Using order management to get closer to your customers

This article is brought to you by Retail Technology Review: Using order management to get closer to your customers.

To compete and win in todays competitive marketplace, aggressive companies have opened a number of promising and profitable new distribution channels.

In addition to traditional brick-and-mortar stores, electronic data interchange, catalogs and mail order sources, a growing number of sellers now also take orders from Web-based customers and mobile buyers, as well as build-to-order and engineered-to-order customers. The proliferation of distribution channels has allowed many companies to penetrate new market segments and to create and grow lucrative new revenue streams.

Yet those exciting new sales and distribution channels have also created significant challenges. The newer Web and mobile channels are faster and more dynamic, and are therefore riskier and less predictable than traditional channels. While that dynamic nature can add considerable agility to an organization, the technologies needed to establish and manage those channels are new and unfamiliar to many firms.

Just as many companies were exploring these innovative new distribution opportunities, many were also experiencing successive waves of mergers and acquisitions. Those changes opened even more opportunities, but the most common approach of creating separate channel processes and systems also tended to create a proliferation of enterprise resource planning systems and other information technology (IT) systems that were complex, siloed and difficult to manage. Those calcified back-end structures add cost, risk and inefficiency to any distribution network. They prevent companies from planning and executing the accelerated product life cycles demanded by todays markets.

Companies in a number of industrial sectors have spent the past few years addressing the shortcomings of their legacy infrastructures, working diligently to drive greater speed and efficiency throughout their supply chains. Those efforts have yielded many positive results, from accelerated inventory turnover to reduced waste and improved bottom-line profits. But for too many companies, those inward-looking efforts have also led to a loss of focus on the single most-important asset any company hasits customers.

Executives can see the symptoms every business day. The most serious of these symptoms is poor service quality, which can be measured by declining satisfaction ratings, increased customer churn and the failure to meet agreed-upon service-level commitments.

Thats why many forward-looking organizations now recognise a pressing need to refocus their energies on their customers. Executives increasingly realise the need for better supply chain visibility, improved analytics and faster, more responsive customer service.

Fulfil expectations

The bottom line for customers: they expect to receive what they ordered, when it was promised. Despite that fact, most companies dont have processes and systems in place that enable them to achieve differentiated fulfilment operations. According to Aberdeen Group, leading enterprises use order fulfilment to continually raise the service performance bar versus the competition. However, only 15 per cent of the companies Aberdeen surveyed reported having an order fulfilment process that extends across the value chain. And only 21 percent of respondents described their customer service strategy as proactive and focused on continuous improvement. (Aberdeen Group: Next-Generation Order Fulfilment: Paving the Road to Success, March 2005.)

How does a company recognise a poorly functioning order management system? Here are a few of the trouble signs:

         Pricing or brand messages across products, services or distribution channels are inconsistent.

         ERP and IT bandwidth constraints limit the ability to fulfil orders quickly and efficiently.

         Order fulfilment costs are growing as a percentage of revenue.

         Excessive inventory-holding costs have a negative effect on cash flow and profitability.

         Material delays affect fulfilment, service-level agreements and customer satisfaction.

         Buyers, sales reps, logistics staff and call centres cannot easily share information.

         Making or meeting promise dates for unanticipated customer orders is difficult.

         It is difficult or impossible to monitor and manage key suppliers.

         Customer-service representatives must access multiple systems to provide information
on the status of an order or shipment.

         Customers, sales and opportunities have been lost.

Ask the tough questions

When evaluating an order-management system, customer service and supply chain managers should consider the solutions ability to rationalise numerous complex activities. Can it provide real-time order promising, allocation management and re-balancing? Does it perform change management, credit modeling and order validation and brokering? Can the solution handle integrated pricing, shipping, invoicing, returns and the myriad of other variables that constitute a successful fulfilment system?

An integrated approach links every element of order fulfilment, from capture to invoice and final settlement. Modern order fulfilment is ideally suited to the needs of companies that sell through multiple, complex channels and systems. The best of this new generation of technologies can efficiently capture, process and fulfil orders from stores, telephony, electronic, Web and other sourcesall while presenting customers with a single, consistent and positive buying experience.

When enacted as part of a larger collaborative effort across the value chain (which may include collaborative replenishment, demand management and transportation bidding), a true end-to-end approach to order fulfilment can help present a single and more responsive face to customers across various processes, locations, business lines and IT infrastructures.

Recognise the hurdles

Of course, executives who are responsible for complex supply chains also understand that there are costs and risks associated with any significant IT initiative. In the past, the rigid nature of legacy systems often prevented the optimum use and re-use of legacy infrastructures. Companies have attempted to modernise and update their order processing systems, only to have sometimes overly ambitious efforts stall due to inadequate planning, the tremendous complexity of multi-channel fulfilment and simple organisational inertia.

Fortunately, the software industry has learned from those earlier setbacks. i2 has deep experience with three full generations of order management and fulfillment technology across virtually every business sector. From that wealth of knowledge, we have identified the following key steps that determine the success or failure of an order management initiative:

         Begin with a clear, enterprise-wide understanding of all strategic, technology and company-specific aspects of order fulfilment in a multi-channel environment.

         Leverage a flexible architecture capable of preserving the companys investment in legacy infrastructure.

         Adopt a phased, incremental approach that gains an early win (for example, in a selected channel or business unit), and then expand the initiative to other channels, units or locations in a carefully planned rollout.

         Then, leverage the benefits.

A streamlined order management and fulfilment system begins by introducing standardisation and consolidation. Those basic changes drive down costs while helping companies accelerate inventory turn, optimise the use of assets and boost the productivity of service associates. More efficient fulfilment shortens the product development and introduction cycle, reducing risk and making companies more responsive and competitive. Product-oriented companies are also using improved order management to make their supply chains more visible, to improve partner performance and to make better business decisions.

Most importantly, better order management helps organisations get closer to their customers. When orders are fulfilled quickly and reliably, customers notice. Companies reap the benefits of greater customer satisfaction through higher rates of retention. Those crucial customer-facing improvements translate naturally into increased sales and market share, new revenues and improved profits.

Record Keeping

   Revenue accounts

   Customer base

   Price lists

   Service history
 
 Order Fulfilment

     Inventory visibility

     Sourcing and availability

     Shipment execution
 
 Collaborative Replenishment

  Customer collaboration

  Auto replenishment

  Liability management

  Exception management