Best practices when analyzing order management system features

It's important to lay the groundwork before purchasing and implementing an order management system. Supply chain users and experts examine key factors in making the right decision.

Selecting the right software for a company can be difficult when there are so many factors to consider. Because enterprise systems typically have big price tags, business decision-makers must be all the more certain about the system that best meets the needs of their organization. Choosing an order management system is no exception.

Order management system features play a critical role in handling the increased complexity associated with fulfillment, as well as other parts of the supply chain management process.

It's no longer simply about traditional order management. Nowadays, it's about orchestrating an order starting with the front office, through CRM systems and across all channels, including delivery of source materials from supplier to manufacturer and eventually to the customer.

As a result, the focal point is concentrated where the orders are to be managed, said Seth Lippincott, an analyst at Nucleus Research, based in Boston. That could be on the front end, where all the customer data is contained in the CRM system; in the finance and accounting (ERP) system, the glue across the entire organization; or in the execution and fulfillment system, where planning and margin are controlled, he added.

"For a long time, organizations have thrown orders over the wall to the supply chain," Lippincott explained. "However, siloed systems lead to exceptions and unmet service commitments. If the order management doesn't exist in the supply chain software or ERP, then ensuring it integrates the data those systems provide is critical."

Know your supply chain

If the order management doesn't exist in the supply chain software or ERP, then ensuring it integrates the data those systems provide is critical.
Seth LippincottAnalyst, Nucleus Research

When considering order management system features, it's important to understand, first and foremost, the supply chain's complexity, according to Gartner supply chain analyst Tom Enright, who pointed out two areas of consideration:

  • Customer fulfillment services. Companies should determine whether customers can collect in store, whether there are different speeds of home delivery and if deliveries can be made to different addresses. 
  • Fulfillment network complexity. This part of the evaluation usually boils down to a company's number of warehouses and stores and whether the company ships directly from suppliers to customers.

"We get a feel from that as to whether the business either already has a complex supply chain or is planning to create one, mainly by rolling out additional services," Enright said.

Based on that information, companies can determine if they actually need an order management system before proceeding to the next step.

"Step No. 2 is really recognizing that, for the vast majority of retailers, they're buying one of these systems for the first time," Enright noted. "They've always been able to manage orders traditionally, mainly through their ERPs. But when they go into the world of packaged software, they're thinking about distributed order management systems for the first time."

For first-timers, Enright suggested companies let the vendors be their guide. It's really a case of adopting some of the workflows that vendors have built into their packages based on what has worked for other retailers, he said, adding that this approach would be better than trying to customize order management system features.

Fitting into the order of things

Companies also have to consider the effect an order management system will have on other IT systems, including ERP and supply chain management, Enright reasoned. An order management system, he explained, will determine the right way to fulfill an order from a timing and cost point of view -- decisions in all likelihood made previously by the ERP system.

We recommend thinking about the 10 or 15 business-critical processes that the system will have to manage in terms of the supply chain.
Tom EnrightSupply chain analyst, Gartner

"So, there's an element of the order management system kind of taking more control that the ERP previously had, and within the confines of the order management system, it determines how fulfillment is going to happen," he said. "And then, it essentially tells the ERP, 'This is what I've decided.'"

Then, there's the issue of the warehouse management system (WMS).

"Typically, the order management system is agnostic to the warehouse management system," Enright said. "It doesn't need to have a particular vendor's application there, but it would talk to the warehouse management system through the ERP to a very large extent. So, there isn't that much of an impact on the WMS. It's still getting its decisions from the ERP. It's just that the ERP isn't necessarily making those decisions."

Going forward, he added, there will be greater implications for allocation and replenishment in a supply chain management system, because the order management system is relatively immature when it comes to retail applications.

"It's 4 or 5 years old, probably not even that much in many ways," he said. "And it's an execution system. It's designed to use inventory and to ship it and get it on the road."

Currently, the order management system isn't responsible for placing inventory. For most companies, allocation and replenishment systems still make that decision.

"So, how many [items] am I going to put in store? How many am I going to hold back at the warehouse? When am I going to flow it into the business? Those things are made by allocation and replenishment currently," Enright said.

But that will likely change as order management system features mature.

"Companies will get to a position where they're saying, 'Well, if the order management system is seeing all of these transactions from consumers, and it's trying to follow its rules as to where to look for inventory, surely it should have some responsibilities as to where that inventory needs to be, because it has an opinion now as to how consumers shop.'"

