Efficient and sustainable e-fulfillment is increasingly becoming a critical success factor for many large e-commerce companies. Sustainable e-fulfillment is not only more environmentally friendly (an issue that is becoming more important for the marketplace daily), but it also increases the profitability and efficiency of the entire e-commerce business. This especially applies to B2B online trade.
This is reason enough to address the trend of “sustainability in e-fulfillment” and to examine the potential of order management systems more closely. This article gives you answers to the following questions:
What are the challenges that global e-commerce faces in 2023?
The e-commerce industry was confronted with big changes and process-related innovations in recent years. On one hand, the COVID-19 pandemic led to record-setting sales, new distribution channels and new delivery concepts. In this way, sales strategies spanning distribution channels such as “Click and Collect” recorded an increase of over 200% due to the temporary closure of brick and mortar stores and have now become a fixed component of e-commerce. On the other hand, supply chain issues as well as labor shortages have curbed—and still curb—growth in e-commerce.
Moreover, political conflicts and quickly changing markets require great flexibility in procurement and partner management for companies. Consequently, e-commerce increasingly focuses on the critical logistics processes, especially procurement and order handling. The high volume of e-commerce orders and growing customer expectations for fast order handling, that spans channels, increases the complexity of these processes and require efficient supplier management and order handling—especially in B2B.
Why are sustainable fulfillment processes in e-commerce so important?
With respect to ecological sustainability, the extremely rapid growth of the e-commerce industry poses additional challenges. As growth is connected to increasing consumption of natural resources, does the online trade industry wish to remain competitive? Are questions raised about short, mid and long-term strategies for resource efficiency? Finally, consciousness for ecologically sustainable commerce has long been mainstream; this presents a buying criterion that should not be underestimated. According to a NetO study, 73% of online consumers pay attention to environmental effects when selecting a brand. And as can be read in “The B2B Future Shopper Report 2023” from Wunderman Thompson, 65% of B2B buyers are willing to accept a longer delivery time if the delivery is more ecologically sustainable.
Besides price and product quality, the image of the brand and the values communicated by the seller, and the resulting economic success, are decisive. So, it’s no longer just about how selling online aids with reducing prices and improving delivery speed; rather, it is much more about applying the potential of digitalization in an ecologically and economically sustainable context. Only in that way can the long-term business success be secured in this highly dynamic market.
What are order management systems and how can they increase sustainability in e-commerce?
In recent years, an efficient and well-structured order management has developed into a critical success factor in e-commerce. As soon as a customer has decided on a product in an online store and goes to check out, the fulfillment process starts, which includes payment, delivery and possibly a return. Traditionally this process was managed by ERP systems. However, due to the complexity of interacting with an ERP, the demand for more efficient processes, less manual effort, and improved order precision in omnichannel sales, the need for order management systems (OMS) has grown.
An order management system is a comprehensive software solution used to optimize and standardize the order handling process across all distribution channels. It acts as a central interface to manage the fulfillment process and rationalizes data integration between company software systems such as customer relationship management (CRM) systems, product information management (PIM) systems and warehouse management systems (WMS). In this way, complex point-to-point integrations between individual systems are avoided and the software infrastructure becomes more flexible.
Moreover, an OMS centralizes all order-related information, offers a single database for customer and order data, and matches sales inquiries to available inventory for the fastest, cheapest order fulfilment. And it can capture omnichannel orders and forward them to the optimum internal or external fulfillment providers. This allows for real-time inventory and order status updates, which can be used both for internal monitoring and customer service.
It’s no wonder that the interest in OMS solutions continues to increase. According to a study from the IHL Group, it is expected that investments in order management systems will increase considerably from 2019 to 2024 eventually reaching around 1.6 billion USD.
This is how order management systems could contribute to ecologically more sustainable processes in e-commerce fulfillment:
The growing significance of sustainable trade is one of the recent megatrends and it requires radically rethinking issues in virtually every field. New ecological corporate goals must be defined in order to ensure a company has a bright future. Financial key performance indicators (KPIs), such as the cost-revenue ratio of an online order must be supplemented by ecological figures such as CO2 footprint per order or resource consumption per order.
Since resource consumption from online orders happens primarily with the logistics of order handling, a well-coordinated order management can contribute to saving resources. The central visibility of all fulfillment-related data in the OMS can optimize resource usage and minimize error rates in fulfillment. Concretely, this means:
- Incoming orders from online shops or marketplaces like Amazon or eBay are recorded centrally and compared against real-time inventories.
- Besides one’s own inventories, the inventories of manufacturers, suppliers and stationary shops can be taken into consideration when checking availability. This means a much higher probability of an ordered article being in stock and the customer can expect a timely delivery.
- Distances can be reduced in the fulfillment phase: If, for instance, a customer from Chicago purchases a product from an online retailer based in Boston, who purchases a part of their products from a wholesaler in Chicago, it would be considerably more efficient just to forward the order to the wholesaler and have them carry it out. This kind of order forwarding is also called “drop shipping” and can be supported by order management systems. The reduction of deliveries can lead to a reduction in resource consumption and lower costs for online retailers.
