How distributed order management is shaping the future of ecommerce

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As online sellers strive to reach new customers in multiple locations across an increasingly diverse set of sales channels, they must constantly consider how their products can be delivered more efficiently and profitably. The answer to these challenges is often found in distributed order management (DOM). But what is DOM?

We spoke with Peter Allsop, Senior Product Manager at Linnworks, to understand the advantages of distributed order management and how retailers can take advantage of the opportunity.

What is distributed order management? 

There is no single definition of distributed order management. “It’s one of those terms that can mean different things,” says Allsop. “Most people will think of DOM as using two or more warehouses. So a retailer might have warehouses in the UK, Germany and the United States and use those locations to ship products in the most efficient and cost-effective manner to customers in various regions.”

But DOM can also be implemented in a single location. “Not all flavors of order management fit all products,” says Allsop. ” For example, a retailer might be shipping CDs and barbecues. The CDs can go in packets and be shipped pretty quickly. In contrast, the barbecues have got to go on a pallet and go via a different route. So DOM can refer to how sellers manage and fulfill those orders internally.”

DOM is also used by manufacturers. “A bike manufacturer might have customers that want to buy pre-built bikes and others who just want to buy the components,” says Allsop. “Distributed order management can help build a flow that helps manufacturers serve these very different customer needs.”

Core components and functionalities of distributed order management

Key components and features of distributed order management include:

  • Order Orchestration: DOM systems manage the end-to-end order fulfillment process, from order capture to delivery. They can intelligently route orders to the most appropriate fulfillment center based on inventory availability, proximity to the customer and shipping costs.
  • Inventory Visibility: Provides real-time visibility into inventory levels across all warehouses, stores and fulfillment centers. This helps prevent stockouts, reduce overstock situations and ensure customers can order readily available products.
  • Order Routing: Dynamically determining the optimal location for order fulfillment based on product availability, shipping costs and delivery time. This may involve splitting orders and routing them to different locations for efficient fulfillment.
  • Multi-Channel Support: Supports multiple sales channels, including eCommerce stores, online marketplaces and physical retail locations. This ensures a seamless customer experience regardless of how and where the order is placed.
  • Real-Time Updates: Provides real-time updates to customers regarding the status of their orders, including shipping and delivery information. This transparency helps manage customer expectations and improve overall satisfaction.
  • Returns Management: Handles the process of returns and exchanges efficiently, ensuring that returned items are correctly processed and returned to available inventory.
  • Integration with Other Systems: Integrates with other business systems such as Enterprise Resource Planning (ERP), Customer Relationship Management (CRM) and ecommerce systems to provide a unified view of operations
  • Analytics and Reporting: Provides analytics and reporting capabilities to analyze order performance, inventory turnover and other vital metrics. This information helps businesses make data-driven decisions and optimize their order fulfillment processes.

How distributed order management differs from traditional systems

Distributed order management isn’t a new idea. “Even when warehouses were using punch card systems to manage their operations, they still had sophisticated systems in place to process orders,” says Allsop. “The key differentiator between those systems and today is just a massive need and scale for automation.”

The rising costs of warehousing and shipping items elevate the need for automation.

“Gone are the days when you could have ten warehouse staff responsible for shipping 300 orders per day,” says Allsop.

The advent of ecommerce and its impact on order management

While ecommerce has enabled online sellers to reach a wider audience by placing their products on global marketplaces, the internet has also reduced barriers to entry for competition. This competitive market, enhanced consumer expectations and ever-present business costs can put incredible pressure on sellers’ profit margins.

“Profit margins on an average order value of £30 are wafer-thin when you take into account marketplace fees, taxes, shipping costs and all those other costs associated with importing and exporting products and managing a warehouse,” says Allsop. “Having a process that helps minimize those costs is essential. In this respect, automation is king.”

Key features of distributed order management systems

In today’s competitive ecommerce landscape, managing inventory, processing orders in real-time and integrating seamlessly with the supply chain are critical components for businesses striving to stay competitive. Three key features that form the backbone of distributed order management systems include:

Inventory visibility across multiple channels

Inventory visibility across multiple channels is a pivotal feature within distributed order management systems. This capability allows businesses to maintain real-time insights into their stock levels, regardless of the channels through which products are sold. 

Whether it’s online marketplaces, brick-and-mortar stores, or other sales channels, a unified and transparent view of inventory ensures accurate order fulfillment and prevents overselling or stockouts. This feature enables businesses to optimize inventory, reduce carrying costs and enhance customer satisfaction by delivering timely and accurate orders. 

Real-time order processing and tracking

Real-time order processing and tracking enable businesses to efficiently handle orders as they come in, ensuring swift and accurate processing. Real-time tracking allows for constant order status and location monitoring throughout the fulfillment process. 

This enhances operational efficiency and provides customers with valuable visibility into the progress of their orders. With this feature, businesses can proactively address potential issues, minimize delays and keep customers informed. 

Integration with supply chain and logistics

Integration with supply chain and logistics facilitates seamless coordination and communication across the supply chain, connecting various components such as suppliers, manufacturers, warehouses and transportation networks. By integrating these elements, businesses gain a comprehensive and real-time view of their operations, from order placement to delivery. 

