Distributed Order Management (DOM) may not be a familiar term, but it is one you should quickly begin to understand. As the ecommerce industry continues to become more customer-centric, omnichannel retail will continue to gain prominence as the sales model of choice.
What is Distributed Order Management (DOM)?
Distributed Order Management (DOM) is a method used to optimize fulfillment so orders arrive to customers on time while incurring the lowest possible cost. Distributed order management systems are software that help orchestrate this process and improve overall supply chain by automating several functions, including order routing, order splitting, shipping, inventory forecasting and reordering, and inventory management.
Consumers want to buy a product from a variety of channels, bounce between platforms, and even order online directly from within a store and have it fulfilled in a way that suits them. Both physical stores and ecommerce platforms need to work together. Blending multiple platforms without impacting the customer experience is essential.
A distributed order management system is one that has been designed to make it easier to meet the demand for products that stems from this industry shift. Omnichannel retail is increasingly complex, and distributed order management is a way of unifying your business in this new age of commerce.
As ecommerce technology continues to evolve with social media, apps, and third-party retail platforms, brands are being forced to accommodate just as quickly. This can make managing inventory increasingly challenging, leading to a call for backend technology that provides a backbone for brands to fulfill this expectation in a flexible, cost-effective, and efficient way. A DOM system provides the support brands need to deliver high-quality customer service, as well as boost brand trust and customer satisfaction.
What are the characteristics of a retail Distributed Order Management system?
The primary purpose of a distributed order management system is to improve how your company processes and manages customer orders and inventory across your business. Quickly replenishing stock and fulfilling orders is crucial for businesses that want to optimize spend while keeping the integrity of their customer’s journey.
Distributed order management systems help streamline stock replenishment by connecting the different technology you use to order more items. They do this by creating a central platform that contains a single viewpoint of every item in your inventory. This allows the modern business to control their inventory better and ensure that all components are in place. It also ensures that current and future consumer demand is met while balancing the need for improved budget control, inventory levels, logistics, and the utilization of existing assets.
Establishing this single, global view of inventory, shipments, orders, and suppliers also directly influence the customer experience because it allows you to meet every retail business’s core promise to consumers – the timely delivery of their order. The last thing you want is to trigger negative customer feedback because of a late shipment or a last-minute order cancellation, and DOM systems help you get ahead of those scenarios.
For brands that are relying on legacy infrastructures, the source of the problem is their static model. Legacy infrastructures are not flexible enough for businesses in the digital age. Distributed order management systems – having been built at a time when omnichannel retail is the new standard – are made specifically to handle the unique complexities of these models with ease. They provide access to several different fulfillment methods through integrations, making it easier to optimize all stages of the fulfillment process without adding too much complexity to your business.
Robust distributed order systems include:
- Integrations and connections to third-party logistics providers (including Amazon FBA)
- Dropshipping features to help facilitate fulfillment by vendors
- Order splitting and merging to maximize cost-efficiency
- Order routing automations giving you greater speed and control over order fulfillment
- Inventory visibility at all stages of the buying and selling process, limiting uncertainties or inventory errors
- Fully customizable workflows and integrations, allowing you to adapt and improve as you scale
While this seems like a comprehensive range of valuable assets, it merely scratches the surface of what is possible with the right distributed order management system. While implementing a distributed order management system into your existing processes can be complicated, the benefits of improved visibility, customization, and inventory accuracy are worth the effort.
How does Distributed Order Management work?
Retailers are more reliant on effective inventory management and order fulfillment than ever before, which is why many of them turn to distributed order management systems. They use DOM systems for a variety of reasons, including:
- Syncing ecommerce platforms and storefront locations to give customers the ability to buy online and pickup in-store
- Merging orders placed by the same customer to consolidate shipping
- Rate shopping across shipping partners to access the best rates while meeting delivery dates
- Quicker and more efficient order processing
- A faster experience for customers
Collectively, these features allow your customers to have more control over when and where they purchase while helping you to track their engagement and connect the dots if they decide to purchase from a different channel each time.
Distributed order management isn’t just limited to direct-to-consumer businesses. The benefits of these systems can also apply in a business to business structure, bringing a greater level of visibility, flexibility, and synchronization with wholesale partners and distributors.
Do you need Distributed Order Management?
The fact is that in the modern business climate, all retailers should be making use of a distributed order management system. It has become the new normal in terms of retail management.
But how do you know when it’s time to use DOM? It depends on what stage your business is currently in and where you see the most friction. The retailers that benefit most from a DOM will be those that have:
- A high number of product suppliers: The more suppliers you work with, the harder it will be to manage those relationships, track your vendor product data, and calculate how many units to order. Distributed order management systems can help you manage this information and track how and when to order from your vendors.
- A multi-warehouse structure: If you have more than two warehouses, it can become increasingly difficult to keep track of what inventory you have and where. This becomes even more complex if you have 3PL warehouses since you are slightly removed from directly managing the inventory. DOMs can consolidate this data, giving you a bird’s eye view of your inventory and access to 3PL inventory at all times.
