Distributed Order Management Definition
Distributed order management (DOM) is a system that coordinates the arrival of deliveries on time with the lowest cost possible.
Because the last mile of fulfillment is the most expensive, reducing cost means fulfilling from the closest location to the buyer possible. Distributed order management systems help companies achieve this through automation, order routing, and omnichannel order capabilities.
Overview of Distributed Order Management
Both B2B and B2C buyers view making and receiving orders across channels as critical factors in buying decisions. When stores are unable to manage orders across those channels efficiently, they lose customers.
The need for omnichannel commerce gave rise to distributed order management systems. But that lofty goal is only achievable through software specialized in enabling DOM, like more modern order management systems (OMS) and some standalone DOM software.
Distributed order management and OMS
A business hoping to use distributed order management needs a robust and reliable platform. But many order management systems (OMS) fall short in meeting business needs for DOM.
Unfortunately, that means that many businesses attempt to conduct distributed order management without the proper tools and make costly mistakes. Using a system that isn’t built for distributed order management is a critical error.
Some order management systems may advertise themselves as able to coordinate distributed order management but are incapable of handling omnichannel orders. That means they aren’t able to fulfill the essential purpose of the distributed order management system.
How Distributed Order Management Works
The core idea behind distributed order management is that orders should be fulfilled from the nearest location that has the item the customer is ordering. Companies use three key methods to do this: third-party logistics, dropshipping, and ship-from-store and buy-online-pickup-in-store.
Third-party logistics providers
Companies using third-party logistics (3PL) providers hire an outside company to perform distribution tasks. They hire a 3PL company with distribution centers close to the buyer in order to reduce the last-mile distance between the fulfillment center and the customer’s doorstep.
Shortening that last mile drastically reduces the cost and time of shipping. An OMS can make working with a 3PL more efficient through its automation capability.
For example, a seller might automate the process of passing order information to and from a 3PL. The 3PL fulfills the order with the automatically-updated information, and when the order is completed, it automatically updates the seller’s database. The result is a seamless 3PL partnership.
Companies also bring their fulfillment centers closer to customers with dropshipping. Dropshipping is a practice where a company completes a sale online and pays a business near the buyer to send the purchased product.
This accomplishes the primary goal of DOM: bringing the seller’s fulfillment center closer to the buyer. In this case, the fulfillment center is a local store.
One of the most significant advantages of dropshipping is the cost savings for the seller. Not only are shipping costs reduced by selling from retailers near the customer, but inventory costs are also reduced for the seller.
After all, a seller relying on dropshipping doesn’t need to keep any stock in inventory. Instead, the seller simply pays the retailer for holding the item in inventory.
SFS and BOPIS
Ship-from-store (SFS) and buy-online-pickup-in-store (BOPIS) are two other ways of reducing shipping costs and time.
When customers choose to ship from a local store, they choose a store that’s convenient. The fulfillment center is chosen by the customer, who benefits from the short last-mile shipping and helps the seller achieve DOM.
BOPIS is even more efficient for sellers. With BOPIS, the buyer is completing the last-mile logistics themselves.
Distributors only need to fulfill orders to storefronts, and the buyer completes the most cost and labor-intensive step. This is only possible through strong partnerships with local stores and a well-implemented DOM system.
Example of Distributed Order Management
As an international enterprise with a supply chain that crosses continents, Nike has significant challenges to overcome when it comes to order management. To adapt to these challenges, it purchased an analytics platform and adopted a new distribution model.
This new model was based on the principles of distributed order management, using technology to bring fulfillment centers closer to customers and also enabling SFS and BOPIS.
As a result, Nike increased its ability to fulfill orders online by three times. This happened while many leaders believed that supply-chain distributions were the largest threat to their business. Nike avoided this crisis by investing heavily in distributed order management.
Not only did Nike build fulfillment centers, it also plans to develop robust SFS and BOPIS capabilities by opening 200 small stores. This means it will be able to deliver to customers the supplies they want at an even lower cost than before.
- Distributed order management organizes shipments to fulfill orders with the minimum expense and maximum cost savings.
- Third-party logistics, dropshipping, SFS, and BOPIS fulfillment are pillars of a successful distributed order management system. They let companies complete orders as quickly as possible without incurring high expenses.
- DOM let Nike increase its fulfillment capabilities by three times in the midst of an international supply chain crisis.
- fabric OMS makes DOM easy and profitable for its users. It makes DOM practices like 3PL and SFS easy and error-free with automated data communication.