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Order management systems take on multichannel, multipurpose role

As the focal point for customer orders and activities, data collected by order management systems can help companies determine behavior patterns and buying habits and improve CX.

Many say the best measurements of a business are its customers and their activities. And the key to capturing this valuable customer information rests with order management technology.

"The biggest trend is that people want to capture more information at the time of order. That's where order management systems are coming into play," said Tyler Wilson, director of software development at The CE Shop, a Denver-based provider of online real estate courses, and former ERP consultant.

Order management systems can drive operational efficiency and give organizations a leg up on their customers. But what kind of information can order management systems provide? And how do they interact with ERP, e-commerce and supply chain management systems?

When it comes to B2C especially, customers expect to know when their products will arrive as soon as they click purchase, said Seth Lippincott, an analyst at Nucleus Research, based in Boston. As a result, order management software has to tie into fulfillment in real time.

"Without connectivity to the planning and execution software [when the order management system resides outside the supply chain], issues can quickly arise," he added.

Companies need an understanding of cost-to-serve for each order that requires integration with supply chain systems. As order management becomes the domain of CRM and field service, rather than ERP and fulfillment, Lippincott explained, acquiring the necessary information from the execution and inventory systems is a going concern.

Solving the puzzle

Order management is a really important piece of the supply chain puzzle, said Bill McBeath, an analyst at ChainLink Research in Newton, Mass.

"One of the [reasons] is that, at the time you take an order, you're making a commitment," he said. "And that commitment is obviously to deliver something -- a certain quantity of something, at a certain time and at a certain place."

Depending on the supply chain, that can mean any number of things.

Without connectivity to the planning and execution software, issues can quickly arise.
Seth LippincottAnalyst, Nucleus Research

"If it's a mining truck that you're delivering to Australia, there's this huge logistical issue," McBeath explained. "But even before that, there's the production piece: Can you make this thing on time? So, all of the forecasting and the production management comes into it. And then the second thing is, can you deliver it [on time]?"

Available-to-promise occurs during the order management process, he said. So, for example, instead of a company promising it can allocate a mining truck on time to a customer without really knowing if it can, the order management system can look into the company's inventory and production levels and allocate that truck depending on the truck's availability.

"Now, available-to-deliver would be, 'OK, I'm able to [deliver] the truck, I've got the inventory. But can I deliver it at the place and at the time that I said I would?'" McBeath explained.

To answer that question and ensure an on-time delivery, the order management system would look into the organization's supply chain fulfillment system.

In terms of marketing, companies can also glean customer demographics from their order management systems, Wilson added. And when a company knows more about its customer base, it can cater to customers more effectively.

"This is where you're creating a customer master file and getting insight into the types of customers you have, and, [therefore,] you're able to tailor marketing strategies around them," Wilson said. "Everything that you do is essentially tailored around what you can capture at the time of order."

Better customer insights

That's precisely the effect that order management technology had on operations at Hanover Direct, formerly a multichannel retailer in Weehawken, N.J. In December 2017, The Home Depot announced its purchase of The Company Store, a catalog and e-commerce retailer of home goods and textiles, from Hanover Direct. The acquisition did not include The Company Store's five retail locations.

You're making a commitment. And that commitment is obviously to deliver something.
Bill McBeathAnalyst, ChainLink Research

Hanover had implemented NetSuite's order management system to gain better insights into customer behavior and shopping habits, target customers with advertising, streamline order processing and improve customer service, according to Hanover's former CIO, Jeffrey Rosenholtz, now an advisory services manager at consultancy CohnReznick.

Previously, Hanover fulfilled orders using daily batch processing in a mainframe system, but many orders placed one day didn't get processed until the next. Orders are now fulfilled as soon as they arrive, he noted. After Hanover's customer records were migrated from its old system to NetSuite, he added, call center agents and other employees had a unified, 360-degree view of customers, allowing for faster responses to customer issues.

Orchestrating into multichannel hubs

Due to its "dependence on customer and item data," order management was once tightly integrated to ERP, said Forrester Research analyst George Lawrie. "But we've seen that drifting into a much looser kind of relationship, into a space of collaboration between suppliers, deliverers, sellers, installers and customers -- what we call an order hub."

These order management hubs, which handle multichannel requests and enable end-to-end business processes, have become more prevalent, particularly in B2C, mainly because order management is critical to handling the increased complexity of the fulfillment process, Lawrie explained.

"It's no longer about order management; it's about order orchestration," agreed R "Ray" Wang, principal analyst at Constellation Research. "It's more than just getting an order inside an ERP system. It's orchestrating an order all the way from the front office, through CRM [and] across all channels. That's what's required for success."

Order management, Wilson added, "is a key transaction to any business operation. You can relate that back to ERP, supply chain and everything else -- everything that an organization does is going to be driven off that order. It feeds your revenue [and] your accounts receivable stream, which will feed the rest of the downstream processes and eventually convert it into cash. It's also going to be part of your forecasting."

With order management, a company first identifies the customer. Then, when the company ships the goods, the system generates an invoice and an open item in accounts receivable that gets closed when payment is collected.

Multiple channels, multiple purposes

There are ways companies can use order management with their back-end ERP systems, suggested Gartner analyst Gene Alvarez.

"You can use the order management system as a single queue for multiple customer sales touchpoints, like call centers, websites, stores [or] mobile devices," he said. "All the orders are captured by various end-user points and then sent into a single queue that passes them off to ERP. The other approach is to use order management to handle multiple ERP system back ends. For example, you could have multiple distribution centers all running the same ERP system for fulfillment, and you need to determine which is the closest to the customer. Order management makes that determination."

Corporate acquisitions also can get a boost from order management.

"For instance, if one company acquires another company that's using a different ERP system, but you wanted to sell their goods through your channels, you can use distributed order management to route that order to [their] ERP system for fulfillment," Alvarez conjectured. "Order management can also be used to fulfill orders from third parties, like drop shippers. On the finance side, you can have that single queue of orders also being sent to finance for revenue recognition."

Overcoming the complexities of e-commerce

E-commerce, however, can complicate the interaction between order management and ERP, because e-commerce applications typically include order management, Lawrie noted. That's the reason online retailer Airsoft Megastore, based in Irwindale, Calif., invested in an order management system, but not ERP. The company's order management system instead worked with its front-end e-commerce application.

"We [used] the order management system in the fulfillment cycle," said Mike Zhang, former Airsoft president and COO, who's now COO at San Francisco-based digital banking platform maker Good Money. "It tied into inventory. We [used] it to process orders, ship orders, generate packing slips and things related to the pre-pick [and] pack and ship elements of fulfilling our orders."

Airsoft always favored applications that were more specific to e-commerce instead of a traditional ERP system, Zhang said. Because the company was already using OrderDynamics' front-end shopping cart, he reasoned, it made sense to deploy the vendor's back-end order management system for easier integration.

"The dynamic nature of e-commerce makes it such that an ERP system is fairly cumbersome in a lot of scenarios," Zhang said. "However, a retail operations platform -- added to the order management system -- could revolutionize the way [Airsoft does] business. It could really drive a lot of operational efficiency throughout the organization."

Next Steps

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