As the pandemic highlighted the need for advanced retail omnichannel order management and fulfillment capabilities, order management systems (OMS) have become one of the most sought-after retail technologies. Further, many consumer brands have implemented or expanded their direct-to-consumer (DTC) channels, necessitating new or more robust order management capabilities.

Successful order management and fulfillment as a business process reaches beyond a single system or functional area and is tightly integrated across the enterprise.

As Gartner validates, “Much of the functionality attributed to order management is embedded within and touches components within the CRM, ERP and SCM markets as it guides products and services through order entry, processing, and tracking.”

In this article, supply chain and PMO expert Dave Birdsall, along with retail omnichannel expert Rob Oglesby, take an in-depth look at end-to-end omnichannel order management and fulfillment capabilities. The two experts outline the considerations and implications of developing or expanding this strategic capability from both business-to-business (B2B) and business-to-consumer (B2C) perspectives.

Let us first set the stage on what exactly is included in the omnichannel order management and fulfillment business process.

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What is omnichannel order management and fulfillment?

Omnichannel order management and fulfillment is the end-to-end process of managing customer orders across multiple channels, varied inventory locations, and diverse fulfillment destinations. This process includes online, in-store, and even call center orders for end consumers (B2C), as well as business-to-business (B2B) orders across a variety of different order capture methods (in-store, online, EDI, partner portal, etc.).

There are some differences between the execution of B2C and B2B omnichannel order management and fulfillment, and even more nuances in how leading OMS providers handle these differences. But overall, there are three high-level processes:

Order Capture

The first step involves the ability to capture a customer order. This can be handled through a single system or many disparate systems depending on the complexity of the business. For B2C applications, order capture is often handled by customer-facing, web front end and in-store point of sale (POS) systems, although some OMS also support it. B2C order capture typically involves significant customization and logic to the ordering event based on customer order history, similar market baskets, product affinities, substitutions, and other data. Many advanced solutions leverage artificial intelligence to enhance this key customer interaction.

B2B order capture is much more complex, and it is important to offer trading partners options, including a web-based portal (often utilizing a CRM platform) and EDI transactions. Across both B2C and B2B transactions, basic order capture information includes the product(s) ordered as well as customer contact, address, and payment details.

Once the order information is captured, it is important to be able to quickly provide the customer expectations about the timing and completeness of the ability to fulfill that order. In most consumer cases, this expectation is set prior to order placement, especially in the event the order is intended for immediate delivery or pick up. For B2B orders, communication of fulfillment expectations may not be immediate, as the volumes and logistics requirements are more complex and inventory may be sourced from multiple locations. However, B2B confirmation is typically expected within a few hours.

Order Orchestration

Order orchestration is the magic of the end-to-end order management and fulfillment process and represents the “guts” of the OMS.  A true omnichannel business may sell products and services through retail stores, direct-to-consumer (DTC) websites and catalogs, as well as through wholesale channels. Each of these demand signals comes with unique characteristics and challenges, but one thing is common: they all require visibility of available inventory to successfully complete the fulfillment cycle.  In most environments, this inventory is scattered across a fleet of retail stores and distribution centers, as well as potentially throughout the supplier network.

Order orchestration is where inventory is matched to an order to provide the ideal path to fulfillment. The type of order as well as the timing of the fulfillment request is considered to properly orchestrate fulfillment. Additionally, some level of inventory must be protected for future demand early in a season.

The best OMS solutions provide a rich set of rules that can be configured to ensure each order is fulfilled on time and at the least cost (most efficient) manner to ensure profitability is maximized. In effect, this becomes the core inventory management engine of the enterprise. There are also fulfillment optimization tools that do not adhere to a fixed set of rules, but rather determine the best source based on achieving the business objectives (meeting SLAs for delivery, minimizing split shipments, maximizing margin, etc.).

Order Maintenance

Order maintenance and tracking is the ability to modify the order as well as track the shipment until the customer takes ownership.  This part of the process is typically handled through signals between CRM or front-end systems, OMS, WMS, and inventory management systems.

With B2C order management, there is a time-critical component to making changes, sometimes called the “remorse period.” There is a process in every OMS that releases the order to the fulfillment location (DC, store, 3PL, drop-ship vendor, etc.).  Once the order is released to fulfillment, a certain level of control is lost since another system (and potentially party/organization) is now “in possession” of the next step.  Essentially, no changes can be made once the order has proceeded beyond this step.

Most B2C systems are designed to quickly release the order to the picking location to meet service level agreement metrics (SLAs) and minimize the remorse period. Prior to this release, there may be the ability to make changes, but this timeframe is typically quite short (hours).

Further, allowing the manipulation of an order after initial capture can be risky, unless the inventory is still suspended from visibility to other customers until changes are saved. More often, making changes once the order is captured is simply not an option.

B2B order maintenance occurs more often than B2C. B2B sales are not necessarily immediate and will consider future deliveries, in some cases months in the future (think Black Friday). Typical changes include quantity, date, and the addition or removal of SKUs. After changes are made, the system will “re-process” the order (go thru whatever validations are required) and send it to the orchestration engine to “re-promise” based on the new order. In a B2B environment, there may be some level of manual intervention, again due to the complexity of logistics involved, as well as the nature of B2B orders that consider both on-hand quantities and future POs.

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What omnichannel order management and fulfillment capabilities are the most important?

  • Efficient orchestration

The most important capability is efficient orchestration of order fulfillment. This orchestration is performed by most OMS and is the “magic” that determines the most optimal fulfillment path (i.e., quickest and least expensive) for the product across a company’s multiple inventory locations. Many advanced systems perform a simulated orchestration during order capture and can immediately provide customers with estimated fulfillment timeframes.

