For most organizations, order management -- taking, fulfilling and shipping orders -- is far from simple.
In fact, there are some common holes in order management software systems that can lead to some expensive failures.
“There are two classic areas: The first one is when you have high growth in the volume of orders or in the source of orders, and keeping track of these orders or even unwinding orders becomes so complex that it’s a problem,” said Alexander Drobik, a regional research director for EMEA, ERP, and Enterprise Suites for Stamford, Conn.-based Gartner Inc.
For more on order management problems
Read advice on how to limit SAP system failures
See why pitfalls in SAP sales order management are common to many
Initially, order management begins as a well-defined end-to-end process in a small company where there’s a single interaction for creating and processing an order. However, once volume grows, orders bottleneck and order queries and new channels outgrow the system. Channels can range from an e-commerce site to the sales force to telephone sales to direct orders.
Typically, companies then put in analytics and new technology overlays to try to see what’s happening along the way, but these extra solutions often don’t fix the root problem, according to Drobik.
“So you end up with someone who’s asking, ‘What can we do to streamline the volume?’” he said. “Well, the answer is a not a lot, because you want the volume.”
The challenge, of course, is that whenever a company experiences high volume, opportunities arise for little bumps along the way -- orders might become mislabeled, lost in transit, returned, or held, all of which can further slow the process.
“We get customers who are so disgruntled with their order management end-to-end process inefficiency that they seriously consider building a new order management system that completely bypasses all of their other systems, to have it outside of all the systems, and then use it to control the internal process and feed back into the existing systems at the right points,” Drobik said.
Finding order management system bottlenecks
Most companies ultimately come to their senses and identify the areas of an order management system that are working, then look for the bottlenecks. However, those bottlenecks can be hard to identify until they clearly constrict your processes.
For example, earlier this month Tesco Direct, an online retailer in the U.K., offered the new iPad for about $70 because it left a zero off the price. Tesco has a clause that lets it accept orders and change them until the point of shipment, but it illustrates some of the challenges with order management, Drobik said.
The reality is that it takes a massive effort to fix this problem and avoid order management system failure.
“Now the company has to say to its customers, ‘You clicked the pay button, and we might have started the payment bit, but now we have to unwind the order.’ How do you plan for that kind of mistake?” Drobik said. “They had terms and conditions that said they are not legally obliged to supply the order, but they still have to take the orders, unwind the orders, send messages to their clients, say they are sorry, that it was a genuine error, give out a 5% voucher to help keep customers satisfied, and now unwind the finance pieces.”
A small mistake could also lead to a much bigger problem that can jam up orders that are still coming along behind it. Fierce storms during the holiday season or rapidly changing clothing fashions can gum up the order management process. These problems point to potentially weak spots in an order management system.
Beyond the obvious crashes, there are other spots that can point to order management technology holes. Jonathan Gross, vice president and corporate counsel for Toronto-based Pemeco Consulting, said that the inability of a company to respond to certain types of requests for quotations is “big-time indicator” that existing order management systems aren’t up to the task.
"For example,” he said, “are you unable to create orders if materials are not available or if future workload capacity is unknown? Scenarios like these usually provide insight into what’s missing and what’s needed. Many ERP systems have sophisticated order management capabilities that give businesses opportunities to prepare orders based on relevant planning and control data.”
Business planning key function of order management software
To find the areas where order management software can help requires understanding the circumstances under which a company cannot prepare meaningful orders, he added. Good order management should account for all relevant planning requirements, including lead times and material requirements.
George Lawrie, vice president and principal analyst for Forrester Research in Cambridge, Mass., agreed. If an order management system can’t account for lead times and requirements through customer, item, and inventory master data in accordance with company policies, organizations have a hole that the right technology -- often an ERP system -- can fill.
“For example, you might have a policy that lets your best customer have first pick when you have limited inventory. I think lots of people with dislocated systems or point solutions are trying to do that manually -- and they disappoint, so they don’t meet their customer service goals, they upset sales guys, and they upset their best customers,” Lawrie explained. “Generally speaking, if you’re not meeting shipment dates, that’s a symptom of multiple different systems rather than one well-implemented ERP [system].”
The inability to apply the correct pricing to orders is another problem companies have with their order management software.
“For many people, that’s what tips them into ERP solutions. They are trying to price orders individually and there are too many different conditions,” Lawrie said. “You have conditions about the quantity but it might also be the combinations of the items, and lots of people have quite complicated rules about that.”
Dig Deeper on Order Management