- A growing SKU portfolio: Managing 20-30 SKUs via spreadsheets is doable, but when your SKU count starts to hit the hundreds and thousands, it can quickly become a headache. Distributed order management helps you keep a better eye on these products and what channels you are making them available in.
- Existing customer solutions and/or software that are not centrally connected: The central concept of omnichannel retail is seamless connectivity. If your software isn’t all synced up, it can put this experience at risk. Distributed order management prioritizes this by bringing all your processes together.
- Growth potential but are lacking in a single data hub: The more fragmented your business, the harder it will be to grow. If you feel your business keeps hitting a roadblock because you can’t get a handle of your data, it might be time to look at distributed order management solutions.
Distributed Order Management versus traditional Order Management
There are many differences when comparing distributed order management with the older, more traditional systems of order management. Distributed order management systems prioritize integrations, data connectivity, and automation, setting them apart from legacy systems.
These focus areas are exactly why distributed order management is no longer a trend and now necessity. It is also the reason why trying to bring both systems together can be inherently challenging.
How does Distributed Order Management differ from other kinds of order management?
Legacy order management systems (often known as OMS), were designed long before the concept of omnichannel retail. That means that they lack the flexibility to support multiple channels for modern retail distribution. They also lack the speed and efficiency to access some of the preferred fulfillment methods used by retailers. That’s because they are designed to work as a solo process. They simply connect a limited amount of channels to a single source of inventory, usually disregarding where that inventory is located. This has the effect of dramatically limiting the visibility of inventory at every key stage of the supply chain. That visibility is vital.
Source: Logistics Management
Channel managers and fulfillment operations staff need to know what is available and where their stock is to fulfill customer orders. Distributed order management provides a real-time hub for this data, allowing everyone to access it at the same time. This ability to quickly access data and combine internal and external data sources helps improve your company’s productivity, eventually increasing your capacity to fulfill more orders.
What can Distributed Order Management do that other order management systems can't?
Legacy systems tend only to be used for the processing of orders. Distributed order management systems focus far more on accommodating the different methods and techniques for order fulfillment that a company might need to use.
It does this by integrating with suppliers and third-party businesses that you rely on. Distributed order management streamlines the entire fulfillment process for every order by being much more transparent in its presentation and collection of data. This provides access to many new capabilities.
- Improved Automation: Many IT systems were designed, built, and sold to businesses before the concept of omnichannel commerce was invented. This new method of retail means that there are now a variety of touchpoints for consumers, multiple fulfillment points, and even a multitude of returns points. If your IT systems cannot manage the demands of the omnichannel experience, then you will be limiting your ability to sell. With the right automation setup working alongside the ability to access real-world data, distributed order management allows those channels to be connected without excessive modification to the basic structure of a business.
- Customization: Distributed order management systems will allow you to establish your parameters and rules for your unique business. When you add more channels to your omnichannel business model, having a clear definition of exactly how you want your business to function is essential. Establishing your brand-relevant rules and synchronizing your pricing, inventory flow, fulfillment data, and information flow is easier than ever. It creates a more logical and consistent system of processes that are designed to adapt to new data as it becomes relevant.
- Integration: Data in modern business comes from a multitude of sources. The challenge is making sure that you are getting the right data and aligning it with every other source. Having vast amounts of data is useless without stable integrations because you will be unable to see the full supply process. Distributed order management allows for both internal and external data collection in one simple location. It offers much greater visibility at all times.
- Flexibility and Scalability: All businesses are hoping to grow, and staying one step ahead of emerging trends and technologies is part of that. Business evolution becomes much easier to tackle with a distributed order management system in place because it is more flexible. Changes can be made quickly across the entire system, ensuring that no department is left out of the data loop.
Another critical difference between a legacy OMS and a DOM is how quickly they can adjust to new requirements in retail. While they may have certain similar functions, a traditional OMS is limited. A distributed order management system doesn’t face the same limitations because most are built on cloud technology and a multi-tenant architecture. That multi-tenancy is crucial because it improves efficiency and is inherently scalable at any time. All of these factors need to be a priority for retailers.
From replenishment to customer experience, a distributed order management system is the evolution of traditional OMS and needs to be adopted if a retail company hopes to stay responsive and flexible in the digital age.
Benefits of using a Distributed Order Management system
By giving retailers a more comprehensive view of their supply chain, distributed order management allows for more control over supply chain management, order coordination, and access to a real-time view of orders being processed and inventory that is in transit. This means that businesses can take advantage of improved flexibility and a higher rate of efficiency and effectiveness. They allow this because they offer many benefits that traditional OMS lack.
- Multiple Fulfillment Processes: Legacy OMS may only connect to a limited number of shipping providers, forcing businesses to use other software to access more accommodating shipping options. These add-ons each come with a cost, adding to the overall price tag for the system. By adopting a central hub with the capabilities to handle all order fulfillment, it’s a smoother process and becomes far easier and more manageable. Distributed order management also allows for split orders so that costs can be reduced on shipping and fulfillment across every available channel. That allows for more defined workflows and extensive monitoring of results.