To support efficient omnichannel order orchestration, a best practice strategy is to employ a common inventory pool across channels and locations because it provides the most flexibility to respond to demand signals.

Advanced OMS aggregate information from inventory management and supply chain systems to determine total quantities available for the customer in a particular channel (e.g., website, marketplace). These quantities do not necessarily represent the company’s entire pool of inventory because there must be a safety stock in place to accommodate in-process orders, in-store customers, and other inventory volatility.

  • Inventory visibility and accuracy

Especially for same-day fulfillment from a store (i.e., many buy-online-pickup-in-store or BOPIS orders), a key capability is visibility to accurate inventory by each store location. As mentioned earlier, this visibility must also have a safety stock component to accommodate volatility associated with in-store customers. The safety stock component can vary by product, category, and in some cases by season.

  • Customer prioritization

Further, employing customer prioritization rules that dictate the amount of inventory exposed to each channel or customer is important to maintaining relationships with B2B and B2C customers. This is a strategic balance driven by margin dollars (GMROI)—it is not a one-answer solution and must be carefully planned.

  • Dynamic customer messaging

Another important capability is dynamic customer messaging. When inventory quantities reach a certain threshold, order capture systems should automatically alter customer messaging to set fulfillment expectations. In these scenarios, the item may be available in the store, but it is important to set fulfillment timeframe expectations in case it needs to be shipped from a different store (and thus not available for same-day pickup). From a B2B perspective, most customers expect to receive a fulfillment commitment back within a few hours, if not immediately. Customer messaging must continue throughout the fulfillment journey.

  • Concise fulfillment tracking visibility

Companies must clearly outline the steps an order takes to fulfillment, at least at a high level. Explaining those steps before the order is taken is ideal; providing the status of customer orders after order capture is imperative. Advanced systems provide visibility to key checkpoints that can be shared with the customer via email, text, or through the ordering interface. It is important that these checkpoints include what points during the fulfillment stage changes or cancellations can occur. A good OMS will also have a rules-based capability to trigger alerts during the fulfillment process when a key milestone is missed, to alert a customer their order will be later than initially expected. Clearly, tight integration with fulfillment and logistics partners is critical for near real-time updates. Lastly, all customer messaging must be concise to avoid any confusion.

Related Client Case Studies

Optimized Omnichannel Fulfillment

Optimized Omnichannel Fulfillment

Improving GMROI by providing on-demand visibility to existing inventory and enabling store order fulfillment across multiple banners, over 900 stores, and distribution centers

Order Management System Design

Refining an OMS design and implementation strategy to enable simplification and efficiencies while supporting strategic business objectives

Implementing BOPIS Capabilities

Implementing BOPIS Capabilities

End-to-end project management, retail business process expertise, and testing oversight for the design, pilot and implementation of new in-store order fulfillment capabilities

What common mistakes or challenges do you see in order management and fulfillment?

  • Setting unrealistic fulfillment expectations

Ideally, an order is not captured if it cannot be fulfilled to the customer’s expectations. However, many brands still do not have the inventory accuracy, rules, tools, or system integrations to support this objective.

  • Segregating multiple sources of inventory

We still see retailers and consumer brands segregating their inventory by selling channel and/or customer type (retail, wholesale, etc.).  This severely hampers order fulfillment efficiency and margins by limiting the amount of inventory exposed across B2C and B2B selling channels.

  • Delayed in-store product picking

Particularly for same-day B2C pickup, products fulfilled in stores should be picked as close as possible to the order capture time (or at least not significantly delayed) to reduce issues associated with volatile inventory.

Recommended Reading

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What innovations can improve a company’s omnichannel order management and fulfillment capabilities?

As supply chain disruptions continue and fuel costs fluctuate dramatically, real-time integration with supplier and transportation partner systems will be critical so accurate, fully loaded costs can be considered during order orchestration.

Further, artificial intelligence (AI), driven by advanced analytics can be used to predict demand signals and alter customer prioritization when needed to drive better margins and profitability. As an example, if a brand initially prioritizes Nordstrom over Macy’s in a certain category, but AI predicts a strong demand signal from Macy’s in an upcoming month, the OMS may suggest reprioritization of inventory in favor of Macy’s.

Lastly, every retailer and brand must be strategically focused on inventory optimization throughout the end-to-end order management and fulfillment process. Leading AI fulfillment solutions aim to find a balance in efficiently fulfilling customer orders with maintaining optimal inventory positions throughout distribution centers, stores, micro fulfillment centers, etc. Inventory optimization can support real-time decisions across planning, buying, allocation, and replenishment to balance customer needs with the brand’s inventory objectives.

Final Word

Efficient order orchestration and inventory optimization are the core of successful omnichannel order management and fulfillment. Retailers and consumer products companies must understand key B2C and B2B capabilities required, strategically design the end-to-end business processes, as well as implement technologies that support omnichannel order management and fulfillment. In doing so, they will improve the customer experience, increase sales and margins, as well as reduce inventory costs.

Authors

Dave Birdsall, Senior Manager

Dave Birdsall
Senior Manager

Rob Oglesby, Senior Director

Rob Oglesby
Senior Director

The Parker Avery Group is a leading retail and consumer goods consulting firm that specializes in transforming organizations and optimizing operational execution through the development of competitive strategies, business process design, deep analytics expertise, change management leadership, and implementation of solutions that enable key capabilities.

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