The best insight into a business comes from what its customers are doing, and according to Tyler Wilson, the key to capturing this valuable information lies in order management technology.
"The biggest trend is that people want to capture more information at the time of order. That's where order management systems are coming into play," said Wilson, senior ERP consultant at Denver-based Panorama Consulting Solutions.
But what kind of information can an order management system provide? And how do they interact with enterprise resource planning (ERP) and e-commerce systems? Read on for user and expert advice about how order management systems can drive operational efficiency and give organizations a leg up with their customers.
Order management systems can inform marketing
Companies not only want to capture information about which products are selling, they also want to glean customer demographics, Wilson said. And when an organization knows more about its customer base, it can cater to it more effectively.
"This is where you're creating a customer master file and getting insight into the types of customers you have, and [therefore] you're able to tailor marketing strategies around them," Wilson said. "Everything that you do is essentially tailored around what you can capture at the time of order."
That's precisely the effect that order management technology has had on operations at Hanover Direct, a multichannel retailer in Weehawken, N.J. According to chief information officer Jeffrey Rosenholtz, because NetSuite's order management system gives the retailer better insights into its customers' behaviors and shopping habits, the company can target the right marketing offers to the right customers.
The system has also streamlined the ordering process itself. Before implementing NetSuite, Hanover Direct fulfilled orders using daily batch processing in a mainframe system, and this meant many orders that came in one day didn't get processed until the next, Rosenholtz explained. Now the company can fulfill orders as soon they arrive.
Rosenholtz said NetSuite has also enhanced the company's understanding of its customers and its ability to effectively address their problems. Since Hanover Direct's customer records have been migrated from the previous system to NetSuite, call center agents and other employees now have a unified, 360-degree view of the company's customers. This comprehensive insight allows them to respond more quickly to issues and offer better customer service, he said.
The rise of order management 'hubs'
While order management has traditionally been tightly integrated with ERP, George Lawrie, vice president and principal analyst at Cambridge, Mass.-based Forrester Research, said this is changing.
The integration between ERP and order management was due to the latter technology's "dependence on customer and item data," he explained. "But we've seen that drifting into a much looser kind of relationship, into a space of collaboration between suppliers, deliverers, sellers, installers and customers -- what we call an order hub."
These order management "hubs," which handle multichannel requests and enable end-to-end business processes, have become more prevalent, particularly in the business-to-consumer world, he said. And this increase in popularity can be attributed to the fact that better order management is critical to handling the increased complexity of the fulfillment process.
R. "Ray" Wang, principal analyst and CEO of San Francisco-based Constellation Research, agreed with Lawrie's assessment.
"It's no longer about order management, it's about order orchestration," he said. "It's more than just getting an order inside an ERP system; it's orchestrating an order all the way from the front office, through CRM [and] across all channels. That's what's required for success."
Order management is one of the foundational transactions that feed the rest of the ERP system, Wilson said.
"Order management is a key transaction to any business operation," he said. "You can relate that back to ERP, supply chain and everything else -- everything that an organization does is going to be driven off that order. It feeds your revenue [and] your accounts receivable stream, which will feed the rest of the downstream processes and eventually convert it into cash. It's also going to be part of your forecasting."
Lawrie explained that in order management, a company first identifies the customer. Then when the company ships the goods, it generates an invoice, which in turn generates an open item in accounts receivable that gets closed when payment is collected.
There are a couple of ways companies can use order management with their back-end ERP systems, said Gene Alvarez, vice president and analyst at Gartner Inc. in Stamford, Conn.
"You can use the order management system as a single queue for multiple customer sales touch points like call centers, websites, stores [or] mobile devices," he said. "All the orders are captured by various end-user points and then sent into a single queue that passes them off to ERP.
"The other approach is to use order management to handle multiple ERP system back ends," he continued. "For example, you could have multiple distribution centers all running the same ERP system for fulfillment, and you need to determine which is the closest to the customer. Order management makes that determination."
An order management system can also help in corporate acquisitions, he added.
"For instance, if one company acquires another company that's using a different ERP system, but you wanted to sell their goods through your channels, you can use distributed order management to route that order to [their] ERP system for fulfillment," Alvarez said. "Order management can also be used to fulfill orders from third parties like drop shippers. On the finance side, you can have that single queue of orders also being sent to finance for revenue recognition."
But when it comes to using e-commerce, order management and ERP in conjunction, things can get complicated because e-commerce applications typically include order management, according to Lawrie. That's exactly the reason online retailer Airsoft Megastore invested in an order management system but not ERP.
Instead, the Irwindale, Calif.-based company uses an order management system that works with its front-end e-commerce application, both of which are products from e-commerce technology vendor OrderDynamics.
"We use the order management system in the fulfillment cycle," said Mike Zhang, president and chief operating officer. "It's tied into inventory -- any time orders are shipping, inventory allocations and deductions are happening, [and] it's all driven by the actions within the order management console. We use it to process orders, ship orders, generate packing slips and things related to the pre-pick [and] pack and ship elements of fulfilling our orders."
Zhang said his company has always favored applications that were more specific to e-commerce over a traditional ERP system. Since Airsoft was already using OrderDynamics' front-end shopping cart, Zhang said it made sense to deploy the vendor's back-end order management system, which allowed the company to easily integrate the two.
But the company is now in the process of evaluating a retail operations platform, designed specifically to help retailers manage, automate and run their businesses more efficiently. Zhang expects that such a platform will complement the order management system.
"The dynamic nature of e-commerce makes it such that an ERP system is fairly cumbersome in a lot of scenarios," he said. "However, a retail operations platform -- added to the order management system -- could revolutionize the way we do business. It could really drive a lot of operational efficiency throughout the organization."
About the author:
Linda Rosencrance has written about technology for more than 10 years and has been a reporter for more than 20. A former Computerworld reporter, she is a freelance writer in Massachusetts and also an author of several true-crime books.
This was first published in July 2013