All online merchants need to have order management, whether integrated into ecommerce software or as a separate system. It is essential to decide which backend systems will be responsible for order fulfillment. You have three options: Ecommerce System, ERP, or a dedicated Order Management System (OMS).
1) Manage orders in the Ecommerce system
Every Ecommerce system comes with built-in order management functionality, and it can be sufficient for some businesses that manage orders exclusively on their e-commerce domain. It should work fine for small to medium businesses when all orders are placed in an online shop, and your Ecommerce system is closely tied to your fulfillment process and inventory management. However, if a business has multiple channels, suppliers, and delivery partners, the chances are that it needs a more robust system for managing orders.
2) The next option to consider is ERP.
Suppose you are an existing retail business that adds a digital channel or a manufacturer that wants to sell directly to consumers. In that case, you already have an enterprise resource planner (ERP) with some order management capabilities. When should you use an ERP as an OMS?
Over the last decade, many ERP systems have added order management capabilities to their products. For small-volume retailers with a less complicated distribution network, an ERP approach might sufficiently meet most business requirements either through standard capabilities or custom workarounds. This approach can be cheaper initially and leads to a more straightforward technology stack with fewer vendors to manage.
While leveraging an ERP may be sufficient for some businesses, it brings some challenges. ERPs are expensive to implement and manage. And while an initial bundled price for order management may seem cost-effective, retailers often spend more money in the long-run customizing the system to meet their needs.
Additionally, the lack of innovative order management capabilities (omnichannel, advanced routing, multiple payment options, automation, loyalty, etc.) may lead to a loss of sales by not meeting customer expectations. While ERPs can be customized, most companies are reluctant to change their ERP system, as it is the source of financial records.
One of the biggest challenges to leveraging an ERP as an OMS is the difficulty of adding (or replacing) other tools within your technology stack when you decide to:
● Offer multiple payment types
● Implement a new loyalty program or a subscription service
● Expand into additional sales channels and marketplaces ● Switch fraud detection vendors
● Or implement BOPIS or curbside pickup
3) Use OMS
Your third option is to use a dedicated order management system (OMS) that complements your ERP functionality. It serves as the single source of truth for order and real-time fulfillment data while remaining agnostic enough to easily integrate and/or communicate with your other systems. If your business takes orders from many different places: marketplaces, websites, POS / in-store, phone orders, and fulfills orders from many different warehouses or suppliers, a separate OMS is the way to go.
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