February 28, 2005, 12:00 AM

Foundation

Order management becomes the centerpiece in retail expansion plans.

Cabela`s Inc. is undertaking a big expansion plan. The Sidney, Neb.-based retailer of outdoor gear, which started life as a cataloger, had been opening superstores at a rate of about one every 18 months. It`s scheduling four stores this year.

One of the keys to successful growth, the company believes is the much-overlooked order management system. "Having an order management hub integrated into our CRM and warehouse management systems is enabling us to make the move to a true multi-channel environment," says Larry Popps, director of management information systems for Cabela`s.

New respect

Cabela`s attitude toward order management systems reflect the new respect that a technology that was once considered part of the back-office plumbing is receiving in retailing today. As recently as 2003, multi-channel retailers had a simplistic view of order management systems. The technology was used primarily to track the number of orders placed in a day, availability of inventory to fulfill the day`s orders, when an order was scheduled to be shipped, and to where.

Sure, there was other information that could be siphoned off, such as the size and color of specific apparel sold and which warehouses contained the inventory to fulfill the order, but for the most part, multi-channel retailers were content with utilizing the basic functions of order management systems because consumer demands did not require them to do otherwise.

Today, the business model for how order management systems are utilized has been dramatically altered thanks to the web. For starters, consumers accustomed to shopping online now expect multi-channel retailers to allow them to seamlessly move between each sales channel to place an order, track delivery status of an order or initiate a return, without any drop-off in service.

And so, a customer who purchases a product in the store that is to be delivered to her home, for instance, expects to be able to check the status of that order on the retailer`s web site or through the call center at any moment. These expectations are prompting multi-channel retailers to integrate order management systems across each sales channel, rather than confining their use and the data gathered to a specific division.

Second, multi-channel retailers are placing increased value on technology that can create greater operating efficiencies by reducing delivery, fulfillment, and restocking costs. Those savings can then be channeled back into customer service.

Plug-and-play

Not only do the new breed of order management systems enable multi-channel retailers to exchange sales and inventory data between all facilities, they can track supplier information on upcoming shipments and real-time status of delivery from third party shipping services.

In short, the latest generation of order management systems are feature rich, plug-and-play applications that require little customization by the end user and that deliver huge benefits across the enterprise.

"The new breed of order management systems is enabling multi-channel retailers to more effectively manage a complex business," says David Schatsky, senior vice president for New York-based Jupiter Research Inc. "Customer satisfaction is key for growing in a multi-channel retail environment and order management systems that can eliminate shipping errors, improve inventory management and create greater operating efficiencies can vastly improve customer satisfaction."

The payoff for higher customer satisfaction can be a 1% to 3% lift in sales revenues, since satisfied customers tend to be frequent repeat customers that spend more than the average customer, according to industry experts.

From an operations perspective, multi-channel retailers who streamline their order management systems can expect to improve order accuracy from 85% to more than 95%, while decreasing handling costs by 10% to 15%, according to Mike Grandinetti, senior vice president and chief marketing officer for Yantra Corp., a Tewksbury, Mass.-based supplier of order management systems.

Quick ROI

"Multi-channel retailers are not only trying to create a unified brand, but operating efficiencies across each channel that extend to fulfillment, delivery, service, installation etc.," Grandinetti says. "Their needs in these areas are changing the features and functionality of order management systems."

Multi-channel retailers--a definition that includes Internet retailers with call centers as well as those with stores--can expect a return on investment in less than a year, on average. While order management systems start as low as $1,000 for small Internet retailers, most mid-sized retailers will pay into the five figures and the largest multi-channel retailers can expect to pay $100,000 or more, vendors say.

Prices have been under pressure for the past few years as retailers` technology budgets have tightened. And further downward pricing pressure is being brought to bear through the use of the ASP model. End users with tight IT budgets can opt to pay a flat monthly fee and a per transaction fee to a service provider hosting the application on its own server, thus saving the cost of installation and maintenance

Chief among multi-channel retailers` needs in an order management system is the ability to integrate the application with any other supply chain management or third party delivery system. Cabela`s, which operates 10 stores in addition to its catalog division and web site, is overhauling its operating platform to allow data from its warehouse management, customer relationship management and order management systems to flow into a centralized data hub that can be accessed through any of its sales channels or warehouses.

The initiative, which began last year and uses Yantra Corp`s Order Hub, is expected to provide a 360- degree view of each customer`s order. This view includes availability of inventory, expected date of shipment for back orders, where inventory is being pulled to fulfill an order, the channel through which an item is purchased, and the channel through which an item is returned.

Inventory, too

Cabela`s intends to use the information not only to serve customers better across all its sales channels, but also to forecast inventory needs and accurately track stock across its distribution centers.

The project is scheduled to be completed in the fourth quarter. "We want to provide our customers with the ability to purchase and return items through different channels without any difficulty, while we know what happens with an order every step of the way," Popps says. "This can eventually help us with forecasting our inventory with suppliers and how they need to break up inventory ordered across our distribution centers."

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