Bob Dylan said long ago, ‘The times they are a-changin’ and it doesn't matter when – or where – you heard this phrase, it's always true. Perhaps the only constant of life is change. And e-commerce is no different.
Change is a force of nature that periodically transforms how e-commerce behaves, operates, and becomes profitable. To ride the wave of change, companies and businesses need to understand these ‘ebbing tides’ of technological upgrades, customer behaviors, or product trends, just to name a few of the most common changes that regularly storm the global e-commerce markets.
But how can you be prepared for something that is by definition ‘a permanent change’? Perhaps the answer is one of the places we sometimes forget to look when we think about ‘future proof strategies for e-commerce’… our warehouses. That’s why today we want to take an in-depth look at order management systems (OMS), what they are, how they can help us, and why we believe a solid OMS could be the perfect companion for ‘the times that are a-changin’. Let us begin!
OMS: More than managing orders
By definition, an OMS is an order management system. A system to control how the orders are processed and fulfilled by your e-commerce. This has led many companies to believe that OMS belongs to the warehouse or to the logistics division of the company.
And there is nothing wrong with this, for it matches the core idea behind an OMS, but it is a lacking and lackluster approach to what a proper use of an OMS can provide for your brand and business.
Conventional e-commerce has evolved and reached a new dimension: customer requirements and order volumes have increased rapidly in recent years, and many companies have invested in the digitalization of their sales and service processes to retain customers, open up new business areas, and survive in the face of increasingly intense competition.
To top this all, the global e-commerce standards of faster and faster deliveries – many times pushed and enforced by big marketplaces like Amazon and Alibaba – have also deeply affected the perception of quality that customers have from any given online brand. How so?
Well, let's say that if you can’t deliver in less than 24 hours in some European cities, or if you don’t have a free return policy, your e-commerce is in for a lot of pain and trouble to become a household name in that particular region.
Because it has become standard to have ultra-fast deliveries and free-shipping return policies, and brands that can’t deliver this are considered automatically sub-par or even untrusty by consumers. As you probably already realized, the complex standards enforced by the big e-commerce players have turned a logistic issue into a quality and brand perception problem.
But furthermore, due to the increasing number of sales channels, new technologies, and the associated complexity of IT system landscapes, the demand for effective solutions for seamless omnichannel fulfillment is also rising and putting even more pressure on your logistics strategy.
This is because today, it is no longer just a matter of transferring orders to an ERP system but instead of efficiently orchestrating orders holistically with a view to all sales channels, the CRM, the ERP, and other customer-oriented applications on the one hand – and the constantly changing customer needs on the other. And this is precisely where order management systems (OMS) come into play!
All this being said, it becomes clear that the OMS is perhaps the rosetta stone of modern e-commerce, being an instrument that – once mastered – can allow your e-commerce to translate multiple languages to operate with them efficiently: your marketing, your managerial decision, your logistics, your sales, and even your human resources, can be controlled, improved or benefit from a proper OMS system, due to the heavy dependency of modern e-commerce on the fulfillment part of the business.
The age of intelligent order management
An efficient OMS is capable of providing a level of cohesiveness of orchestration of the entire operations of the business that not even the best managerial strategy can achieve.
And how is that possible? Let’s not dive deeper into the complex theoretical conundrums of ‘how and why, and when, and who’ of OMS, but into a practical case that can explain beautifully, I must say, how an OMS implementation can completely transform the way a company operates.
Suppose you have a shoe brand that has been selling via traditional brick-and-mortar stores for at least the last 20 years. Obviously, nowadays, your brand wants to get a slice of the ‘digital market’ and decides to create e-commerce.
Now shoes are sold in multiple sizes and variations. So it is perfectly possible to go to a shoe store, find a pair of shoes you like, and then when you are already prepared to pay, discover that your size is out of stock.
Traditionally, the physical store would offer the client the possibility of returning in a few days once they get the correct shoe size from their warehouse. Most likely, if the client had a pleasant experience with the sales representative for the brand, and if the client is a regular of that location where the physical store is, it might happen that in a few days, the will be client would return to see if its size is available.
Now e-commerce can’t do this. If the size is not there, the digital client leaves, never to return again. That’s how life works in a ‘bits-and-bytes world’. Competition is brutal, and online consumers are spoiled to the point of only thinking in terms of instant gratification: either I get what I came for, or I leave and never return to this e-commerce. Because – this is their logic, and it isn’t flawed – probably another e-commerce will have the same product in stock, and perhaps, even at a lower price.
So, traditionally in the e-commerce shoe-selling world, when a given size is not available, the client is lost. Now, suppose you haven't worked with the shoe industry. In that case, you might not know that not having the proper size is pretty possible because in fact, to guarantee that your physical stores have the widest variety of sizes possible, you normally spread thin your inventory of shoes among all stores.
