A business attuned to the value of the customer makes sure to satisfy clients from needing products or services to delivery and fulfillment. With that in mind, all wasteful activities and non-value-adding processes in the business value chain must be avoided. That being said, it is necessary to have an order management system in place so the business can be said to be responsive to customer needs through well-thought-out order fulfillment.
By having an order management system in place, optimizing processes, reducing errors, and reducing waste, you can be sure to come across as efficient, responsive, and a business a customer can always rely on. Let’s get into the reasons one-by-one as to why your business must have the said system in place.
A bigger problem, global supply chain woes
Outside of the things you can control, though, are the current global supply chain problems. In the aspect of logistics, there is the problem of not enough personnel and warehouses, even truck drivers. Adding to that is the complicated fulfillment processes of e-commerce promising efficient door-to-door deliveries. Plus, there are still the pandemic-induced health-related red tapes adding delays to logistics and order fulfillment. However, with an efficient order management system, all these can be anticipated, taken into account, or, perhaps, even avoided.
The New York Times shared in an article the sentiments of over 3,000 CEOs in a recent Alix Partners survey. “Fewer than half said they were taking longer-term action to alleviate supply chain challenges, while a majority said they were relying on short-term measures. Regardless of their approach, more than three-fourths of chief executives were skeptical that their plans would prove effective.”
There has been much talk that supply chain problems are just a largely momentary phenomenon resulting from the pandemic. As said earlier, however, the pandemic is just an additional factor and supply chain problems are to persist.
Meanwhile, at the individual business level, regarding e-commerce activity, in particular, much of the processes in logistics are still done manually. According to a new survey from Zebra Technologies Corporation mentioned in a recent FreightWaves article, “55% are still using pen-and-paper manual processes to manage their logistics.”
Overall, the migration of individual businesses’ processes from manual to automated systems is quite slow. Improvements such as the adoption of technology for real-time management of inventory and for eliminating the challenges of backlogged orders are projected to slowly become apparent in the next five years. Warehouse space, retail inventory, e-commerce delivery, omnichannel logistics: these are some of the challenges that can be easily organized with an efficient order management system.
What is an order management system?
An order management system (OMS) is a digital way of managing all aspects of an order’s lifecycle. With it, you can easily track all information and processes including order entry, inventory management, fulfillment, and even after-sales service. An OMS allows the business to check inventories in real-time and provides customers access to information as to when their order will arrive. Basically, an OMS provides a higher level and real-time view of the following basic steps: inventory availability, order, verification, inventory promising, fulfillment, and service. For Shopify Plus, OMS “enables the people, processes, and partnerships for products to find their way to the customers who bought them.”
Needless to say, an OMS is essential to ensure revenue growth and, more than this, customer satisfaction. Now, let’s get into the reasons as to why your business must have the said system in place.
Reasons Why Your Business Needs an OMS
1. Building a Responsive Supply Chain
In an earlier article, we talked about the value of listening to the voice of the customer (VOC) and determining critical-to-quality (CTQ) outputs. In this current context, paying attention to VOC and determining CTQ metrics at the outset are essential to building a responsive supply chain and, thereby, an effective order management system.
An organization’s supply chain must be agile and quickly responsive to its customers’ changing needs. Attunement, that is, listening to customers’ changing needs, is a vital first step in creating a supply chain that fulfills those needs. At the outset, you need to define the problem from listening to VOC (more on this later) and narrow your answers to what is critical. You can then build your system based on CTQ metrics. With such metrics you can then, at each segment, measure progress in terms that your customers consider critical.
2. Decreasing order fulfillment time
Towards the other end of your business value chain is order fulfillment. Making sure that you are able to deliver on time and all in good order to the satisfaction of the customer is also critical. Of course, throughout the process, you also need to make sure you’re not going beyond your means. Make sure you’re not spending too much or stretching yourself too thin, just to fulfill a promise of on-time delivery. Freeing you from all those order fulfillment concerns, OMS can greatly help your business spot areas with high degrees of waste and variance. Once identified, inefficiencies in the order fulfillment process can be corrected by reducing paperwork, automating picking and shipping planning, and automating shipment verification.
If you already have an order fulfillment system but, also, still have the above concerns, perhaps it’s about time to enhance the existing process. Or, if you’re still doing everything on paper, then shifting to a digital or an automated process could really make a big difference.
3. Reducing Errors
Well, there are those, however, who would insist on retaining a manual. For them, they trust their people can do it better. But a kind of worst-case scenario already hit global business operations. In the past two years, we saw how the pandemic halted business operations despite them having trusted people, working like well-oiled machines. In addition, there is always the looming human error that could break a business. As Murphy’s Law states, “If anything can go wrong, it will,” and it can happen when you least expect it. We’re not saying here that you let go of your employees, but, at least, have a system. Streamline your processes, organize for an uncluttered environment, and reduce the odds of human error.
