If anything’s clear about the rapidly-growing ecommerce market, it’s moving multichannel.
With more consumers and ways to sell online is a definite positive, there are some clear hurdles involved with selling multichannel that can’t be passed up, especially in regards to inventory and order management.
Fortunately, there are Order Management Systems (OMS) - tools that keep everything under control are out there, and can make managing multiple channels, warehouses, and inventory levels a bit easier to well… manage.
The Move Towards Multichannel
Before we dig into Order Management, first we have to ask, “what is influencing this move towards multichannel?”
Consumer behavior is the short answer.
In the last 25 years or so, thanks to the ubiquity of the internet, we as consumers have become accustomed to a more “on demand” lifestyle. This has applied to how we consume entertainment, how we get our news, and of course, how we shop.
A recent PricewaterhouseCoopers study on consumers’ multichannel behavior found that 74% of US respondents purchase goods from the same retailer across more than one channel.
Think about that statistic for a second. Nearly 3 out of 4 people buy from the same retailer from more than one channel. How many channels do you currently have a presence on?
The implications for your acquisition and retention strategies are staggering. Have you missed repeat revenue from a customer simply because your items weren’t present when they were shopping on Amazon? If you are present on Amazon, are you using your packaging to drive those buyers to the channel you own?
The word multichannel (sometimes referred to as omnichannel) traditionally means selling online and offline. Make no mistake, it still does, but these days multichannel can be completely online, as the amount of sales channels out there is substantial and growing by the month.
Selling Anywhere, Anytime
Sales channels exist wherever there’s an Internet connection and this will become even more true as the internet continues to mature and evolve.
Orders are placed via social media with “buy” buttons, at least a third of online sales are made on mobile devices, retailers can go physical with point-of-sale systems, and smart TVs are on the verge of becoming yet another screen for selling. Plus, you’ve still got your standard hosted and home-grown storefronts, as well as marketplaces as broad as Amazon and as specific as CrateJoy.
Long story short, avenues for selling are expanding. While it’s definitely possible for a retailer to sell on any number of ‘em, managing each is an entirely different story.
Inventory is spread across multiple channels with orders arriving from each.
Logging into every channel every day to collect orders, and manually updating inventory quantities in a master spreadsheet is overkill, not to mention an opportunity for human error that could lead to a delayed order or stockout.
On the Supply-Side of Life
Multichannel isn’t restricted to the customer-facing side of your business, either.
Retailer’s fulfillment models are moving that way as well, with merchants mixing models depending on their products. Multichannel issues pop up here, too.
An example: let’s say a retailer is selling on Shopify while also selling high order volume products on Amazon. They use the marketplace’s outsourced fulfillment service, Fulfillment By Amazon (FBA), to efficiently fulfill only those products sold on Amazon, as FBA tacks on slightly higher fulfillment fees for non-Amazon products. Those non-Amazon products are fulfilled in-house.
Problem is, the merchant’s inventory is now straddled between two locations -- their personal storage and an Amazon FBA warehouse -- making it more difficult to track orders and monitor inventory quantity.
Another example: a Shopify merchant creates, sells, and fulfills its own handmade goods, but they’ve decided to start dropshipping in an effort to expand their product catalog. They sell a dropshipping supplier’s products.
An additional supply-side channel is now in the mix. The merchant ensure that their dropshipping supplier has inventory on hand to meet demand. Orders for those dropshipped products must also be relayed to the supplier if they’re to fulfill them.
Bottom line: consumer behavior and ecommerce as a whole are pushing retailers towards multichannel business models, but with more channels and warehouses, the more difficult it is to manage a business. That’s where Order Management Systems come in.
Bringing Order to Your Multichannel Machine
The solution to multichannel mayhem is an Order Management System (OMS). It’s at the center of your multichannel machine -- the center of a wheel keeping all of the pieces moving together.
Every channel of your business, whether it’s a sales channel, a back end supplier, or a useful accounting app, can be connected with the OMS. Information from each channel flows to the OMS, which then relays it back to every other channel, keeping everything organized in a single location.
