Why Today’s ERP Systems Need OMS
Companies need to optimize their operations to stay competitive in today’s fast-paced business environment.
Consumers expect retailers to engage with them personally and maintain this interaction throughout the entire customer journey, especially when fulfilling orders and processing returns. If the process becomes frustrating, customers are likely to turn to other retailers—and expose their negative experiences on social media.
To add to the challenge, retailers are no longer compared to their closest competitors. Instead, they are held to the high standards of innovative global brands like Amazon and Alibaba.
Integrating an order management system (OMS) with an enterprise resource planning (ERP) system can help retailers improve their efficiency and accuracy in managing orders and inventory.
By combining the strengths of both systems, businesses can streamline their order fulfillment process, gain better visibility into inventory levels, and provide a better customer experience.
Adding OMS to ERP can be a strategic decision for companies that want to optimize their operations and gain a competitive advantage in the marketplace.
Why ERP Isn’t Enough
Today’s top brands were constructed from the ground up with revolutionary technology. As a result, they are not held back by outdated systems or fragmented processes driven by unreliable data.
To remain competitive, retailers must thoroughly comprehend the strengths and shortcomings of their current processes and supporting information technology systems. Although ERP solutions still have a role to play in meeting customers’ demands, they do not offer the essential features that a best-of-breed OMS can provide.
Initially, ERP systems were created to restock stores and sizeable distribution centers. As the retail industry progressed, they became robust, reliable, and dependable records management systems for retailers.
However, a shift occurred when the purchasing, finance, and inventory systems became monolithic.
These systems can’t meet the needs of today’s discerning and tech-savvy consumers. Modern consumers expect to interact with retailers anytime, anywhere—and they desire the flexibility to have orders fulfilled at a location and time of their choice.
Now, retailers are presented with a substantial IT predicament. They must decide whether to pursue the challenging path of upgrading their ERP system to incorporate newer analytics and faster in-memory processing, despite the potentially high cost and lack of proper functionality.
Alternatively, they could take the risk of constructing their own system, necessitating significant IT investment and a long time-to-market.
Or they could invest in a specialized order management system optimized for omnichannel operations to supplement their existing ERP.
The Power of a Modern Order Management System
By incorporating an OMS layer, retailers can avoid the need to overhaul their IT infrastructure altogether. They can meet customer demands in a timely, cost-effective, and low-risk manner without undergoing extensive surgery on their systems.
This approach enables retailers to develop a viable product rapidly while maintaining the integrity of their existing IT infrastructure.
Limits of a Traditional ERP
- Tailored for traditional brick-and-mortar retail and not optimized for omnichannel operations.
- Manages inventory independently for each sales channel, limiting visibility and causing potential stock imbalances.
- Has limited inventory allocation capabilities and cannot use store or warehouse conditions to fulfill orders.
- Uses a rule-based waterfall approach for fulfillment sourcing, which may not be flexible or responsive to changing demands.
- Has limited returns functionality, with returns restricted to their original sales channel (e.g., store purchases can only be returned in-store).
- Uses batch-driven updates and has rigid integration limitations, which can result in delays and compatibility issues.
- Not designed for agility and enforces strict business processes, potentially inhibiting innovation and growth.
- Provides only one view of inventory, regardless of the product, channel, or consumer, which may lead to inaccurate order promises and inefficient operations.
Benefits of a Best-of-Breed OMS
- Specifically designed to handle the complexities of modern shopping, providing a 360-degree view of the customer, processing large order volumes, and immediately releasing them to fulfillment locations.
- Cloud-native and agile by design, capable of adapting quickly to changing demands.
- Provides a global enterprise inventory, making any item in any location available to view and sell from any location or channel, enabling services such as ship-from-store, click and collect, and save the sale.
- Can sell against inbound or return supply and dynamically optimize and select the most profitable fulfillment source in real-time, reducing shipping costs and time-to-ship.
- Offers a real-time view of the order and real-time promising, allocation, and exception management.
- Supports omnichannel purchases, returns, and exchanges.
