By Caleb Nicolson, General Manager, New Zealand TMX & Nick Bye, Director of Product at TMX.
While the use of Order Management Systems (OMS) to optimise inventory, reduce freight costs and improve customer service is not new, as the technology evolves, organisations are starting to explore a new layer of opportunity in a highly competitive e-commerce environment.
Order Management Systems (OMS) have been the backbone of better inventory management for some time now. Often utilised to drive freight efficiencies through inventory optimisation, many retailers have been using OMS to prioritise customer orders while also reducing freight costs.
If a retailer receives an order in Melbourne, and their distribution centre (DC) is in Sydney, people usually start using OMS to optimise the inventory available by working out the best fulfilment location based on speed to market and freight cost. However, as OMS technology evolves, there’s a new layer of efficiency that’s beginning to be uncovered.
OMS technology can now be used to calculate where the best location to send inventory from dependent on a number of rules beyond cost and speed including shipping/handling capacity, rejection rate, inventory levels, days of supply, selling price and proximity to the customer, sending further efficiencies up and down the supply chain.
As retailers mature in their use of OMS optimisation, inventory optimisation is becoming a key focus and one area where OMS can really make a difference is reverse logistics. Reports suggest reverse logistics can cost retailers upwards of 8-10 times the original freight cost and retailers are continuing to grapple with this challenge.
Optimising your inventory has a whole new meaning when you start exploring your reverse logistics processes. This is particularly relevant when you consider seasonal goods. If you know that you have more stock in a DC that is further away from the end-customer, but is also further away from your central DC, it may be more beneficial to pay the additional freight costs now. By approaching your freight strategy this way, you can eliminate the need to redistribute product at the end of the season.
This level of optimisation becomes even more critical when dealing with snap lockdowns up and down the country. According to data from Australia Post, in the 11 weeks to 11 September 2021, consumers in NSW shopped online in record numbers, with a 58.5% YOY growth. Retailers who could take advantage of their OMS capabilities to make smarter decisions could be more flexible and adapt to the situation and continue to meet consumer demand.
There’s also benefits beyond the operational aspect. This enhanced layer of OMS not only improves freight costs and speed to market, but also increases customer satisfaction. Which is crucial in the increasingly competitive e-commerce market.
As retailers struggle with disruption across their DC and store networks, with closures due to COVID-19 cases and major fluctuations in demand – inventory visibility is a defining factor here. Retailers who can capitalise on the flexibility and agility OMS provides are able to move inventory around their network much quicker and ensure faster processing and ultimately increase speed to market.
Being able to deliver a good customer experience is becoming one of the main competitive advantages in the e-commerce space, and while there continues to be disruptions to networks up and down the country, inventory visibility is more important than ever. New changes in demand have led to a distinct need for retailers to pivot and adapt by refocusing their inventory and operations. By utilising real-time data and intelligent insights through OMS technology, retailers are better equipped to handle fulfilment outages, capacity constraints and inventory protection and ultimately better service the end consumer.
By utilising OMS and ensuring it is part of your organisation’s daily reporting and decision making, it will soon become a critical tool in your demand planning processes and provide a competitive way for your team to optimise inventory.
With e-commerce volumes continuing to grow, and OMS capabilities evolving alongside this, now is the opportune time to capitalise on the benefits that OMS can deliver for both your operation and your customers.
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