By Kevin Quigley, Enterprise Account Executive, Kibo
It’s no surprise that retailers everywhere are scrambling to create flexibility and agility in their supply chains in a post-COVID world. In the current environment, time is of the essence and many retailers are looking for quick ways to solve for programs like curbside delivery or Ship from Store (SFS). A tempting short-term solution to this challenge is configuring their Enterprise Resource Planning (ERP) system to handle these functions.
However, an ERP is not always the best choice for inventory availability and order management in today’s world. Though it can operate as a full-blown system of record for information like raw materials, purchase orders, and payroll, the ERP system was never intended to manage the direct-to-consumer selling process, nor does it excel at handling the core functions of a best-of-breed Order Management System.
Let’s dive into why adopting a dedicated Order Management System is a much better strategy than attempting to leverage an ERP to manage orders and inventory availability.
The Origins of Enterprise Resource Planning
One downfall of managing orders through an ERP is that it was originally intended to be an internally-facing system that managed complex manufacturing processes. It allowed manufacturers to manage their manufacturing process down to the raw materials needed to create their products. Most ERPs are still heavily focused on raw inventory and the manufacturing process to this day.
As the ERP evolved, other functions like financial accounting and HR were added to the functionality. The integration of these functions into the ERP made it a critical system for managing a business. ERP systems are used by companies large and small. Many smaller companies in the manufacturing and wholesale space will leverage an ERP for all of its functions, including order fulfillment/routing because of the simplicity of their business models.
However, as their fulfillment networks grow, and become more complex and customer-facing, the ERP becomes less equipped to handle the functions.
Today’s reality is commerce is now digital with customer experience at its center. The ERP simply cannot (and should not) handle what a Distributed Order Management System was created to do.
Some Functions an Order Management System Can Provide That an ERP Cannot
Enterprise Inventory Exposure
The OMS serves as the system of record for inventory availability and ultimately what you will expose on your website to the customer. It is a source that brings all inventory data into a single view that allows for data-driven decision-making based on a real-time view of inventory across all channels in the network and supply chain. A lot of companies still aren’t able to expose store inventory to the online customer which leads to a disconnected experience and missed potential revenue. Not only can exposing store inventory online increase the assortment you are providing (think items that are only available in stores), but it also increases the volume of products that can be sold on the eCommerce site. If a product is out of stock in the main distribution center, but can be fulfilled by a store nearby, you can save what otherwise would have been a lost sale.
ERP systems were not designed to consume inventory from multiple channels and sources, then apply commerce rules to them. Dynamically managing something like safety stock at a store is not within the core functionality of an ERP. Exposing and managing inventory availability is best left to a best-of-breed Order Management System.
When receiving a “ship to” customer order, what is the most optimal way to fulfill that order? The answer is, it depends on your ultimate business strategies and goals. This is the basis for order routing within an Order Management System. Some ERPs may have an “Order Management” function in which they can send orders to the source closest to the customer, but order routing has become so much more than that. There are many other factors that could play into how you want to fulfill an order to a customer. Everything from distance to shipping costs, product margin, split order strategy, and custom metrics, like store labor rates, should be taken into account when deciding the “optimal” way to fulfill an order—it should all be based on profitability, efficiency, and the customer experience.
The order routing functions within legacy ERP systems are very rigid and don’t take all of these factors into account. ERP systems also aren’t as agile as Order Management Systems.
With a modern OMS, you are able to change your fulfillment strategy in minutes, not in days or weeks.
When stores start reopening after COVID-19, a modern OMS will allow them to be strategically added back into the fulfillment network in a phased rollout. Forcing the ERP to handle complex processes like order routing can bog down the system and create bottlenecks in the functions it is designed to handle such as processing of critical information.
Customer Service & Store Ops
A best-of-breed Order Management System should also incorporate the call center and store operations in an easy and intuitive interface. Today, customer experience is the core focus of order management and retail.
Put yourself in the seat of a call center agent—you’re on the phone with a customer and trying to click through a clunky ERP system to find details about the order and you may not even have access to the customer’s data, or at best you’d be toggling between systems to get the full picture. You can imagine how frustrating this would be while you’re on the phone with a customer that demands timely answers and a good customer experience. Meanwhile, an OMS acts as the source of truth for orders and customer data in the system and at least should show that customer’s order history, returns, and order status, providing the agent with the information they need quickly.
Advanced OMS on the market are now incorporating product recommendations in the call center interface so consumers get a personalized, consistent experience, whether the call center is internal or outsourced.
Store operations have also been infused in the Order Management System through Point of Sale (POS) applications or Store Fulfillment modules. The ERP was never meant to be an extension into stores—it was simply a backend system that was internally-facing. Not only does a POS solution allow companies to quickly train employees for an array of fulfillment options including Ship from Store, Save-the-Sale/Endless Aisle, and BOPIS (or curbside in today’s environment), but it can also be an opportunity to deliver tailored experiences customers through clienteling at stores.
For example, Kibo’s personalization solutions are native within the OMS and POS solutions, giving the store level employees a 360-degree view of the customer to assist with relevant up-sell recommendations.
All in all, the ERP, while still a core system in the overall ecosystem, does not excel at handling the core functions of a best-of-breed Order Management System. With a modern OMS, you will be able to create the agility & flexibility needed to adapt to changes in the environment and not rely on slow, clunky changes within an ERP system. The OMS was created to manage complex, omni-channel fulfillment networks and is shifting more and more toward enhancing the customer experience.