- Cross-Channel Integration: Disparate sales channels and the systems that they use can be unified far more effectively with distributed order management. Inventory sourcing becomes much easier to accomplish, even when different channels and individual store/warehouse locations are taken into account. This ensures precision and accuracy of fulfillment data. If you use legacy OMS, then you will need to juggle multiple systems, and that will slow down updates and offer a skewed view of real-time inventory status.
- The customer experience: A business can be put at risk if poor inventory and cost management prevent order fulfillment. Being out of stock means that profits will slow down. This problem can be solved with a distributed order management system. By unifying your overall view of both inventory and suppliers, it becomes much easier to anticipate and react to unexpected scenarios. Being able to track inventory across multiple channels means that you have far greater control over providing your customers with what they need when they need it.
- Global visibility: Applications for distributed order management will allow for more global inventory visibility. Having your international warehouses and 3PLs connected to your system makes it easier for consumers to order and receive products from anywhere.
- The cloud: Distributed order management systems are cloud-based systems. This gives brands the foundation that they need to grow. The cloud structure makes it so when updates are made to the DOM system, it is instantly available to customers without impacting the service. It also provides the flexibility for users to log into the system from any computer, allowing data to be accessed across from any member of the team. This also provides a network-based solution that better handles information processing, performance monitoring, and the execution of business strategy. More intelligent forecasting becomes easier to evaluate and analyze, and automation can streamline the process even further.
Best practices for selecting a Distributed Order Management system
To choose the best-distributed order management system, you will need to have a clearer picture of what you hope to achieve. However, there are some key questions and elements to address when it comes to choosing the system that is best for you, your company, and your future growth. It means taking some well-defined steps.
1. Define Objectives and Priorities
This needs to be discussed across your entire business. Take the time to investigate what you need your new system to do for you. Include every department in your corporate structure and don't forget to discuss your expectations and plans with your suppliers. You need to have an aligned focus to choose the distributed order management system that best suits your needs.
By questioning as much as possible, you will develop a much clearer picture of your requirements over the features and functions that are nothing more than nice to have. Consider your answer to the following questions:
- What are your success metrics in terms of your inventory? Are you hoping to cut down on carrying costs, developing more accurate inventory counts, or improve inventory turnover? The clearer your goals, the easier it will be to choose the most suitable DOM.
- What are your plans for growth? You want to choose a tool that will allow you to stay on track with these plans and manage them in a much more fluid way.
- How seasonal are your sales? Having on and off-peak periods can have a dramatic effect on stock management. If your business relies on seasonal sales, then you need to ensure your inventory management tool can address this.
2. Proposal Request
You will need a vendor for your distributed order management system, and by drafting a proposal, you can organize the selection process. That’s because it will contain the core features that you are hoping for, as well as the technical requirements that you need. The key elements to include in your proposal are:
- Order volumes
- Your existing vendor landscape
- The software, hardware, and networks that you currently use
- A systems acquisition process timeline
- A detailed breakdown of your training process
This will provide both you and your DOM vendor with the technical specifications to help quickly determine if they can match your needs.
3. Do Your Research
You will be more satisfied with your final system choice if you have a stronger awareness of what the key features and limitations are of the available systems. Find a variety of DOM vendors and discuss their systems with them.
At this stage, it is often a good idea to make use of trials and demos of the systems that you have narrowed down. This gives you a much more effective means of evaluating the ease of use and the practicalities of training on a new system. It is also a smart move to check customer reviews on sites like GetApp, G2, and Capterra, as this will give you a much more unbiased perception of the tools.
It’s also worth remembering that ecommerce platforms like Shopify and BigCommerce also host reviews for integrated products. These reviews sections can be a valuable source of unbiased and practical reviews.
It is challenging to find a system that will always fulfill 100% of your requirements. In those cases, it will be essential to make the trade-offs that will ensure that the features you lack are not going to hinder you.
Make sure that you get the features and functions that are most vital to keep your business running smoothly. However, don’t merely evaluate the inventory management software itself. Make sure that your system vendor is a good match for your brand.
Follow these steps and your distributed order management system will be easier to find. Consider as many additional elements as possible so you have a clear picture of your exact needs, as well as what you can live without.
Once you’ve narrowed down your final selection of potential software, it’s time to ask the harder questions.
- Does this system mean that you will be able to automate manual processes? Automation is one of the key features to prioritize to save time and money.
- Does this system let you manage your sales across multiple channels, as well as across a variety of currencies and geographical locations?
- Does it have the support needed for those companies that make use of multiple warehouse locations?
- Is forecasting possible through reporting? This will be a vital feature for those retailers that are anticipating change in their sector.
- Do they have the support necessary for third-party integration throughout the ecosystem of the supply chain? This should include having a reliable warehouse management system, accounting, and fulfillment.
- Are new features being added to the system regularly?
Distributed Order Management can transform a business. Make sure that you are not relying on outdated legacy OMS. Look at the capabilities of modern solutions and your business will be more effectively positioned to optimize the customer experience.