The days when consumers did most of their shopping at stores are long gone. Today's shopper is just as apt to order an item online or with a mobile phone as walk into a shop, and that's creating big headaches for some retailers. In particular, many are struggling to make sure they have the right inventory on hand and in the right places to keep the customer happy.
That's why a number of retailers have begun using a type of software known as "distributed order management" (DOM). Distributed order management applications determine the best fulfillment location for a particular order. Essentially, they provide visibility into inventory holdings on a network-wide basis—at distribution centers, in stores, and even at supplier sites—so the retailer can decide where to pull the product from. For instance, the app might indicate that the retailer's best option for filling an online order would be to pull the item from a store, rather than the e-commerce site's fulfillment center.
"A lot of retailers grew up using different systems and serving different channels," says Chad Hooker, senior director of supply chain solutions at the Oxford Consulting Group. "With DOM, you get the visibility as to what the customer is doing across all channels."
Although retailers are currently the main users of DOM software, industry experts believe that other sectors struggling with order fulfilment across multiple channels may soon begin turning to these apps as well. Hooker notes that the government is showing an interest in this type of software, while Gartner analyst Jessica O'Brien says that the life sciences industry has started looking into its use.
Despite the recent surge of interest, DOM software is not new. These applications have been around for more than a decade. But they've been gaining traction in the retail sector in the past two years as more merchants struggle with multi-channel fulfillment. Interest in this application is "largely driven by retail and the need to support all-channel commerce seamlessly without busting the budget," explains Jim Le Tart, director of marketing at RedPrairie, one vendor of this type of software.
In addition to RedPrairie, a number of well-known vendors provide DOM software, including Manhattan Associates, Sterling (IBM), Oracle, and Softeon. Other software companies in this space include Jagged Peak, IMI, OrderMotion, and VendorNet.
Prior to the changes in consumer shopping behavior, companies were hesistant to invest in this kind of software because of the integration work involved. DOM software must connect to multiple systems, including warehouse management systems, front-end e-commerce systems, merchandising systems, order management systems, point-of-sale systems, and customer relationship management systems.
Because of the amount of tie-in work required, installation and deployment of DOM systems are expensive undertakings. Although the actual cost depends on the order volume and the complexity of the integration, Gartner analyst O'Brien says installation of this type of software can easily reach $1 million. "They are definitely not cheap projects," she says.
Despite the huge capital investment for this software, a lot of retailers would rather deploy a DOM system than upgrade their existing systems or install new ones. "They look to use their current [information technology] infrastructure without having to rip out and replace existing systems," explains O'Brien. "They can have a layer of inventory visibility and enable intelligent order sourcing throughout their distribution network."
The payback for users comes about from the savings in improved inventory management. "You're not stockpiling inventory," says Hooker, "because instead of having the stores just pulling from the store DC and the dotcom pulling from the dotcom DC, you can pull from the entire network."