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Why should I consider a specific OMS (Order Management System) rather than adapting my ERP?

2 years ago
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You may have an ERP that manages your inventory (sort of) and your order receipt and input (sort of) and your fulfillment (sort of), but was it designed to do that, or are you cobbling a Frankenstein monster of ill-fitting parts? The upside is that you are using what you already own. The downsides are many. Your ERP supplier is probably charging you plenty for the custom development. The parts don’t fit well together. Remember, when Dr. Frankenstein’s monster woke up, he caused all kinds of problems!

An OMS that is designed and implemented to integrate your order input and processing with your inventory and fulfillment processes is a more predictable way to succeed.

The customer you have is your most valuable customer. Odd, isn’t it, how we spend so much time prospecting for new customers and so little time taking care of the customers we already have. An excellent OMS does much of that automatically. What does a customer want? Beyond a good product at a fair price, the customer wants accurate order entry, fast delivery, responsive customer service, and excellent after-sales service. How can an OMS help you to deliver all of that? By ensuring that information is entered into the system quickly, accurately and simply and by transmitting all the information necessary to everyone (customers, suppliers and employees) that need it—when they need it—without having to resort to multiple screens or time-consuming additional inquiries.An OMS can help you in many other ways, as well. What if you could offer a wider array of products for sale by drop-shipping from your suppliers? Without the need to carry specific inventory, but with the assurance that you will know that the inventory exists and that you will have complete transparency into the picking, shipping, and billing for a drop-shipped order, the ability to offer items you don’t have to keep in inventory can dramatically add to profitability and customer satisfaction.

An OMS has more specific functionality to manage orders than can be retrofit into an ERP.

These include:

  • Connecting the dots between order receipt, inventory management, and fulfillment.
  • Managing drop-ship suppliers, including payment authorization to drop-ship suppliers.
  • Automatic inventory updating and reordering.
  • Providing complete visibility into order status at every stage.
  • Managing returns and exchanges.

With most ERP systems, you would pay at least as much to custom-design these features as to purchase a separate OMS.

The key is to buy that OMS from a supplier with a history of fast and effective integration with the other software in use by your company.

It cannot be overstated—the key to a satisfactory implementation of an OMS is in the experience of the OMS supplier in integration. The design and architecture of the software is very important. The quality of the implementation and integration is far more important.An OMS must be easy to use and fully functional for a variety of users. The following applications must be considered, in advance, before deciding on an OMS:

  • Define the required web functionality
  • Ensure mobile device access and efficacy
  • Does your system support touch-screen operation?
  • Does it offer point-of-sale integration?
  • What are your requirements for social media connectivity and user access functions?
  • What reports will be generated?
  • How will they be disseminated?
  • How automatic is the integration with new product introductions?
  • Does your OMS support extreme seasonality?
  • Does it manage multiple sites, including drop-ship sites?
  • How do kits (multiple products assembled for one purpose) or back orders get processed?
  • What customer notifications are automated?
  • Does your OMS manage service provision at your customer’s place of business (e.g., installation)?
  • Does the OMS help to automate your Customer Service Function, including prompting your CS representatives to best assist customers?

Again, many of these requirements involve both the architecture and design of the software, as well as the effectiveness of the integration and implementation.

Choose your software carefully. Choose your implementation partner even more carefully.

Another whole set of considerations involve the extent of integration you desire with your accounting software. Billing, tax calculation, payment to drop-ship suppliers, promotional discounts, price matching, credit card authorization and fraud prevention, refunds, additional charges for additional services and many other activities have connectivity to your OMS. It is imperative to spend the time necessary to anticipate all of the required integrations with your accounting / billing systems and make sure that they are possible to integrate with your new OMS. 

Do you sell products that require ongoing service? What coordinates the initiation of a billing cycle with the delivery of products?Still another set of important considerations is whether your business uses multi-sales channels and / or multiple identities (e.g., do you sell under more than one name?). In such cases, the design and architecture of your OMS must anticipate these requirements and the integration with your Channel Management Software (CMS) and the various types of order content and the sources from which order information will arise. Since one selling platform will undoubtedly be your web site, perhaps the most important integration is that to be created between your web site and your OMS, as the conduit to your inventory and fulfillment process, CRM, billing and other systems.

Yes, it’s getting complicated… and that’s the reason you need a good integration partner.

It used to be that your orders came from one place. Perhaps you had a bank of telephone operators receiving calls from customers, or a web site through which customers placed orders. Now, you may have a number of sources from which you receive orders, which may even include a brick and mortar retail location. Perhaps social media sites are connected so that you can receive orders. You probably also only had one fulfillment location, rather than several warehouses and drop-ship suppliers. But, as you became more successful, your order receipt and fulfillment activities became more complex and sophisticated. Can customers pick up merchandise at various locations, including your brick and mortar retail sites? Can you manage drop-ship locations? 

Can you ship from a retail store? Unfortunately, your infrastructure may not have kept pace. The most likely deficiency will be found in your processing of orders and the collection and transmission of information associated with orders. How effectively can you have a single, consolidated view of all orders and how those orders relate to your inventory status at a variety of fulfillment locations, including drop-ship suppliers? This obviously will take a lot of planning and a dedicated system—modifying your existing ERP is generally a bad solution to such a specific and complex challenge.Adapting your ERP is difficult and necessarily complicated.

