only helps you see how your channels perform, but also shows you how your goods move.
For instance, you experience a slew of orders for Product A on Amazon and fewer on Walmart. Meanwhile, Product B is the opposite, with more orders for it on Walmart than Amazon. Since you know how these items behave, you can properly allocate your stock for each channel.
Proper tracking across sales channels also tells you which stage of your workflow process an order is in. This allows you to update your customer about their purchase, which keeps them in the loop and improves their experience.
2) Maintain Accurate Inventory Levels
Without the ability to track orders against your inventory, multi-channel selling is out of the question. According to supply chain executives, proper inventory management across multiple channels is the third-biggest challenge for their companies.
Knowing how quickly your products move will help you hold accurate amounts of inventory. The right DOMS will have an inventory alerts feature such as:
- You set inventory thresholds, which serve as the minimum quantities of goods you should have on hand.
- The alerts feature will send you notifications when those thresholds are hit, letting you know it’s time to restock.
To maintain correct inventory levels, the DOMS should also update what customers see on your storefront (for example, your ecommerce website tells shoppers how many units of Product A are left or if it’s out of stock).
This avoids situations where you’re unable to fulfill customer orders because they unknowingly ordered an item you don’t have.
3) Facilitate Seamless Fulfillment
Besides handling your sales channels, your chosen DOMS should also consolidate your supply chain. It can streamline your fulfillment through:
- Automation of order routing, splitting, and shipping
- Payment processing for different regions and currencies
- Transmission of customer order information to your distribution network
- For in-house fulfillment, the automatic printing of your shipping labels
Then, detailed sales and inventory reporting tell you when and where your goods move fastest. This gives you an idea about consumer behavior, which also identifies ideal locations for your storage and distribution facilities.
These DOMS capabilities can introduce seamless fulfillment so your customers will receive their orders as quickly as possible.
4) Reveal Profitability for Individual Channels
Understanding the profitability of your sales channels helps you formulate business strategies tailored to each one’s strengths.
This is a popular capability that Flxpoint merchants find highly useful. We assign each item a unique Flxpoint ID so you can see item expenses and revenue according to the corresponding sales channel.
Imagine your revenue for Product A is exceptional on Amazon, but poor on Walmart. Product B, on the other hand, earns lots of money on Walmart, but doesn’t perform as well on Amazon.
With Flxpoint, you can identify which product your marketing should focus on for each marketplace. You’ll then reap higher returns and determine where more of these products should be sold or pulled from.
5) Manage Reverse Logistics
Reverse logistics involves processing product returns and return shipping, which are vital to the customer experience. A Voxware survey found 31% of consumers would cease buying from a company if they received the wrong item just once. Those who continue to buy from the brand, however, want immediate fixes to these mistakes. Almost 40% expect the right product to arrive a day or two after notifying you of any errors.
Your DOMS can help you manage your reverse logistics to solidify operations and keep customers happy. It’ll simplify:
- Scheduling of return shipments
- Replacement of defective products
- Approving refunds
Additionally, an efficient DOMS should be able to sort and categorize returned items based on their conditions. It’ll also help you decide whether to:
- Fix the defective or damaged products
- Resell the incorrect items as new or returns
- Recycle, scrap, or refurbish the returned goods
5 Popular Order Management Systems
(1) Manual Order Management Tracking
Many growing companies manage their orders via spreadsheets. They also usually have their own tracking systems that aren’t standardized or uniform. This type of order management tracking is entirely manual and highly time-consuming.
As your business expands, you’ll need to be strategic about where your inventory and warehouses should be located for faster deliveries and shorter supply chains. Manual tracking is insufficient for handling this degree of scaling.
If you’re a small business or an individual seller, you can start with manual processes. But thinking about your long-term growth, we highly advise against it—especially if you want to scale up.
(2) Marketplace Order Management System
Some marketplaces have their own order management systems. For instance, Amazon Seller Central and Walmart Seller Center are made for merchants on these platforms. Sticking to these systems is ideal if your business revolves around a single marketplace.
But if you’re looking to expand to other channels, relying on marketplace-specific order management systems won’t be enough. You’ll need a DOMS to unify them and make it easier to run a multi-channel setup.
(3) Sales-Channel Specific Order Management System
Sales channels also have internal order management systems, like Shopify’s OMS. Similar to marketplace-specific systems, using a particular channel’s OMS can work if it’s your business’s main point of operation. However, a DOMS should supplement it as you expand to other channels.
(4) Enterprise Retail Platform (ERP)
ERPs are often complex systems that connect all of the tools in your ecommerce suite with custom setups. An ERP can simplify the management of day-to-day business activities. It can streamline accounting, project management, risk management, and compliance when done well.
However, ERPs often require in-house IT teams to manage and maintain. Beyond that, they also have long implementation timelines and complex setups.
While there are plenty of ERPs that can combine order management across various sales channels and platforms, the downside is they’re incredibly complex to implement and maintain. Unless you’re a massive brand with your own custom or in-house built tools, an ERP is typically overkill.
(5) Digital Distributed Order Management System
A DOMS is free of the limitations and complexities of the previous order management systems. It’s practical for businesses of various sizes, streamlining inventory management, fulfillment, and your overall operations.
A great example of an efficient DOMS is Flxpoint. Our company serves as a “hub” or connection center for all of your sales channels, fulfillment networks, and end-to-end order routing systems. Besides distributed order management, Flxpoint can also:
- Organize and maintain supplier data through its wide array of integrations
- Handle product information management
- Manage your product data and inventory syncing across multiple channels
Wrapping up—Adopt a Distributed Order Management System for Seamless Growth
Kick-start your business’s growth by implementing a DOMS and tapping into the accompanying benefits. By streamlining your inventory management, fulfillment, and your business operations as a whole, a DOMS can help you:
- Maximize profitability
- Minimize expenses
- Improve the customer experience
Keep in mind the features and considerations mentioned in this article to choose the right DOMS for your business and experience the joy of a seamless supply chain.
For more articles check out our EcomBalance Blog to keep up with what’s new at EcomBalance and how we’re working to change bookkeeping for the eCommerce industry.