- Provides an unlimited number of views of global inventory, ensuring that only inventory that meets the buyer’s conditions is presented as options, resulting in excellent customer experiences.
- Uses real-time heuristic algorithms for optimized fulfillment sourcing, increasing efficiency and order accuracy.
Not So Fast—You Still Need ERP
Although ERP has some notable limitations, it remains an essential system for modern, integrated commerce.
For over a decade, ERP systems have capably handled store, inventory, and supply chain operations, enabling products to reach stores in synchronization with relatively predictable demand forecasts.
Given the high costs, risks, and potential harm to a retailer’s operation, replacing the core of their business is a complex and risky decision to make. For this reason, ERP still plays a crucial role in modern commerce.
Integrating with and stacking an OMS above the existing ERP provides a quick and cost-effective solution to meet the demands of consumers. While major ERP systems may have limited OMS capabilities, a distributed order management system can dynamically optimize order fulfillment across a complex network of systems and processes, in contrast to the static nature of ERP.
By working in tandem with an existing ERP, an OMS enables retailers to offer the functionality and innovation that modern consumers expect while retaining the robust accounting and finance functionality of an ERP.
The advantage of integrating an OMS is the ability to add functionality quickly and incrementally. This allows retailers to focus on achieving quick wins with minimal investment and risk within weeks and months rather than years.
With this approach, obtaining a return on investment and building out OMS capability becomes easier. Plus, it encourages a culture of continuous improvement based on agile working methods.
For example, an OMS enables retailers to implement a click-and-collect service. If it is successful and generates revenue, the retailer can incorporate additional functionality such as same-day delivery, drop-ship capability, ship-from-store, and more. They can gradually expand their offerings with the least amount of organizational strain.
Using OMS in Tandem with ERP
Implementing OMS in tandem with ERP creates a critical component in delivering a unified commerce experience. OMS offers a variety of benefits, such as:
- Real-time access to accurate information, including a view of available to promise (ATP) inventory
- A seamless and consistent experience across all channels with personalized engagement and interaction
- Real-time visibility of order status, regardless of the fulfillment channel
- Configurable and dynamic order orchestration, providing a range of delivery and collection options driven by customer convenience
- Complete access to entire inventory across all channels, ensuring optimal customer experiences
Most retailers are adopting OMS to enrich, rather than substitute, their ERP systems.
The primary benefit of integrating both systems is that it enables retailers to attain front-end business flexibility without compromising accounting and finance capabilities. Retailers realize that order management provides quantifiable business advantages, especially in terms of inventory management, logistics, and fulfillment. Using an OMS layer alongside an ERP guarantees that each system can leverage its strengths with fewer modifications.
OMS can view inventory across the entire supply chain network in all stock locations (including stores, hubs, DCs, inventory in transit, and with suppliers). It’s also an additional revenue driver, allowing retailers to sell their inventory through all sales channels (stores, customer service, digital channels).
OMS also allows retailers to provide accurate and real-time customer insights on inventory levels, lead times, and order statuses.
At the same time, OMS safeguards profitability by ensuring online orders are fulfilled in the most profitable way by sourcing inventory from the best location.
Perhaps more importantly, OMS technology’s ability to enable innovation, fulfill modern customers’ expectations, and win customer loyalty—with minimum risk—sets it apart from other systems.
It’s Time to Modernize Your ERP With OMS
Faced with the immediate challenge of agile ecommerce, OMS + ERP is the most effective solution for retailers.
While ERP systems have served as a reliable system of record for managing store, inventory, and supply chain operations, the limitations of ERP in meeting the demands of modern retail are becoming more apparent.
However, the addition of OMS enables retailers to enhance, rather than replace, their existing ERP systems. OMS provides retailers with real-time information, a seamless and consistent customer experience, personalized customer engagement, a single view of customers, orders, and inventory, and dynamic order orchestration, among other benefits.
By integrating OMS with ERP, retailers can achieve front-end business agility without sacrificing functionality and deliver the experience that modern consumers expect.
Flxpoint offers an OMS that you can fully integrate into your ERP. Talk with an expert to learn more.
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