Supply Chain Trends and Issues: Our Weekly Feature Article on Important Trends and Developments in Supply Chain Strategy, Research, Best Practices, Technology and Other Supply Chain and Logistics Issues  
  - Dec. 2, 2010 -  

Supply Chain News: A Distributed Order Management Thought Leaders Discussion


DOM as a Powerful Driver of Supply Chain and Customer Service Excellence

  by SCDigest Editorial Staff  
SCDigest Says:
When you consider that the foundation of DOM is based in its holistic visibility into inventory, orders, shipments, and customer interaction with the seller's brand, it's easy to imagine how that 360-degree visibility might be leveraged to improve the customer experience, as well as, the seller's operational efficiency.

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As part of our new SCDigest Letter on Distributed Order Management, SCDigest Editor Dan Gilmore recently sat down with John Konczal, Worldwide Industry Director Communications, Media, & Retail for IBM, to discuss a number of topics related to DOM. That interview is transcribed below. To download an electroni copy of the full 16-page letter on Distributed Order Management as well as a variety of other materials, please visit our Distributed Order Management Resources Page.


Gilmore: Many supply chain professionals are not really sure what distributed order management is – how would you define it?

Konczal: Distributed Order Management serves as the technology foundation of the selling and fulfillment processes for many types of businesses, including retailers, communications service providers, and manufacturers. It is a commerce engine that provides a central solution for managing the information, executing the process, and monitoring to ensure customer orders are fulfilled accurately and cost efficiently across a complex network of sourcing and fulfillment systems and processes, as well as suppliers.

Distributed order management technology provides key capabilities such as aggregation of global inventory views and intelligent order sourcing, capabilities that not only help improve supply chain efficiencies but also help improve the business’ ability to be responsive to customer demands.

But it really goes further than that. Distributed order management also plays a key role in the customer sales experience by centrally brokering and managing orders from multiple sales channels to ensure customer orders are executed to customer expectations. In addition, by playing the role of a central order orchestration hub, the order management system also provides a 360-degree view of all of the customer’s purchases across all of the seller’s channels. So distributed order management is a key enabler of increased supply chain efficiency as well as an improved customer experience.

Gilmore: I would say as much any other supply chain application area, DOM addresses different problems and challenges depending on the industry sector. What types of problems can DOM solve across different vertical industries?

Konczal: To start, the primary purpose of a distributed order management system in any vertical is to intelligently broker orders across the disparate systems and processes involved in fulfilling an order while using a global view of all inventory to intelligently sourcing the line item components of that order to ensure that the business can meet customer demand while optimizing inventory utilization. With that said, how distributed order management is applied to solve specific business problems can be quite different from vertical to another.

Consider two examples, one in the retail sector, one in communications. In retail, given the still generally weak consumer demand, many retailers have aggressively cut back on inventory levels. With less safety stock to buffer risk, a lot of them are also seeing rising levels of lost sales due to in-store stock-outs.

Many retailers wrestle with in-store stock-outs and have had no efficient, reliable means of locating available-to-promise inventory, thus saving the sale and satisfying the customer in a cost-effective, timely way. A distributed order management system can help solve this problem by leveraging real-time, back-end integration into many systems that monitor inventory availability across multiple inventory locations like other stores, in DCs, or even inventory on order or in transit to the retailer. Most retailers do not really have these complete capabilities today.

Through cross-channel integration capabilities, a distributed order management solution can provide the store associate with visibility into available-to-promise inventory at eligible fulfillment locations as well as indicate the optimal location from which the product should be fulfilled, whether it will be shipped, held for pickup, or transferred. And the distributed order management solution can interface with the existing in-store point of sale system to enable the store associate to finalize the purchase of the out-of-stock item before the customer ever leaves the store. Finally, the distributed order management system can trigger the appropriate notification to the designated fulfillment location. And, because of the system’s integration components, you and your customer maintain comprehensive order status visibility throughout the process. So in retail, the order may be a single item that can be fulfilled uniquely based on inventory availability.

Now the problems that distributed order management solves in retail are compounded in industries like communications and manufacturing. Let’s take a look a communications. Let’s say a small business is buying a broadband line supported by a special secure router that requires custom installation services. Here, a communications service provider’s distributed order management solution will need to ensure the logical network inventory is available, the router is available from a third-party supplier and can be shipped to meet the preferred installation date, and that installation resources are available at the customer’s preferred installation date. These are all inventory items of different types for which availability and fulfillment must be carefully orchestrated to ensure the delivery and installation promise is kept with the customer. While the complexity in communications may be a bit higher than in the retail case, the end need and result of distributed order management is the same: orchestrating all aspects of inventory awareness, sourcing, and fulfillment to meet customer demand and expectations while optimizing the utilization of inventory and resources.

Gilmore How have DOM capabilities advanced over the past few years?

Konczal: The big changed over the last few years has been the move from a supply-chain facing system to both supply-chain facing and customer-facing. The typical view of a distributed order management system is one of a behind-the-scenes, supply-chain facing system focused on effectively and efficiently managing orders across a diverse supply chain where seamless integration to multiple inventory sources was the key requirement. For example, a DOM system’s ability to automatically generate purchase orders when supplies are needed, while warning of events which could delay deliveries is a key feature. In addition to providing order purchase capabilities, DOM systems can help speculate future supply demands based on current conditions.

Obviously, these are still critical functions of DOM solutions. But distributed order management is now moving closer to the customer and using integration capabilities to provide increased visibility to the customer to enhance the buying experience. For example, a distributed order management system with a well-defined services oriented architecture can provide inventory, order, and shipment status information to users or customers across any combination of sales channels.

