Target and Toys R Us posted overall sales declines during the holidays.
(Page 2 of 2)
The order management system also needs to feed into a manufacturer’s inventory and fulfillment center if the manufacturer is drop shipping for the retailer, with many of the same issues of timing and availability. “You have to capture that global inventory visibility regardless of the fulfillment source,” says Will Fox, vice president of product strategy for Yantra Corp. “You need good information on what you have on hand or what’s in transit.”
And the same holds for re-ordering, industry participants say. An order management system needs to report sales to the re-ordering system so that as stock dwindles, the merchant can order more. “Our Ecometry package feeds into the inventory forecasting management system and creates a purchase order for various vendors,” says Karl Kroeplin, vice president of information technology for Miles Kimball. “That’s an important part of the package.”
Feeding into CRM
But in addition to going back into the supply chain, order management systems also need to feed into the customer relationship management systems. “CRM systems depend on the order management systems for all the data and a large percent of functionality,” Himes of NewRoads says. Some order management systems come with CRM functionality as simply another part of the e-commerce services that the vendor provides. Others are designed to feed into CRM systems from other vendors.
And finally the order management system needs to connect with the marketing program to report the results of marketing campaigns. “Order management systems need to be able to report to marketing departments such things as the results of different test offers and of specific campaigns,” says John A. Marrah, president and COO of Ecometry.
FrenchToast.com started its direct-to-consumer business believing it could perform order management by itself. “The requirements grew exponentially as we got into all the different parts of direct selling,” Sutton says. “For instance, we had to know how to handle the freight and sales tax requirements for split shipments, how to handle returns against split shipments, how to handle the order if part of it was a gift. After dong it manually ourselves for the first year, we started looking for a system that could accommodate all the requests we got.”
Sutton took a simple approach to identifying vendors who could help: “We asked all the questions our customers had asked of us,” he says.
As with any technology investment, the cost of implementing an order management system will vary based on the size of the retailer. Small retailers can buy off-the-shelf small systems for a few thousand dollars, then scrap them in favor of more sophisticated systems as the company grows. At $5 million in sales, a retailer can implement an Ecometry system for $50,000 to $70,000, Marrah says. At about $20 million in annual revenue, a retailer could spend $400,000 to get an entry-level system from CommercialWare, Askin says. Yantra systems cost into the seven figures, Fox says. Or retailers can outsource to a provider like NewRoads.
The benefits of doing it in-house vs. outsourcing have been widely debated in many areas of technology and retailing. The same arguments pro and con apply here, analysts say, including the primary questions of the amount of direct control a retailer wants over a system and the amount of money a retailer wants to invest in hiring in-house support staff and in upgrades as they become available.
FrenchToast.com outsourced for the customer service and fulfillment expertise of NewRoads, Sutton says, leaving FrenchToast to do what it does best. “We know school uniforms and that’s what we wanted to focus on,” Sutton says. “We’re leveraging the expertise of the people and the systems at NewRoads.”
Some observers place the size of the order management market at about $200 million, but some caution that the market for order management systems is being absorbed by broader e-commerce systems. “The b2c space is very finite because the lines are becoming fuzzier,” Askin says. “We are expanding our reach into a broader retail application and in two or three years, the silos will dissipate.”
Vendors of order management systems are doing their best to make those lines disappear. But until they do, retailers need to carefully examine claims of what an order management system will do and make sure that the system fits the strategic direction of the company. “We bend over backwards to accommodate every request a customer could have,” Sutton says. “So it was very important for us to automate and to do it in a way that could offer the level of flexibility that consumers want.”
What to expect of an order management system
As the pivotal point between customers and supply chain, order management systems must:
- Accept and track orders
- Separate complex orders into components for fulfillment, such as sending a personalized order to one fulfillment center and a high-value order to another
- Receive feeds from inventory so it can tell customers whether items are in stock
- Report stockroom replenishment needs to a warehouse
- Report sales to a supply chain system for re-ordering
- Feed customer activity into a CRM database
- Report promotional campaign results into the marketing database.