This means that if you have, let's say, 15 stores, all your 200 sneakers size 41, will be spread between these 15 stores. But because we are humans and not clones, they will surely not sell at the same rate. Meaning some of your stores will get a lot of clients needing 41 sizes, others only a few, and it might even happen that some stores won’t sell a single 41 size sneakers.
And enter the OMS.
Some online brands selling shoes have figured out that you can actually customize an OMS to make a global pool of all your physical stores' inventories, configure your logistics companies into an automated pick-and-packaged order processing, and put all this information at the service of your e-commerce store. Effectively turning our 15 stores into one single digital warehouse.
Meaning your e-commerce customers will be able to place an order for any given size, and the OMS will find the correct pair of shoes in the physical store inventory, process the order, send it to packaging, and deliver it to the online customer address.
But furthermore, shoe brands realized that this system also benefits physical customers, allowing them to buy online in the physical store – via a tablet or any other mobile device – the correct size they want if it happens to be out of stock (it’s called the Endless Aisle concept). This way of using an OMS has considerably proven to increase the profitability of brands and businesses.
And also changed the way they operate. Now sales representatives don’t need to convince the will-be customer that ‘in a few days its desired product will be available, so please wait for it’ but instead can provide the customer with a hybrid solution mixing e-commerce and traditional brick-and-mortar retail to get them their products as fast as possible.
This is the true power of an OMS: it becomes the director of your business orchestra, taking information, orders, and needs from all parts of your business and then deciding the best course of action to fulfill them in the most profitable way, following the rules and specifications you desire.
OMS: A massive overhaul for your entire business operation
An OMS is a massive improvement of your entire business operation that can significantly change – for the better – the following areas:
Increase sales: By allowing you to control your stock, repurpose it, be faster and more efficient in your warehouse operations, and reach the current standards of global e-commerce. With an OMS, any small brand has the chance to be able to deliver products and services at the same speed that major marketplaces do.
Increase customer happiness: Another key point of an OMS is that customer orders from all sales channels (e.g., online stores, EDI, offline stores, or field sales staff) are merged into a single system. This enables comprehensive analysis of all transactions, both in overview and detail. It also allows companies to tailor their offerings to customers across all channels, thereby increasing cross- and up-selling potential as well as customer satisfaction and loyalty. An OMS is the best tool to have a clear understanding of what and to whom you are selling your products. And knowing your buyer is the core job you have to do if you want to keep them happy.
Real-time inventory overview: Keeping track of what you have and where might seem essential for any business - or any activity in general - and yet, to do so is sometimes nearly impossible. If you are handling orders from multiple clients spread across multiple regions - and make no mistake, that’s precisely the idea behind having e-commerce - you need to keep track of a remarkably complex operation.
Here an OMS is a perfect fit. All available inventories can be shared across different channels. If demand in one channel is lower than expected, the excess inventory can be made available to other channels. Conversely, if demand in a particular channel is higher than expected, it can be met with inventory from other channels, directly from a central warehouse, or from a dropship supplier. In short, an OMS gives companies real-time access to all available inventories in their offline stores, stock held by suppliers, and inventories within the supply chain. With this information, vendors can commit to deliveries immediately and create custom delivery processes.
Reduced costs: Increasing your delivery speed and having tighter control of what your stock is, and to whom, when, and how your products go are stepping stones into the final cost reduction goal. There is no way to reduce costs if you don’t know exactly what resources you spend to achieve your goals. That’s why an OMS is nowadays almost mandatory: it allows you to keep absolute control over what resources are being used to fulfill your orders.
Consistent customer experience across all channels: With a general overview of your business operation, an OMS can provide the tools and systems needed to guarantee a seamless omnichannel customer experience. The information they receive is consistent across all channels, whether mobile devices, desktop computers, customer hotlines, offline stores, or direct contact with field sales staff. The combination of complete transparency of data and processes with consistent real-time information across all channels has a positive impact on customer satisfaction and loyalty while also enabling additional customer-oriented services.
Sustainability: For companies, having a 360-degree overview of all customer transactions and channels makes for more efficient business processes that result in better and faster decision-making. At the same time, they can improve their carbon footprint through intelligent, perfectly coordinated order processing and routing.
For all these reasons, using an OMS isn’t any more an ‘upgrade’ to your warehouse or logistic system but rather a must for your entire business operation to run smoothly and profitably.
Times indeed are ‘a changin’ e-commerce is a fierce battlefield where companies must achieve the current golden standards and provide the customers with the best possible experience while at the same time reducing costs, increasing efficiency, and being socially and environmentally responsible. And to do all this, OMS is fundamental. So, having an OMS implemented is something you can’t stall.
Or, as the legend, Bob Dylan would say:
‘Don't stand in the doorway,
Don't block up the hall,
For he that gets hurt,
Will be he who has stalled,
The battle outside ragin'.