Don't be myopic

Another best practice is to go outside a pure order management system, said Tyler Wilson, director of software development at The CE Shop, a Denver-based provider of online real estate courses.

You want to define what you want to look like in the future and integrate those requirements into your selection process.
Tyler WilsonDirector of software development, The CE Shop

"I would look at something that's all-encompassing," said Wilson, a former senior ERP consultant at Panorama Consulting Solutions. "Look at something that can integrate with your order management to feed it to the receivables, and that can capture your customer data and put it right into your customer master files."

And after a system is selected, implementation poses a new set of challenges. Wilson pointed out the potential for redundancy in order management if the same data is being captured by and shuttled between multiple systems.

"That's not the goal in business these days," he said. "You want to streamline those processes and avoid as much work as possible."

Start by documenting existing order management processes.

"If you're looking at your order management," Wilson noted, "what does that look like on paper? What are your business requirements around that? Ask yourself those questions and physically map it out."

He also stressed the importance of planning for future requirements.

"You don't want to select a system based on what you do now," he cautioned. "You want to define what you want to look like in the future and integrate those requirements into your selection process."

The best way to define these needs is to get a consensus not only from department heads, but also from the people actually working with the system on a daily basis.

"They're the people who know what's going on day to day," Wilson said. "It's a collaborative effort. You want the people who are doing the job as well as management who have that vision into the future of the company."

In addition, Enright recommended mapping order management processes to the supply chain.

"Another best practice pertains to developing a request for proposal for an order management system," Enright said. "Rather than writing out an exhaustive list of 300 questions, for example, we recommend thinking about the 10 or 15 business-critical processes that the system will have to manage in terms of the supply chain -- so, trying to create the environment in which the order management system will live and see how well it would handle [certain supply chain] situations."

Compatibility is critical

When Mike Zhang searched for an order management system, he had to make sure it was compatible with his company's shopping cart system.

We didn't want to be in a position where we were conforming our company's procedures and sacrificing efficiency in order to satisfy software logic.
Mike ZhangFormer president and COO, Airsoft Megastore, and now COO, Good Money

"In terms of buying best practices, it's [a] hybrid approach for e-commerce," said Zhang, COO at San Francisco-based digital banking platform maker Good Money, and formerly president and COO at Airsoft Megastore in Irwindale, Calif., an online retailer of recreational pellet guns, gear and accessories. "It's the traditional concept of spec'ing out everything you need from the software and providing that deliverables list to all the vendors."

While at Airsoft, Zhang made the technology purchasing decisions, but he also solicited other opinions in the vetting process and factored them into his ultimate decision.

"I evaluated business processes to determine what we needed to do on a day-to-day basis," Zhang explained, "and then I outlined how order management software would be able to help us work more efficiently and more inexpensively. We also had certain executives in the company involved, but I wouldn't say to a great extent. Everybody laid out what they wanted in a solution, and we pieced that together, and I was the person to carry that project forward."

Airsoft was considering a hosted system and was particularly interested in reliability, uptime and the sturdiness of the infrastructure, along with price.

"We were also concerned about how the software facilitated process," Zhang said. "We didn't want to be in a position where we were conforming our company's procedures and sacrificing efficiency in order to satisfy software logic -- how the software was designed to work. Ideally, we wanted the software to be designed around how we work."

Another consideration in the decision-making process is a distributed order management system instead of classic order management system features, said Gartner analyst Gene Alvarez.

"The difference is distributed order management systems have orchestration components that enable you to create workflow," he explained. "That way, the system can determine which distribution centers are the best ones for fulfillment, and it can determine order of execution. For example, you may have an order that requires delivery and service scheduling for installation. The distributed order management system should have a workflow capability to enable that."

Taking the time to implement and train

Zhang selected an order management system from a vendor that provided Airsoft's e-commerce software application.

"The implementation for the order management system was rather lengthy, because we had a lot of data migrating from our legacy system," he said. "It took about 12 months to get up and running, and during that time, we were still running the legacy software."

Training meant getting users familiar with the system and its new functionality before going live. In addition, the system had to be customized to the needs of each department.

"So, if it's customer service, it's doing use cases for customer service needs. If it's warehouse, it's examples of shipment receipts," Zhang said.

This specialized training was supplemented by a two-day on-site training session conducted by the vendor.

"We documented our operating procedures internally for every single department or category of user," he added. "Implementation and training was a critical process to get right."

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