The ever-evolving competitive business landscape has brought in its unique challenges and opportunities for distributors, who are in a relentless pursuit of making their operations fast and efficient.
Effective management of orders is a prerequisite for ensuring customer satisfaction, streamlining operations, and optimizing inventory levels and this article delves into the importance of order management for distributors, what makes it unique to this industry as well as provides an in-depth overview of all the use cases demonstrating the significance of having an effective order management system (OMS) in place.
Importance of Order Management for Distributors
A proper OMS sits at the crux of any distribution operation, encompassing the entire process ranging from receiving and processing to fulfilling customer orders. Distributors value order management for several reasons:
Customer Satisfaction
In the bustling world of distribution, the clock ticks faster for order processing and fulfillment, and customer expectations are higher than ever. The need for swift processing of orders is paramount. Yet, for distributors managing a multitude of sales channels and thousands of orders, challenges such as backorders and shipping complexities can be a huge stumbling block.
The OMS takes the reins of the entire procurement process, automating each step. With order routing and fulfillment capabilities, the OMS will track orders and optimize delivery routes. This ensures that products reach their destination with clockwork precision. The result? An elevation in customer satisfaction, transforming transactions into experiences that resonate.
Inventory Optimization
Effective order management also helps distributors to maintain ideal inventory levels. Distributors may avoid issues like overstocking, reduce stockouts, and lower carrying costs by tracking inventory levels in real-time and at the same time automating reorder points and safety stock levels.
Operational Efficiency
Apart from eliminating redundancies, a seamless order management process also helps minimize manual errors, thus increasing productivity and increasing bandwidth for resources to work on other vital elements of a firm. Making operations like order processing, inventory management, and delivery automated improves operational efficiency to a large extent.
Data-driven Insights
Order management systems also collect and categorize data on client orders, sales trends, and inventory levels, which the distributors can comprehensively analyze to extract insights into customer behavior, demand patterns, and operational effectiveness. As a result, a proper OMS can help in strategic planning and making informed decisions.
What Makes Order Management Unique for Distributors
Order management is unique to distributors because of its complexity. Distributors usually deal with a wide range of items, multiple suppliers, shifting client expectations, and different distribution methods. To efficiently manage these complications, one needs robust systems that can track high volumes of orders, link with other systems, and provide real-time visibility into inventory and order progress.
The use cases below demonstrate how a good OMS can address the specific demands of distributors:
1. Inventory Management
The OMS plays a key role in solving the inventory visibility challenges for distributors. While the distribution business is mostly B2B in nature and the customer orders mostly in bulk, distributors need to carry enough inventory to fulfill customer orders. But carrying too much of it only increases the inventory carrying costs. Maintaining an adequate amount of inventory and having good inventory visibility is key to organizational success.
For distributors, inventory is typically spread across various distribution centers (DCs), and keeping an account of inventory at all these locations can quickly become challenging. A distributed OMS assists distributors in maintaining near-to-ideal inventory levels by consolidating data from all of their DCs and gives a real-time picture of inventory at any point in time thus reducing overstocking scenarios.
Another common problem faced by distributors is stockouts that cause huge sales impacts. With an OMS, safety stock guardrails can be defined to alert when inventory is about to run out and avoid a stockout scenario. Knowing the pace of inventory movement against stocking levels ensures that stock is reordered and purchase orders are issued.
2. Demand Forecasting & Preventing Lose Sales
One of the key challenges faced by distributors is demand planning due to the lack of real-time forecasting data. Not only does an OMS track the current inventory in real-time, but it also allows distributors to estimate future inventory requirements based on past sales data, customer behavior, market trends, and other factors to create data-driven demand forecasts. This can help distributors make informed decisions about inventory procurement, production planning, and efficient resource deployment, and ensure that products are available when customers need them, thus reducing the risk of lost sales owing to inventory shortages.
3. Order Routing
With multiple distribution locations, choosing the most optimized location for fulfillment is a key challenge for distributors. With an OMS, distributors can define dynamic rules to automatically route orders to locations based on proximity, inventory availability, and logistical costs, and also split orders between multiple locations for fulfillment. This isn’t just cost-effective but also enhances timely order fulfillment, which increases customer happiness.