4. Reducing Waste
Another reason why your business needs an OMS is waste reduction. With an order management system, you can eliminate defects by reducing process variation. Streamline your variety of ways of doing things to one efficient management system. In narrowing down, you may end up with categories of processes, and that’s okay. The important thing is to have a system in place so everything is organized from order to fulfillment. At least begin with a system, then improve it later. An OMS is a powerful tool for continuous process improvement and a resilient supply chain. What kind of waste are we talking about? Here are some of them.
Over-production. Without an efficient system, there is a tendency to rely on speculative forecasting. This leads to building up greater inventory which means high inventory costs.
Over-stocking, which results from over-production, then means large quantities of unsold inventories lying around. What this means further is costs on top of costs, that is, in terms of the stock itself and the storage fees you need to pay to hold it.
Stockouts. A lot of businesses experienced stockouts when the pandemic halted production and slowed down movement of supplies. Not having enough inventory to fulfill demand presses you to turn customers away. Worse is not having any idea when the stock could be replenished.
Transport. Moving materials around more than needed increases production costs and cycle time.
Non-value-adding processes due to poor production facility layout, system, or procedures are just a waste of business resources.
5. Optimizing order fulfillment
Overall, with an OMS in place, you can easily spot and thereby address problems in the system such as an outdated planning process or inefficient execution. On the fly, that is, with order tracking, you can have control over the order fulfillment process and can address any issues as immediately as they arise. On the flip side, that is, without an OMS, you can easily miss tracking information, thus resulting in backlogs and a flood of inquiries and follow-ups from unsatisfied customers.
Today’s businesses must constantly seek out more efficient methods and processes. Especially for those operating in an omnichannel environment, there is a need to balance demand, supply, and cost optimization to sustain resiliency. If your business would, later on, require other partners to fulfill orders, then make sure not only to optimize your OMS but also to streamline it for synergy.
6. Securing business resilience
In an earlier article, as above, we talked about business resilience. By that, we meant being robust, responsive, and prepared to be related to collaborate with other businesses across industries. This not only makes your business resilient but also the collaborating businesses can be stronger together. To that end, there is a need to strengthen the supply chain network－ particularly, your network.
According to Supply Chain Dive, 2022 supply chain outlook features shortages and high delivery costs. “Shortages, labor constraints, limited storage space, and soaring delivery rate are all expected to continue and create headwinds…this year at a time when demand still remains high.”
The current global supply chain problems, perhaps, are outside those you can control. However, within your sphere, that is, within your business are things you can control. Insofar as the continued existence of your business is concerned, however, are the customers you need to satisfy. You rely on them as they rely on your business, but only, of course, as long as you can deliver and provide them with the customer experience they deserve.
In order for your business to survive, be creative, be agile, have a system (OMS) that is flexible and scalable.
7. Building for flexible growth
Now, what if it all works out? Or, since businesses always envision to scale, then make sure your OMS is compatible with that vision. Be one of the innovation adopters. So far only half of the businesses, who have recognized the need to implement an efficient order management system. In a 2021 IBM article on order management software solutions, Sudhir Balebail, Order Management Applications Program Director, wrote, “The ability to be agile and adjust to demand peaks, while rebalancing for demand troughs, has been proven as a competitive differentiator.”
8. Improving customer experience
According to a recent LaserShip survey on COVID, retail, and customer experience, 80% of customers want to be able to track their orders not only online but also on their mobile devices. They expect to have insight into the status of their order, including its current location and estimated delivery date. In fact, 76% of them want SMS communication throughout the entire shipping process. With an OMS, you can effectively meet those expectations and also prevent negative online reviews. What really is important here is customer experience: 98% of consumers say shipping impacts their brand loyalty. 84% would not return after a single bad shipping experience. But, 86% of customers are willing to pay more for a better experience.
With the reasons presented above, the next question is how to choose the right OMS for your business. Well, we mentioned partnerships earlier. While it is you who needs to identify the problem as said above in order to determine the critical-to-quality metrics within your business value chain, you may not have to build your own OMS yourself as there are businesses and software solutions available and dedicated to building OMS. Once you have determined your CTQs, you just simply have to define your objectives and priorities. Then, get in touch with OMS providers who can tailor an OMS specifically for your needs. From there, you can evaluate your options and choose one that works for you.
In case you need help in determining the right provider for your business, or if you need access to OMS providers, then we at StratAccess can help you with it.