What is Distributed Order Management & When Do Retailers Need It?

Advanced Distribution

As retailers see an increase in direct-to-consumer (D2C) sales, they're seeing new challenges that come with the business model - including technology to keep up with customer expectations.  To keep up with omnichannel, dropshipping, and other complex D2C distribution models, retailers are feeling the amplified need for advanced order management solutions like distributed order management.

What is Distributed Order Management?

Distributed order management (DOM) systems power advanced order processing and routing logic to fulfill retail orders from the best location(s) to maximize margins and customer experience. They provide global views of inventory and orders and determine the best fulfillment source by referencing comprehensive rules including proximity, priority, capacity, and others. Retailers with robust sales and fulfillment networks use DOM to automate business rules that optimize their buy, fulfill, return anywhere models.

what is distributed order management

How is DOM different than standard order management?

Standard – or “traditional” – order management is focused on automating order processing functions like transactions, customer communications, and servicing. Distributed order management enables traditional order processing plus the addition of advanced order routing logic.

Standard order management systems support retailers with simple operations (ex: a single sales channel and fulfillment location), where distributed order management systems support retailers with advanced fulfillment networks and sales channels (ex: omnichannel / multi-brand / global sales and fulfillment).

Fulfillment scenarios and customer experiences supported with distributed order management

How retailers handle complex fulfillment scenarios can make or break the entire customer experience. Customers expect to receive their orders without issue no matter what items they order. Let’s say a customer purchases an in-stock item, both a digital and physical gift card, a custom item, and preorders an item. To the customer, they are placing one order.  

If a retailer is unable to fulfill such a complex order because of limited fulfillment rules/scenarios (fill or kill or can’t split shipments), all the customer knows is their order was canceled or delayed. Most likely, that customer will take their business to another retailer that has advanced order management rules to fulfill the order seamlessly regardless of the complexity.

With DOM, complex fulfillment scenarios like the above example can be automatically routed to the optimal fulfillment location(s), trigger customer communications, and payment transactions based on configurable rules set by a brand.  

Some of the most common fulfillment scenarios supported include:
  • Split shipments
  • Quickest or closest to customer
  • Prioritize location based on profitability (i.e. is fulfilling from a high-velocity warehouse more profitable than any store, even if the store is around the corner from the customer)
  • Capacity controls to prevent overwhelmed fulfillment locations
  • Designate location based on item type (i.e. large items that may only ship from certain locations, items that require gift wrap, etc.)
  • Turn fulfillment nodes on and off as needed
  • Customer fulfillment (i.e. store pickup, curbside pickup)
  • Dropshipping rules specific to retailer compliance (i.e. fill or kill)

How does distributed order management support an omnichannel strategy?

DOM enables an omnichannel strategy by managing orders from all channels in one place, so brands have visibility and control to create ideal CX and make strategic business decisions. By accepting order inputs and producing outputs for an unlimited number of sales, fulfillment, and return channels, DOM makes it easy to add, remove, or change logic as needed to support both changing customer experiences and business processes.

Here are three ways DOM supports an omnichannel strategy:

  1. Enables flexible buy, fulfill, and return experiences between all sales and distribution channels, so customers can interact with a brand in the way that’s most convenient for them, while the brand maintains high margins.  These experiences include:

    buy online pick up in store (BOPIS)

    buy online curbside pick up

    buy online return in store (BORIS)

    buy online ship from store (SFS)

    buy in store return to warehouse

    buy in store ship from warehouse

    buy in store return to store

    buy online fulfill and return via 3rd party (dropshipping)

    any other variation for a truly buy, fulfill, return anywhere strategy

  2. Makes it easier for retailers to automatically process orders placed across any channels like DTC websites, marketplaces, affiliate sites, search feeds, social selling, and apps.
  3. Provides accurate cross-channel inventory visibility, including dispositions, as orders are processed.

How does distributed order management support dropshipping?

While DOM technology doesn’t physically store and ship your products like a drop shipper, the comprehensive sourcing logic supports a profitable drop shipping strategy by:

  1. Reducing training time for drop shippers’ warehouse employees
    Training warehouse employees to manually run through the long list of requirements needed to meet each retailer’s dropship requirements (i.e. fill or kill, shipping SLAs, etc.) can be near impossible and time-consuming. With each big-box retailer having their own set of specific rules, profitability and margins plummet if manually checking each order meets their requirements is the only option. With the right DOM, these dropshipping rules can be automated for each retailer, ensuring warehouse employees don’t have to manually review each order for compliance.
  2. Minimizing fees for orders that don’t meet retailer requirements
    Big-box retailers charge premium fees for orders that don’t meet their strict dropshipping standards. With automated DOM rules, these orders can be detected before fees are incurred – protecting your business from sunk costs associated with dropshipping.
  3. Rerouting orders that don’t meet dropship requirements to another distribution center when possible
    Not only can DOM logic detect orders that aren’t a good candidate to be drop shipped by big-box retailers, they can give your business another opportunity to route the order to the next best fulfillment location – all without manual intervention.
  4. Communicating inventory positions back up to all channels
    As dropshippers reserve and ship inventory, DOM systems update available-to-sell (ATS) inventory across all channels to prevent oversells and frustrated customers.

How does distributed order management work with an ERP?

When a retailer’s operations are sophisticated enough to require an Enterprise Resource Planning (ERP) system, it’s highly likely they need advanced order management if they want to support an increased direct-to-consumer volume. While an ERP supports static back-door business processes, DOM supports ever-changing customer experiences associated with business operations.

A few examples of how DOM supports business processes that enable the best customer experience:

  • Enabling buy, return, fulfill anywhere experiences most convenient for your customers
  • Automating time-intensive manual processes, like automating the returns process instead of using spreadsheets
  • Allowing retailers to easily swap payment, loyalty, affiliate, and other technology to improve conversion rates as consumer habits change

>> Read the comprehensive article: Should Retailers Use an ERP as an Order Management System (OMS)?

ERP vs OMS

When do retailers need distributed order management?

Not all retailers need advanced order management functions. For brands with singular sales and fulfillment channels and no plans for expansion, traditional order management systems are the most profitable option, since they don’t need smart routing logic to power their operations. Retailers that meet one or more of the below criteria will see ROI from the right DOM strategy.

    • Selling on multiple channels, marketplaces, apps, stores, affiliates, etc.
    • Multiple fulfillment or return locations including stores, warehouses, 3PLs, etc.
    • Offers customer experiences that require advanced orchestration like automated returns, preorders, backorders, custom orders, digital items, bundles, or kits
    • Can’t scale or grow because of inefficient/manual inventory, returns, or fulfillment processes
    • Using spreadsheets to manage transactions, returns, or fulfillment
    • Retailers with sophisticated business processes and tech stacks (using an ERP, fraud, loyalty, tax, multiple payment types, etc. - sometimes trying to supplement ERP for DOM functions.
    • Issues with cross-channel inventory accuracy and visibility
    • Would benefit from automating capacity, proximity, priority, and other fulfillment rules
    • Needs the flexibility to turn fulfillment locations on and off with a button
    How complex are your D2C operations? Get your score.
About the Author
Kristen Mulvaney

Formerly a strategic account manager for retailers using Deck Commerce, Kristen now brings her commerce strategy and product insight to our marketing team. When she’s not posting on our social accounts and monitoring analytics, she’s watching true crime with her pups.

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