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Best Practices for Selecting Retail Distributed Order Management Systems

Selecting a distributed order management (DOM) system is a new task for most retailers and requires a different approach to that which they have previously taken in selecting other software applications.

At Gartner, clients regularly come to us with the problems they’re trying to solve — increase fulfillment performance, reduce the costs of fulfillment and use more of the inventory they have available in their distribution network. They don’t always know exactly what sort of system they need, and even if they do, they’re not always aware of the various applications on the market and how to effectively select the right one for their needs. It’s a tough task for companies that haven’t been down this path before.

To help companies navigate the road towards selecting the right software, they need to focus on the following key factors.

Define the Scope of Business Fulfillment Requirements

They need to have clarity as to their reasons for investment and tightly define the scope of requirements to match fulfillment operational goals. This clarity comes from their vision for how fulfillment will be carried out:

Secondly, by assessing the current and planned future levels of fulfillment complexity across two dimensions (See Figure 1):

  • Supply complexity — the variety and roles of the locations within a retailer’s network from which orders can be fulfilled. Retailers that also use their stores, suppliers and alternative DCs for fulfillment would have high levels of complexity.
  • Demand complexity — the variety of methods available to consumers for receiving their online orders. Retailers offering in-store pickup, remote and curb-side collection, ship from store and supplier drop-ship fulfillment would have sufficient complexity to warrant investing in a DOM system.

To meet today’s consumer shopping demands, an increase in fulfillment complexity becomes unavoidable and should be considered an operational strength rather than an operational problem.

Use Order Fulfillment Scenarios to Compare Vendor Application Capabilities

Retailers are used to creating hundreds of functionality questions for selecting other applications in the past. But because selecting a DOM is a first-time task for most companies, and they lack familiarity with the systems on the market, this approach isn’t the best one.

They should instead focus on how they wish to manage their order fulfillment operation from a process perspective and less on exactly how DOM systems work and their functional scope.

This means creating fulfillment scenarios rather than hundreds of functional questions. Questions lack context. Scenarios are much more meaningful and allow for more accurate evaluation of how the applications will support their planned order fulfillment process flows.

Here’s a scenario that relates to a consumer ordering six products to be delivered to them in three days’ time, but none of the retailer’s inventory-holding locations has all six items in stock.

So, the retailer wishes the DOM application to:

  • Ship one product from a regional distribution center to the closest store to the consumer.
  • Transfer two more from a nearby store to the closest store to the consumer.
  • Pick the remaining three products from the closest store to the consumer.
  • Consolidate with the other three products shipped to the store.
  • Ship all six items as a single parcel from the closest store to the consumer.

Here’s the same situation written as a series of functionality questions.

  • Is your application able to:
    • Fulfil a multiproduct order from more than one inventory-holding location?
    • Pick products from both distribution centers and stores for the same order?
    • Pick a product from one store and transfer it to another store?
    • Consolidate products into a single store from distribution centers and stores?
    • Ship an order from a store for home delivery?

Unsurprisingly, due to the specific nature of each individual question, the majority of, if not all, vendors would say yes to everything, making differentiation between vendor offerings difficult to impossible. Scenarios provide the context of how the retailer wishes to operate its fulfillment process to a level of clarity that a list of functional questions cannot.

Manage the Speed of the Selection Process

The COVID-19 pandemic increased the urgency of retailers investing in DOMs, and they took 20% less time, just more than five months between searching and signing a licensing agreement than before the pandemic.

Retailers wishing to match or beat that speed should focus on these activities:

  • Spend enough time in the discovery and business process development stage.
  • Ensure approved budgets are in place before starting a system search.
  • Identify and involve all key cross-functional stakeholders with a vested interest.
  • Agree on the selection process timeline.
  • Limit the number of vendors in the final short list to no more than three.
  • Understand how DOM vendors licensing frameworks work and prepare internal data.
  • Agree on a comprehensive scoring model to drive the overall selection process.

Tom Enright
Research Vice President
Global Retail Supply Chain
[email protected]

Best Practices for Selecting Retail Distributed Order Management Systems

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