 For example, how can you manage multiple ship-to addresses? What about orders that are sent to gift recipients? How can you create business rules to determine to which fulfillment center orders will be routed?If you have a variety of inventory locations, can you see a consolidated inventory report? Does your OMS relate the existing inventory to your item velocity to help you know when to order inventory, for which fulfillment location, by when? Do you have business rules created for “safety stock?” How is that information transmitted to your purchasing department? Are some purchase orders (subject to tight controls and logical business rules) automated?What about situations where part of an order ships from one fulfillment location and the balance from another? 

Again, modifying an ERP to manage the business rules associated with these complexities will be ineffective and expensive. A customized and well-integrated OMS is a superior option.Another important consideration is the distinction between business-to-business sales, as compared to business-to-consumer sales. How do you ensure that multiple orders are consolidated for minimizing shipment cost? How do you balance consolidating shipments with fast delivery? Do you have business rules built into your system to reflect this balance? The excellence of your implementation partner is critical for you to successfully navigate these complex paths. How do you manage pricing differences between various B2B customers (who might have different volume-related pricing) and B2C customers?

Presuming you are convinced that an OMS customized by an expert implementation partner is better than trying to retrofit your ERP, how do you select the OMS and the implementation partner?The first thing to do is to create documentation of existing processes and activities. As a checklist, the following probably ought to be considered, although not every company will have to address the entire list.

  • Users: Who, where, department (eg., CSR, drop-ship, 3PL, accounting, in-houses and field sales, operations, logistics, personnel, purchasing, etc.), customers, suppliers and others.
  • Channels: How do you sell? Do you use the Web, brick and mortar? Call centers? Catalogs or other direct mail? Do customers order via mobile devices? Do you have sales personnel in the field?
  • Order Entry: How do you create orders? Modify existing orders? Validate orders? Notify customers at various stages? Manage exceptions? Receive orders from B2B customers? Receive orders from B2C customers? Calculate taxes? Calculate shipping costs? Verify inventory before accepting an order?
  • Reports: What reports do you have now? What reports would you like to have? Can you see all orders across all sales platforms in a single view? Can you see the allocation of orders to particular fulfillment centers? Do your orders automatically update inventory velocity reports?
  • Accounting: How do you ensure accurate billing? How do you accomplish fraud protection? What do you post—batch or individual transactions? How do you manage B2B credit limits?
  • Fulfillment: How are orders transmitted to fulfillment center? How do you manage Pick / Pack / Ship scheduling?How do you remain aware of order status and package tracking and how do you communicate this to your customers? What happens when inventory isn’t available and partial shipments are required? How do you manage backorders? How do you assign shipments to multiple fulfillment centers?
  • Returns: What if only one line item is returned from a multiple line item order? How do you reverse entries for sales tax and shipment costs? What if the items were fulfilled at different fulfillment centers, but returned to a single location? How do you handle exchanges?
  • User Interface: Can users save data in particular ways? Are different menus available for different users? Can you modify and adapt menus and user interface in-house without the need to retain your software supplier? Do your screens effectively prompt employee activities?
  • Purchase Orders: To what extent are POs issued automatically? Subject to which business rules? How are credit limits anticipated? How are shipping times by vendor calculated into inventory requirement processes? How are suppliers created?
  • Inventory: Do you have a WMS? Is it well integrated with your OMS? If not, how do you manage inventory? What inventory visibility do you have? Is it synthesized with your item velocity information? Does it incorporate cycle counts and inventory confirmation processes? Does it help you plan inventory ordering, receipt, putaway, quality control, picking, packaging, shipping, and reorders? How does your system help you decide which suppliers are optimal where multiple suppliers for a single item exist?
  • Customer Service: Do your CSRs have all the information at their fingertips to answer every question without delay? Are all order details available to CSRs, including order and shipping status? Does the order history of the customer appear on the CSR screen? Can a CSR perform checkout tasks for a customer? Can a CSR edit or cancel an order? Can a CSR schedule and monitor ancillary services provided to the customer, such as installation or future service appointment scheduling?
  • Value Added Services: Does your system help you upsell? Can your system manage work orders? Does your system help you understand and manage any capacity limitations?

Conclusion

Do your homework. Understand and document your current processes. Get input from employees, customers and suppliers. What additional functionality would be beneficial? Is the software you are considering scalable? How much does it cost to add users as you grow? Will you be locked into a system that becomes progressively unaffordable; a victim of your own success? Find an excellent integration / implementation partner—the best OMS in the world will perform poorly if it is poorly integrated or implemented. Research the functionality of the software you are about to purchase. If your software supplier suggests that it will handle your needs “out of the box” you ought to be very suspicious. A good rule of thumb is that the software should offer a maximum of 80% of your requirements, with the remaining 20% coming from an effective integration / implementation / customization. Don’t modify your ERP. OMS functionality is too complex and specific to retrofit an ERP. Purchase a customized application—it will allow you to achieve your potential.Want somebody to chat with about these complex and critical decisions?Call us. We can help you make the best decisions. 

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