Some of today’s distributed order management systems can provide product and inventory availability information to a retail store associate’s mobile device to handle customer inquiries on availability in real-time. They enable customers to track and even modify their orders across different interaction channels. Distributed order management solutions are advancing in ways that enable them to have a direct positive impact on the customer experience by moving inventory, ordering, and shipment information closer to the customer.

Gilmore: Can DOM solutions be deployed in a phased approach? If yes, how would that work?

Konczal: Numerous roll-out strategies are valid. Offering in-store pickup of on-line orders is a classic place to start for retailers. Similarly, leveraging in-stock availability to recover from a stock-out is another. Establishing inventory visibility everywhere (whether in stores, in DCs, in transit to stores, on order, or in transit to distribution centers) provides the seller with the luxury of sourcing from the most appropriate inventory source without jeopardizing on-hand inventory levels or failing to meet the fulfillment window for the customer.

(Supply Chain Trends and Issues Article - Continued Below)



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One apparel retailer is rolling out their DOM implementation as follows. Phase one, they simply want to be able to trigger an inventory pick and hold at an in-stock store so they can capture the order of the product at the out-of-stock store. Phase two, they intend to take an on-line order and trigger a similar in-store merchandise pick and hold to enable buy online, pick up in store. Phase three, they will offer in-store returns of online purchases. Phase four, they will enable ship to home from stores. And, phase five, they will be able to source from any inventory pool (i.e., in stores, in DCs, in transit, or on order) to optimally utilize inventory while minimizing fulfillment time and costs.

Similar types of deployment patterns can be used in other industries well. The deployment patterns used are based on the most significant need of the business as well as the flexibility in configuration of the DOM solution.

Gilmore: Many people think of DOM as being very e-commerce oriented, but can DOM serve as a company’s primary order management system?

Konczal: Distributed order management is designed to serve as a company’s primary order management system. This is because of the multi-channel selling environment of today’s businesses. Today’s consumers expect sales channels to work together, whether at a retailer, manufacturer, or service provider, as one seamless entity. The consumer sees one brand, not multiple channels.

Distributed order management can play a key role in unifying sales channels, such as e-commerce and call center, to enable a customer to have consistent ordering experience across channels. It can provide the same view into inventory across all channels, plus act as the broker and information source of the order across all channels. But more importantly, distributed order management can facilitate transactions that cross channel, such as buy on line and pick up in store or buy anywhere and return anywhere. The distributed order management systems becomes an order orchestration hub that facilitates order transactions and information across all channels to create a unified cross-channel customer experience.

Gilmore: What do you see as the top areas of benefits that companies will usually see from DOM deployment?

The primary and traditional benefits of distributed order management include improving order accuracy by tightly orchestrating orders across a complex network of fulfillment systems, processes and suppliers. DOM can also help to reduce costs by automating the intelligent sourcing of orders and optimizing the use of available inventory to meet customer demand.

Increasingly though, a key benefit of distributed order management is in the area of increasing customer satisfaction by delivering a seamless cross-channel customer experience courtesy of cross-channel ordering and fulfillment capabilities such as enabling customers to order from anywhere and pickup from any location.

Gilmore: Sterling Commerce was recently acquired by IBM. Are there synergies between what Sterling brings to the table with its DOM solution and IBM solutions and capabilities?

Konczal: Sterling Commerce’s distributed order management solution is now part of IBM’s Smarter Commerce portfolio. IBM's Smarter Commerce offerings are flexible and integrated solutions spanning the entire spectrum of commerce phases that include buying activities such as sourcing, controlling, and procuring of goods and materials; targeted and personalized marketing capabilities across all customer interactions; selling and fulfillment of products and service across all channels; and service, responding to all customer needs throughout the relationship.

As part of Smarter Commerce, the IBM Sterling order management solution integrates with—and takes advantage of—the advanced capabilities of many IBM solutions to help our customers improve their business processes. This includes such examples as enabling our customers to better optimize inventory levels by providing enhanced analytics and intelligence around current inventory positions and sourcing options, resulting in improved fulfillment rates at a lower cost. It also includes integrating such selling channels as Web, mobile, kiosk, call center, and store POS systems to deliver a seamless cross-channel customer experience regardless of sales, ordering, sourcing, fulfillment, or service channels. Finally, the integration capabilities from the former Sterling portfolio provide valuable visibility into order, inventory, and shipment status information that can further enhance the seamless cross-channel customer experience.

Gilmore:: Where can DOM go from here?

Konczal: The boundaries are really nearly endless. When you consider that the foundation of DOM is based in its holistic visibility into inventory, orders, shipments, and customer interaction with the seller’s brand, it’s easy to imagine how that 360-degree visibility might be leveraged to improve the customer experience, as well as, the seller’s operational efficiency.

For instance, knowing what the customer has purchased in the past—regardless of the combination of channels—and what inventory is currently available, offers/promotions can be tailored to best speak to customer interests/needs while promoting slow-moving inventory. End-of-season inventory—that’s at risk of markdowns—in slow-moving channels can be sold a full price when sourced across channels.

Inventory levels can be pared down to the most efficient levels by removing excess safety stock. Orders of any type—including orders with a combination of product and service components—can be managed at the line item level while maintaining an eye on the overall context of the complete order. And, the concept of an order need not be simply related to those steps that led to a purchase, but, rather can include any investigatory steps that began to show an interest in a particular product or collection of products. Said differently, the purview of order management will no longer be from the point of purchase onward, but, rather, the point of interest onward.

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