- Too much or too little inventory can be found early and safety stock can be reduced. This contributes to minimizing the waste caused by too much inventory and by using warehouses more efficiently. At an average annual consumption of electricity per square meter of 65 kWh/m2in logistics facilities and 198 kWh/m2 in stationary non-food trade, economic and ecological savings potentials result, according to Statista, which can lead to cost savings.
After determining the optimum procurement location for order handling, the order management system must decide next what delivery route is the most cost effective and the most environmentally friendly. This optimization is based on rules defined by the company and adapted to their respective eco strategy. If, for instance, the most environmentally friendly fulfillment strategy is sought, knowledge of scientific studies, such as from van Loon et al. (2015), can be taken into consideration. These studies deal with the environmental effects of various fulfillment methods in digital commerce and give corresponding recommendations. So, for instance, smaller e-commerce orders can be delivered in the most environmentally friendly way through the central shipping of a cross-docking service provider or from a brick and mortar business. With more items per order, however, consolidation of orders will be more advantageous to maximize the number of items per delivery and minimize environmental effects. Factors such as volume and weight of the articles also play a critical role in the selection of optimum fulfillment methods and can be taken into consideration.
Another important factor in digital commerce is handling returned products. According to a ZDF report, Germany is sadly the CO2 European leader pumping out 795,000 tons in 2021—all based on product returns. This corresponds to the exhaust of around 6.6 million cars driving 800 kilometers. This enormous amount of CO2 emissions shows that the return rate effects the environment. It also presents a significant financial burden for companies selling online. For that reason, it is important for companies to develop a consciousness for the resource consumption that they cause and to reduce this as much as possible. Order management systems can be help in varied ways:
1. Recording and analysis of return figures
With optimum use, order management systems can act as a data interface between order recording and order handling and can communicate with external partners such as suppliers and delivery services. In this way, comprehensive information about customers, products and deliveries can be collected. With the help of analysis and monitoring tools, important data on the return process can be analyzed and optimization approaches can be identified.
2. Improved customer communication
Online order management should not be viewed as additional complexity but rather as a way companies can increase solutions and options. First though, customers must understand and appreciate the advantages of omnichannel buying. An OMS can simplify the entire ordering process for the customer by providing them items such as real-time information about fulfillment options and the delivery status. This guarantees that the information is consistent across all the channels. By setting up a “remorse period,” customers also have the opportunity to cancel or change their order up to a certain point in time. This transparency and flexibility created for the customer promotes retention, adoption and higher satisfaction and lowers the probability of returns because of incorrect orders or unavailable inventory.
3. Intelligent routing of returns
Since the focus of order management systems is on seamless communication between systems and on intelligent order routing, these areas offer the greatest potential for efficiency increases. An OMS helps companies to design return logistics in an environmentally friendly way by processing returns more efficiently by incorporating other distribution channels such as brick and mortar stores and by integrating returned products directly into handling other orders. In this way, a product purchased online can be returned to a physical location and either immediately resold or consolidated with other returned articles and sent back to the warehouse. This routing is based on predefined rules—exactly like the delivery of orders—and can be adjusted by the company as needed. So, it is possible to balance out shortages in certain warehouses by rerouting returns or repositioning the inventory.
Use of available return data and an improved communication with partners and customers may also contribute to controlling and optimizing the flow of goods in the supply chain in order to reduce the waste connected with returns and therefore the ecological footprint.
What advantages does using order management systems have for your company?
Imagine the OMS system as the “brain” of all of your B2B activities. It is a centralized system that allows you to record data and to recognize how, when and where you are using your resources in the entire fulfillment process. With the help of this powerful functionality, coupled with a pre-defined sustainability concept, you can optimize and design your activities in a more efficient, more environmentally friendly and a more profitable way.
An overview of your advantages:
- Structure and monitor your fulfillment processes:
To keep an overview of resource usage in complex omnichannel distribution strategies, it is critical to organize and monitor the processes. The optimum use of resources can reduce the CO2 footprint per order and minimize handling costs, which is a significant advantage in a highly competitive market. This advantage provides your company with freedom to focus on other important issues.
- Increase efficiency through automation:
Automation is an extremely effective method to increase business efficiency. By automating recurring and time-intensive tasks such as order handling, you can secure consistent results and reduce the risk of errors. This can also lead to significant cost savings by reducing the need for manual intervention and by minimizing returns due to errors.
- Respond in a flexible way to new trends:
Order management systems offer ideal tools for effective supplier and procurement management, which is of critical importance in today’s unpredictable and quickly changing business world. Especially in times of supply shortages, political instability and changing business trends, these systems are invaluable. With the help of an OMS, you can expand your software architecture effortlessly via API interfaces and seamlessly incorporate service providers into fulfillment. This helps ensure maximum efficiency and flexibility.
- Translate your company values into your fulfillment strategy
By using an order management system, you get to define what goals to concentrate on and when, thereby rationalizing your fulfillment process. Rules-based order routing allows for establishing and adapting rules for order handling in accordance with your specific preferences. This flexibility allows you to orient your company to future challenges and incorporate sustainability aspects into your fulfillment process.
Sustainability in e-fulfillment is without a doubt one of the most spectacular B2B commerce trends in 2023 – and beyond. Download our free Digital Trends Report to discover more exciting trends for your B2B commerce business!