CEO Roland Smith will retire and Troy Rice will oversee e-commerce as Office Depot’s new chief operating officer.
When orders can go down any path toward fulfillment, retailers need technology to manage them.
When French Toast School Uniforms LLC went online in 1998, order management was almost the farthest thing from President Michael Sutton’s mind. “I initially thought, What’s the big deal?” Sutton recalls. “I thought all we needed an order management system for was to track the orders and do the financial processing.”
Many retailers who went online during the rush, especially those who had not sold direct before, had a similar reaction. But they since have found out what the big deal is. “I didn’t understand the frequency and complexity of exceptions,” Sutton says. “20% of orders require an inordinate amount of our time.”
FrenchToast.com is the online marketing operation of Lollytogs Ltd., manufacturer of children’s clothing that started selling school uniforms in 1991 through retailers. In response to customer requests for items that local retailers did not stock after the start of the school year or for low-demand sizes that retailers did not stock at all, Lollytogs began selling direct in 1998 with a web site and a catalog. FrenchToast.com executives quickly learned the vagaries of direct selling. “An order management system needs to accommodate any path an order might go,” Sutton now says.
Order management is widely recognized as the key that makes fulfillment work. But it is just now being understood as a key part of the supply chain as well. And as a key part of a customer relationship management system. “Order management is the piece that ties the supply chain and the value chain together,” says David Himes, senior vice president of business process solutions for NewRoads Inc., an outsourced provider of e-commerce services. “It’s the centerpiece in how you satisfy the needs of a customer who has placed an order.”
Handling it all
To fill their role as the key link throughout a retailer’s operation, order management systems must not only accept and track orders, but also be able to tell the warehouse that the fulfillment center needs more product, tell the supplier that the retailer needs replenishment on a certain item, keep the customer relationship management database up to date and report to the marketing department how well its campaigns are functioning.
“It’s no longer enough to take the order and tell the customer when she will receive it,” says Donny Askin, CEO of CommercialWare Inc., a supplier of order management software. “The order management system is a foundation for so much more.”
And with the rise of multi-channel retailing, it’s the foundation for all that happens in all channels. “We expect our order management system to handle it all-mail orders, phone orders and web orders,” says JoAnn Muegge, application software support manager for Miles Kimball Inc., a $140 million-a-year retailer of greeting cards and specialty housewares. “And we expect consistency so we can move from mail to phone to web easily.”
Even the simplest kinds of orders involve a degree of complexity that order management systems must be able to handle. Take personalization, for instance. At Miles Kimball, personalization is big business. Throughout the year, 40% of orders require personalization in the form of return address labels or names on pencils, mugs or backpacks. During the holiday season that increases to 50% as customers order personalized Christmas cards as well as other items.
Personalization creates not only the challenge of making sure the personalization is correct but also the challenge of making sure that personalized items and standard items in the same order, each of which can take a different route through the fulfillment center, get packaged together and shipped correctly. Thus Miles Kimball requires its order management system to be able to split orders to direct them to the correct personalization station as well as to the correct picking area.
Check and balances
To that end, it has developed an interface to the order management system it operates from Ecometry Inc. Before anything happens, an employee manually verifies all personalization orders that come in over the phone to make sure the phone rep entered the information correctly. Web orders do not receive such scrutiny, except for Christmas cards. Then the system processes the order for payment and only then does it assign a particular item in inventory to the order. From there, the system splits the order into its components, breaking out each personalized product, sending instructions to the personalization software, which resides on a server, and creating a separate work ticket for each item.
Employees scan each work ticket at the personalization device; that scan pulls the personalization information from the server. Once personalization is complete, the items are consolidated into one order at a staging area and from there they go to the packing area. The order management system manages the entire process, making sure that every step is fulfilled and all the right items end up in the right box with the right label. “We customize a lot of products and we need a lot of checks and balances,” Muegge says.
But even beyond dealing with the actual order, order management systems need to feed into upstream and downstream databases. Miles Kimball’s system, for instance, reports replenishment needs to the warehouse in case quantities so as items sell out of the fulfillment center, warehouse pickers can send new ones in.
Then the systems need to report even deeper into the supply chain. “The supply side of the equation has become of increasing importance,” Askin says.
Consider this scenario: A customer orders an item. The order management system sees that the retailer is out of stock. But if it can look into the supply chain, it may also see that the retailer ordered replenishment stock and the manufacturer is due to ship the order within a day or two. Or perhaps it even sees that the new merchandise is on a truck on its way to the warehouse. In the Internet age when it is so easy for a customer to simply click from one retail site to another, a retailer might be able to save a sale by taking the order and giving the customer an expected delivery date within a few days.