4. Fulfillment and Shipping
One of the key problems that distributors deal with is the high cost of fulfilling and shipping since the orders are mostly bulk in nature and require freight handling and most distributors manually deal with these processes with increased human resourcing costs.
A smart OMS system enables distributors to streamline order picking, packing, and shipping operations, lowering fulfillment times and costs. It automates these activities, increasing efficiency and precision while decreasing the likelihood of errors. At the same time, an OMS that integrates with 3PLs provides efficient route planning and real-time shipping methods & rates, which further reduces the risk of human error and increases efficiency.
5. Returns and Refunds
Returns are unavoidable in a distribution business. However, the cost of return management and handling can be reduced to a great extent. With an OMS, distributors can streamline return initiation, issue refunds in multiple ways, track the status of returns in real-time, update inventory levels, and also make informed decisions on handling specific customers based on their return history.
Additionally, an OMS can help facilitate efficient restocking of returned items. It helps prioritize restocked items based on factors such as demand, shelf life, or product conditions, ensuring that returned products are quickly made available for resale.
6. Data Analytics and Reporting
Data collection, analysis, and reporting are among the most crucial functions that an OMS can provide. Distributors can use sales data, consumer behavior, and operational performance to make more informed and error-free decisions about inventory management, marketing strategies, and resource allocation. Modern OMS comes built-in with dynamic reporting dashboards that can be customized based on different personas with every single data point being utilized.
7. Compliance and Regulatory Considerations
Compliance with data privacy legislation and other legal requirements is critical for distributors. An OMS can ensure that client data is handled securely and that the company follows applicable regulations, lowering the risk of legal complications.
8. Integration with Other Systems
Integration with other systems, including ERP, e-commerce platforms, and logistics solutions, is critical for ensuring a continuous flow of information and activities. An OMS can interface with various systems to guarantee that data is synchronized throughout the organization, reducing silos and increasing efficiency.
9. Customer Self-Service
Generally, in a distribution business, the customer is B2B in nature and usually reaches out to sales reps or customer service teams to get orders placed, returns initiated, etc. Distributors can minimize the cost of customer service by providing an interface to customers where they can do self-service activities such as order creation, returns management, tracking shipments, view order history, etc. This empowers the customers with more control over their ordering processes and transparency.
Signs That You Need an OMS
The difficulties listed below are indicators that distributors’ current processes and systems are struggling to fulfill the needs of their operations and that an OMS (Operation Management System) could be extremely advantageous.
- Inefficient Order Fulfillment: Delays or errors in processing orders, picking, packaging, and shipping of items leading to customer discontent and higher expenses.
- Lack of Real-time Visibility: Limited or lack of insight into inventory levels, order status, and general operations, which makes it difficult to make informed decisions or calculated risks.
- Manual and Paper-based Processes: Using manual or paper-based techniques for processes, which are error-prone, time-consuming, and difficult to scale.
- Inventory Management Challenges: Struggling to control inventory placed across numerous locations, which results in overstocking, erroneous inventories, or even stockouts.
- Complexity in Managing Returns: Difficulty in processing returns and refunds efficiently and promptly, thus resulting in consumer discontent and higher expenditures.
- Inability to Meet Customer Expectations: Failing to fulfill consumer expectations for order accuracy, delivery timeliness, and service standards.
- Data Silos and Integration Issues: Lack of integration across systems, resulting in data silos and inefficient information sharing among departments.
- Limited Scalability: Systems and processes that need to be more scalable to facilitate expansion or adapt to changing business requirements.
Conclusion
An effective order management system is fundamental for distributors to streamline operations, improve efficiency, and drive customer satisfaction. The use cases covered in this blog show how an OMS can solve distributors’ specialized demands, such as inventory management, order fulfillment, and customer service. By deploying an OMS, distributors would stay relevant and competitive in today’s dynamic industry while ensuring long-term success.
Learn more about Kibo’s partnership with Trika Technologies.