This interconnected approach enhances efficiency by automating processes, minimizing errors and optimizing resource utilization. It also enables proactive decision-making, allowing for quick adjustments to changing conditions or demands. 

Benefits of distributed order management

The main benefit of a distributed order management system is the ability to get products into the hands of consumers as quickly and smoothly as possible. “Ultimately, it’s all about minimizing touch points and getting the stock to the customer as fast as possible,” says Allsop.

Distributed order management also removes the risk of unpleasant surprises. “If I’ve ordered something and all of a sudden I’m paying import tax, I’m annoyed,” says Allsop. “Especially if I thought it was from a UK company. It’s about creating as local a service as possible, with all the benefits of speed, cost and convenience.”

The ability to ship items faster and cheaper creates opportunities for online sellers to expand their international operations. While this opens up new markets, it can also create new challenges for sellers. “If you’re looking at expanding into the European market, you’re going to need to create listings in the local language,” says Allsop. “That’s why many UK sellers often look to the US or Australian markets before expanding into continental Europe.”

How distributed order management is shaping the future of online retail

Like every other area of online retail, Distributed Order Management is a rapidly evolving field. While many people are looking towards AI for future advancement, the smart money is currently spent on improving automation around rules and decision-making processes.

“Businesses are spending a lot more money on things like macros to support their specific business needs,” says Allsop. “For example, a customer that regularly ships liquids but can only ship 5 liters at a time needs the ability to split their packages based on volume and weight. There are so many variables, like the type of liquid or whether it’s a plastic or metal container. It’s custom scripted logic, rather than automation, but we’re seeing a massive increase in that kind of thing.”

Heat mapping is one area where AI is already helping warehouse teams become more efficient. “It’s an interesting model,” says Allsop. “You don’t necessarily want all your hot stock at the front of the warehouse because your warehouse staff get in the way of each other, creating bottlenecks.”

While technology is making huge strides in the warehouse environment, it’s important not to ignore the human needs of your warehouse staff. “If you don’t give people a level of ownership, they genuinely stop caring,” says Allsop. “If something becomes mundane, then that’s absolutely fine for some people. But others will work better with a little bit of variety.”

How to implement distributed order management

Implementing a distributed order management system will require a lot of preparation and relationship-building. “Local knowledge is always a good thing,” says Allsop. “For example, you’ve got to make sure you’ve got the right couriers at the right prices to fulfill that local need. You must also ensure you have the right rules set up. If you cannot afford to ship crossborder, don’t offer cross border shipping.”

Each geographic location will have different rules and regulations governing the importation of goods. “Hiring someone with experience in the local country to help you set up your operations, even as a short-term consultant, is a good idea,” says Allsop.

Testing markets before investing in them is always a good idea. “Working with a third-party fulfillment center is a great way to test a market without risking too much capital,” says Allsop.

How to choose the right distributed order management solution

There are several factors online retailers must consider when selecting the right Distribution Order Management solution. These include:

  • Scalability: Your chosen DOM system should be able to scale with the growth of the business. Can it accommodate increasing orders, products and channels without compromising performance?
  • Multi-channel support: Your DOM system should support multiple sales channels, such as online marketplaces, brick-and-mortar stores and various ecommerce platforms. This enables a unified view of inventory and order information across all channels.
  • Integration capabilities: Seamless integration with existing systems, including ecommerce platforms, CRM systems and other relevant software, is crucial. A well-integrated system ensures smooth data flow and reduces manual intervention.
  • Real-time visibility: Real-time monitoring and visibility into inventory levels, order statuses and other crucial data are essential. This ensures accurate decision-making, prevents stockouts or overselling and enhances overall customer satisfaction.
  • Flexibility and customization: A flexible DOM system allows customization to meet specific business needs. You should look for a solution that adapts to your unique workflows, business rules and changing market demands.
  • User-friendly interface: An intuitive and user-friendly interface is crucial for any system to be effectively utilized by your staff. Training time can be minimized and employees can navigate the system more efficiently.

How can Linnworks help?

With Linnworks, businesses can efficiently manage their orders, whether operating through a single location or multiple warehouses. The platform’s user-friendly interface, scalability and seamless integration across the ecommerce ecosystem make it a practical solution for retailers looking to streamline their operations. 

Linnworks provides real-time visibility into inventory across multiple sales channels, ensuring accurate order fulfillment and preventing stockouts. Its commitment to automation aligns with industry trends and best practices, addressing the need for efficient processes in the face of rising warehousing and shipping costs. 

Furthermore, Linnworks’ powerful analytics and reporting features empower businesses to make informed decisions and optimize their order fulfillment processes.

To learn more or to see Linnworks in action, contact us today or request a demo

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John Hayes

John Hayes

Marketing strategist and author who has been helping businesses develop their online marketing strategies for more than 20-years. Working alongside some of the biggest names in ecommerce and online marketing, he has dedicated much of his career to demystifying the web and highlighting opportunities for businesses to grow. He is the author of five books and is widely recognized as an influential thought leader in content, email and social media.