Order management systems have undergone a transformation, evolving from mere back-office operational tools into pivotal components that significantly enhance the overall customer experience. It’s the engine that processes customer orders, manages inventory, and ensures timely deliveries – all critical drivers of customer satisfaction and operational efficiency.
As businesses of all sizes navigate the complexities of order processing, one significant decision looms: Should you build your own custom order management system or buy an existing one “off the shelf”?
The choice between building and buying an order management system is not a one-size-fits-all decision. It hinges on several factors, ranging from a company’s specific needs and budget constraints to its technical expertise and long-term growth strategy. Each option comes with its own set of advantages and drawbacks, making the decision-making process a pivotal one for businesses striving to stay competitive in a dynamic marketplace.
In this article, we’ll explore the pros and cons of building versus buying order management technology, and why a hybrid (build and buy) approach could give you the best of both worlds.
Adoption of the Modern Order Management System
While eCommerce platforms have been widely adopted across most industries in B2C and B2B, we’re now starting to see adoption of modern order management systems. According to a recent Forrester webinar:
- 25% of organizations are actively expanding their existing OMS solutions
- 22% are in the process of implementing an OMS solution
- 20% are planning to implement an OMS solution within the next 12 months
These three discoveries suggest that businesses are recognizing the need to invest in OMS solutions that enable them to respond to shifting market demands, optimize operational efficiency, and expand their order management capabilities.
What are businesses prioritizing in an order management solution?
When upgrading an order management solution, there are a few key functions and capabilities that businesses prioritize to deliver better customer experiences and improve operational workflows and processes.
Business-Friendly UI: A business-friendly user interface (UI) within an OMS is vital for improving operational efficiency, reducing errors, and enabling better decision-making. It streamlines processes, minimizes training requirements, and enhances the customer experience by offering real-time insights and responsive customer service.
Modern Architecture: Future-ready solutions that leverage microservices, are API-first, cloud-native, and headless allow enterprises to execute phased modular implementations depending on use case requirements—all without the need for a disruptive rip-and-replace strategy. These solutions seamlessly integrate into the omnichannel commerce ecosystem, offering adaptability and scalability for the future.
Inventory Management: Robust inventory management capabilities allow companies to accurately track and control inventory levels and minimize overstocking and stockouts, which leads to cost savings and improved customer satisfaction. Moreover, it enables real-time visibility into stock availability, helping businesses make informed decisions, optimize order fulfillment, and enhance overall supply chain management.
Order Orchestration: Order orchestration entails the coordination and management of a multitude of tasks and resources essential for meeting customer order requirements throughout the supply chain. This encompasses the harmonization and enhancement of the flow of orders, inventory, and information to guarantee efficient and punctual order completion.
Flexible Integrations: For seamless omnichannel commerce, accurate unification of inventory and order data across silos is crucial. With a unified view of inventory, including stores, distribution centers, in-transit stock, and suppliers, an OMS can optimize order fulfillment throughout the supply chain, providing customers with near-real-time transparency. To achieve this, an OMS needs to integrate with platforms like eCommerce, warehouse management, inventory management, and ERPs, while also handling exceptional scenarios like payment, fraud checks, and address validation providers.
Is building an order management system worth it?
In some scenarios, building a homegrown order management system can make sense. Developing an in-house platform gives you the ability to tailor the functionality to fit unique use cases, and it also gives you complete control over the system, allowing you to add new features as needed. However, reaping these benefits often hinges on the presence of a sophisticated, in-house IT department.
Without the technical team to build and maintain a modern OMS, companies often face the following:
- High costs: You not only have to spend significant resources in building the platform, you also need to support a large team to maintain the platform.
- Limits innovation: The substantial time invested in system upkeep leaves less room for crafting enhanced customer experiences or refining the user interface for everyday system users.
- Slower to market: Designing, developing, and testing a custom system is time-consuming, and unforeseen technical challenges only cause further delays. As a result, it can be challenging to update the system as quickly as market demands evolve.
Why Buy a SaaS Order Management System
According to a webinar hosted by Kibo and Forrester, 50% of commerce leaders surveyed say that transitioning to SaaS is one of the top priorities for customer-facing technology over the next 12 months, followed closely by modernizing legacy technology.
Tired of monolithic architecture that’s difficult to update, costly to maintain, and hinders agility, companies are moving towards flexible and scalable commerce solutions. This shift offers numerous advantages:
- Future-Proofing: Given the rapid transformations in the retail landscape, vendors are better equipped to adapt to these changes swiftly.
- Staying Competitive: Vendors have the capacity to assess the entire market, enabling them to incorporate cutting-edge features into their solutions.
- Lower Cost: Opting for the right vendor can prove more cost-effective than building technology in-house, eliminating the need to maintain an entire team dedicated to platform upkeep.
- Flexibility: Composable order management solutions, in particular, grant the flexibility to collaborate with multiple vendors, allowing the acquisition of an OMS and seamless integration with best-of-breed loyalty solutions.
Buying an order management system doesn’t mean you won’t be able to accommodate your unique use cases or scale as the business grows. With the right solution, you can have the advantages of both building and buying.
The Hybrid Approach: Build and Buy
Buying an order management system from a proven vendor with a depth of out-of-the-box capabilities gives you the foundation needed to scale and optimize inventory, delivery, customer service, and ordering processes. But every company needs a ‘secret sauce’ that allows it to stand out against competitors. By taking a hybrid approach, you can buy the order management functionality you need, such as inventory visibility or order orchestration, and build unique features that take your customer experience to the next level.
If a hybrid approach sounds like the best decision for your company, here’s what to look for in an OMS:
- It’s business-centric: It enables non-technical users to add new features and capabilities without overreliance on IT. This lets you focus on building functionality that supports business needs and strategy without being bogged down by the technological limitations of using a single platform or technology.
- It’s modular: You can cherry pick the composable commerce capabilities you need to solve a problem and reuse them elsewhere. This reduces the time it takes to implement new capabilities, allowing business users to be much more agile about solving problems and delivering better experiences.
- It’s open: Anyone can develop composable commerce applications without being tied to a specific vendor or platform.
Home Hardware Takes the Hybrid Approach
Home Hardware was looking for a scalable commerce solution with a depth of out-of-the-box solutions but also flexible enough that allowed the IT team to build on custom features and capabilities. By switching to Kibo Order Management, Home Hardware was able to immediately take advantage of the platform’s functions, such as omnichannel inventory visibility, support of various fulfillment options, and business-friendly UI—allowing the IT team to focus on differentiating features.
“We are a franchise with 1100 stores across the country. Because Kibo’s OMS is headless, we can make incremental changes to the fulfillment interface to all locations and say, ‘we’re going to make this improvement to how you can return a product.’ We are also able to make changes to the UI specific to individual stores which has been a big help,” said Danny Valentino, Director of IT eCommerce Home Hardware.
Which path is right for your business?
The role of order management systems has evolved into a vital element for customer satisfaction and operational efficiency. The choice between building or buying such systems depends on specific needs, budget constraints, technical expertise, and growth plans.
By combining the strengths of both building and buying, businesses can position themselves to meet evolving customer and market demands, ensuring long-term competitiveness. Ultimately, the chosen path should align with a company’s vision, recognizing the strategic importance of order management systems in today’s dynamic commerce landscape.