What is Distributed Order Management and what are its benefits?
Does it still make sense to speak of “eCommerce” in 2021; does the “e” require distinguishing the experience or have we finally arrived at “commerce”? The unification process was already underway, but the pandemic certainly accelerated the move towards hybrid customer journeys across the retail store network and online.
Another important dynamic to factor is globalization. Brands look to expand their reach globally, continuously opening markets to engage and serve new customers all over the world.
These forces translate into exciting opportunities for retailers but also bring a layer of complexity. One of those challenges is managing orders in a global, omnichannel environment and this is where Distributed Order Management comes into play.
What is Distributed Order Management?
Distributed Order Management (DOM) allows retailers to fulfill orders using multiple stock locations, prioritization rules, and order splitting strategies in order to optimize shipment costs and delivery times to customers. It brings together commerce applications, warehouses, and brick and mortar stores to deliver a unified brand experience to the customer. A well‑designed and architected DOM provides unparalleled flexibility in achieving operational excellence goals, today and scales as your business grows.
The future will see the continued development of social media platforms as modern sales channels and the emergence of new ones such as the Internet of Things. Different business models may also take hold. The year 2020 showed us how quickly the “new normal” of retail shopping can happen; digital maturity accelerated along with customer expectations. Your technology must provide the flexibility to let you innovate in your sector, scale without interruption, and adapt to fast‑changing customer behaviors and needs.
DOM in practice: how it works
The main output from a DOM is a unified view of your inventory model. As an omnichannel retailer, your priority is understanding SKU availability and sell‑through. The order management system will leverage specific SKU locations and your business rules to perform its optimization.
The general process is as follows:
Let’s say your business has now scaled such that you want to prioritize inventory optimization to mitigate stock‑out in any one location. You can set business rules (or parameters) in the DOM to support this strategy.
The flow would be as follows:
How to approach the optimal set-up
- As a first step, carefully map your processes throughout your organization.
- Define your stock locations.
- Define your return locations — a simple and efficient returns process is as important as delivery.
- Assess delivery lead times for the different stock locations.
- Create split order strategies (i.e. splitting an order into multiple shipments) that allow you to increase flexibility of fulfillment — these can be location‑based or based on the stock availability.
- Align agreements with shipping providers or broker services with this strategy.
Once this assessment is complete and the OMS is set up accordingly, you are ready to test the rules in a controlled pre‑production environment. Testing is a very important step to pre‑empt issues in a live environment. You want to ensure that the rules you have set up in the DOM behave consistently with expectations. Having a good test environment is of paramount importance. Once you are ready to go live, Commerce Layer makes it easy to switch from test to live production mode.
As you roll out to the live environment, there are options. You can start with one sales channel and then integrate additional channels. With this approach, you can test in the “lesser risk” channel. You can also opt to start with a small country market. Here, you can test the entire solution but in a less risky market.
Benefits of DOM
There are material benefits for each stakeholder: customers, business owners, and the environment.
A single, unified view of a brand’s inventory will improve its ability to fulfill customer demand for a best‑selling item or that special, must‑have last piece spotted on a social media post. Fulfilling this demand (and maximizing your sell‑through) will create a positive brand experience for your customer. If the customer’s need is fast delivery, the flexibility of choosing from multiple stock locations can help achieve this goal. This is all made possible without exposing customers to the complexity behind fulfillment. The customer will receive their order on time and to their desired destination: at home, in the store, or at a specific pick‑up point.
A positive customer experience doesn’t end with the delivery. Having a flexible and simple return process sets you up for repeat purchases and positive word of mouth. DOM provides smart tracking of return locations, enables returned goods to be easily restocked, updates inventory counts, and processes customer refunds. It further offers the flexibility of return locations, not necessarily the original location.
For business owners
From a business perspective, the benefits will be inventory efficiency, cost savings, and scalability. The entire order management process, due to its greater flexibility, will allow businesses to fulfill orders in a way that meets customer expectations but is also optimized in terms of shipping costs for the merchant. Having a smart routing system for orders will result in choosing the best shipping provider in each situation.
Global businesses will derive even more from DOM. New sales channels are now multiplied by the countries the merchant operates in. This means much more complexity in terms of stock locations, delivery costs, and lead times. DOM is a must for global brands.
For the environment
As merchants look to do their part in reducing carbon emissions, one area of focus can be order fulfillment. DOM can improve the way orders are fulfilled by optimizing the stock location for the shortest path to the customer and selecting from multiple delivery service providers. By considering this approach, merchants are embracing the environment as a stakeholder.
Commerce Layer's DOM service
Commerce Layer, as a headless commerce platform for global brands, manages DOM in a simple, yet powerful way through its APIs and OMS.
With Commerce Layer, you can define one or more inventory models that will give you the ability to look at your different stock locations as a whole, and define prioritization and cutoff rules to support your fulfillment strategy.
This business service, together with the platform’s market‑based approach, will enable global brands to scale their DOM as their business grows — through organic sales, new channels, and expanded geographies.
With global expansion and the growing number of customer interaction points, the complexity of modern retail is increasing in a way that traditional ways of managing operations can’t keep up with.
By using a Distributed Order Management system, merchants can gain better control over their fulfillment process by having a unified view of their stock locations that include warehouses and/or physical stores and define fulfillment strategies that are efficient and cost‑effective. A flexible, parameter‑driven DOM, will also scale with your business and ensure that quality customer experiences — from purchase to delivery and returns — are not disrupted.
Distributed Order Management allows merchants to manage orders efficiently, reducing costs and improving the customer experience from purchase to delivery and returns.