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As consumer expectations shift inexorably towards omnichannel experiences, Distributed Order Management (DOM) systems are here to make them happen. They enable retailers to capture, orchestrate and fulfil customer orders from any channel - smoothly and efficiently.
But what exactly is a DOM system, and how does it differ from a “regular” order management system? What are the biggest benefits of adopting one, and will it work with your existing stack? In this guide we’ll cover all these questions and more.
What is Distributed Order Management?
Distributed Order Management software uses logic-based rules to capture and fulfil customer orders as quickly and reliably as possible, at the lowest possible cost. It leverages integrations and automations to combine data from multiple channels, using technologies like Extract, Transform and Load (ETL).
These rules – known as Order Fulfilment Logic (OFL) - consider a range of factors including order proximity, priority, current capacity and more. For example, OFL rules will consider a customer’s physical location to identify the best carriers for fulfilling an order, and which distribution center to serve them from.
Why is this necessary? Because consumers are now placing orders across a range of channels, from bricks-and-mortar stores to websites, apps, social media and more. Without a central overview of inventory and orders placed on all channels, regular order management systems quickly get overwhelmed. Which leads to unhappy customers.
In fact, in this new reality, order management can be described as “the heart of omnichannel commerce”, according to Maia Benson, Managing Director of Forum Ventures and host of a 2023 MACH Alliance webinar on the topic.
A 2021 study by McKinsey & Company for the US Retail Industry Leaders Association (RILA) found that over two-thirds of the retail execs surveyed see the growth of omnichannel and digital shopping as the biggest trend affecting the industry – but also its biggest challenge.
Typically, DOM software is especially useful for growing companies with multiple suppliers, warehouses, and an expanding product range. The more channels that get added to this mix, the more complex it all becomes.
Distributed Order Management vs. Traditional Order Management
“Traditional” Order Management Systems (OMS) were designed to connect a small number of sales channels with a single inventory source. They revolutionized commerce by automating key processes like transactions, communications, returns and customer service.
In the new omnichannel reality however, traditional OMS struggle to provide visibility of inventory, which can lead to slow delivery times, overselling or even out-of-stock situations. No bueno. Plus, returns can be clunky and complicated, which customers hate.
Distributed Order Management (DOM) solutions on the other hand can meet your customers’ omnichannel expectations, while optimizing fulfilment. They provide a central overview of all inventory, with accurate “availability-to-promise” info, using rules and automations to keep service levels high and fulfilment costs low.
DOM systems are connected to multiple channels and marketplaces, and can quickly be adapted to new ones, using technologies like Application Programming Interfaces (APIs) and Extract, Transform and Load (ETL).
Sound complicated and slow to implement? It doesn’t need to be. In fact, many brands, retailers and manufacturers are already choosing composable DOM systems that enable them to choose the exact capabilities they need, using an orchestration layer to provide a “single source of truth” across all channels, and integrate the pieces step-by-step.
As a member of the MACH Alliance, Actindo’s Core1 platform is Microservices-based, API-first, Cloud-native and Headless. Find out more.
Benefits of Distributed Order Management
Compared to a regular order management system, a distributed order management (DOM) system offers more accurate visibility of your inventory, automation of manual processes, greater cost efficiencies, higher customer satisfaction and more.
Let’s look at these benefits in more detail.
Firstly, a DOM system provides a global view of available inventory in real-time, across multiple warehouses and distribution centres. This means that retailers can be much more confident in their “availability-to-promise", and customers can get their orders on time.
Secondly, many manual processes can be automated – saving many man hours and reducing the chance of human error. As anyone who has ever used an Excel macro before will know, why do it yourself when you can write a script?
Which leads us on to our next benefit: a DOM system is integrated with all channels. Unlike the Excel example above, this enables you to capture and update order and inventory data automatically and in real time, no matter where it comes from. No more spreadsheets.
Cost savings! These are another big benefit – retailers can realize significant cost and efficiency savings by migrating to a Distributed Order Management system. For example, by grouping orders by the same customer from different channels into a single package. Every little helps.
On a related note, procurement becomes easier to manage. Retailers can dynamically replenish stock from multiple suppliers as, when and where required. Predictive models make this process even easier during the ramp-up to seasonal events like the holidays.
The last benefit we’ll mention is arguably the most important of all: higher customer satisfaction. Make no mistake, your customers care deeply whether they get their items delivered on-time, with regular updates along the way, and a smooth returns process.
Challenges of Distributed Order Management
Of course, while this all sounds very good, many online retailers with omnichannel requirements will be asking “back-to-reality" questions around now.
Like: how much does a DOM system cost? How long will it take to implement? Can it be integrated with my existing legacy ERP?
Of course, all these omnichannel benefits don’t come for free. A DOM system will require investment and system change, both of which need to be carefully considered.
But it’s worth noting that the cost of not selling your inventory at full price is usually much higher than that of a system change. And some estimates describe an “e-commerce tax” of 8-15% on Gross Merchandise Value (GMV), which is levied on retailers by the legacy OMS platforms that must be adapted to our new omnichannel reality. Ouch.
Looking ahead, a 2023 study by Google Cloud found that so-called “unified commerce” (an evolution of omnichannel commerce which combines a retailer’s front- and back-end systems) can drive a 3-6x increase in annual revenue growth.
And the good news is that a DOM system can be integrated in a matter of weeks, including within a legacy ERP. In fact, the Actindo Core1 platform was deployed by German lifestyle brand Kapten & Son in just 9 weeks – read the case study to see how they did it.
Getting Started with Actindo Core1
So we’ve looked at what a distributed order management system is, what the benefits are, and the challenges involved. Interested in knowing more?
The Actindo Core1 platform combines DOM capabilities with a central DataHub for orchestrating everything in near real-time. Due to its MACH architecture, it can easily be connected with a wide variety of microservices, channels and marketplaces, depending on your specific needs.
"We at Actindo have made it our mission to enable sophisticated transactional business models across and beyond retail, e-commerce, and desktop.
Actindo is responsible for driving and delivering the single point of truth for composable commerce and delivering customer-centric experiences in the unified commerce era.”
- Boris Krstic, Co-Founder & CEO at Actindo
The Actindo Core1 platform uses APIs to ensure that data flows smoothly; detects and corrects errors in real-time; and ensures that the customer journey is tailored, smooth and satisfying.
That’s why renowned companies like Tesa, Nintendo of Europe, Powerfood and many more use Core1 to orchestrate and fulfil customer orders smoothly, across any channel.