This graphic, based on research by Software Advice, clearly illustrates how an OMS keep a merchant’s multichannel wheels turning. They help optimize the fulfillment process, and keep your inventory, regardless of all your channels, transparent.
Because on-time delivery ranked highest in impact, let’s begin with shipping.
Order management systems are all about -- you guessed it -- handling orders, and an inevitable part of that is shipping.
Most order management systems integrate with a variety of shipping providers, like USPS, FedEx, or UPS. Through that connection, merchants can access cost-effective, real-time shipping rates, purchase postage and shipping insurance, and print shipping labels for each of their orders all in one place.
Plus, because the OMS is helping you manage orders, it’s able to keep tabs on them, letting the appropriate sales channel know of the order’s status and tracking number as it journeys to the customer.
Along with those shipping capabilities, order management systems are oftentimes equipped for inventory management. Makes sense -- orders are obviously composed on inventory, and that’s the very reason sales channels need to be aligned.
Inventory is likely your biggest investment so it’s critical you keep tabs on it. But things get messy when inventory is spread across multiple channels. Fortunately, order management systems clear up visibility of inventory.
Here’s a simple rundown of how it works:
- Once they begin using an OMS, a merchant inputs their current inventory count into the system.
- They integrate each of their channels with the system which then connect to that inventory count.
- When an order is made on a channel, it alerts the system, relaying the order specifics.
- Then the OMS updates inventory quantity, writing back amounts to each connected channel, whether it’s sales or supply-side.
- The merchant logs in to fulfill orders, prints a label via the system, and ships it off.
That last step may change depending on fulfillment model. If you’re dropshipping, you’d shoot the order to the product’s dropshipper. If outsourcing fulfillment with a third-party warehouse, it goes their way. And if each of those supplier channels is integrated with the system, the order can be relayed automatically.
Speaking of suppliers, in addition to providing a single place for monitoring all those orders and inventory, Purchase Orders are often able to be easily generated. Supplier information can be plugged into the system, so when a restock is needed, a merchant can whip up a quick Purchase Order and send it their way.
But a decent chunk, 29%, of order management users aren’t satisfied with their service due to their lack of integrations with enough channels.
Integrations are Everything
Like the spokes of the wheel, integrations are what connect your apps and channels to the OMS. They’re the conduit that allows information to flow between one piece of software and another.
The main cause of those retailers’ dissatisfaction is an order management system’s failure to meet specific integration needs. If a merchant’s running an unwieldy beast of a business, with sales channels aplenty and an entire portfolio of apps relying on inventory or order info, they’ll need each of them connected to the system for things to run effortlessly.
An OMS typically will integrate with as many sales and supplier channels or third-party apps as is feasible for them. The more integrations, the more compatible customers.
But feasibility in this case really means “if it’s worthwhile.” Creating these integrations costs money and time. In order to build them, you’ll need help from a developer who knows how to tinker with an API.
Getting Comfortable With The API
If integrations are spokes, APIs are the nuts, bolts, and the directions booklet for putting the wheel together. API stands for application programming interface, and it acts as a blueprint with rules and routes that help two pieces of software integrate with one another so they can communicate.
Software developers are the people dealing with these acronyms; they both build them and tap into them to create integrations. Sales channels, apps, and supplier channels hire these developers to build in-demand integrations with other apps and channels in an effort attract as many customers as possible, whether it’s a just-starting merchant or a multichannel mammoth.
A great example is Shopify Plus’ very own API. A high-volume retailer may need an integration for something as simple as a marketing pop up app, but as hefty as a Customer Relationship Management (CRM) integration like SAP.
Through their API, Shopify Plus is able to meet each of those business integration needs, regardless of scale. Plus, in the event that an integration is extremely unique, Shopify Plus’ expansive partner network is available to create it.
About The Author
Sangram Kadam is a co-founder of Ordoro, a shipping and inventory management tool. Ordoro tackles the unsexy but essential function of supply chain and order management, allowing merchants to streamline their back-office processes across all their sales channels so they can focus on growing their business.