It’s a reasonable question to ask: why do you need an OMS when you have an ERP solution? As the expanded acronym suggests, a central plank of the concept is that companies need (and ERP provides) a centralized view of a variety of resources across an entire organization – quite literally, the enterprise.
ERP has evolved hugely since its origins as Materials Resource Planning. Modern ERP solutions enable and integrate almost every process needed by almost every company: from planning to purchasing, to sales and marketing, to finance and accounting, to production, distribution, human resources. The centralized database at the heart of any ERP system ensures that all business functions work from the same information at all times, ensuring cohesion and consistency.
Collectively, an ERP is a powerful and certainly more all-encompassing solution than an OMS. So it’s a reasonable question to ask: why do you need an OMS when you have an ERP solution?
ERPs are stable and robust, but not agile
After 25 years, ERP solutions are very stable and very reliable. But, having evolved to be all things to all functions in all businesses, they tend not to be especially flexible. In fact, while ERP solutions today are generally cloud-based, they remain monolithic – the opposite of
composable – and their robust, do-it-all capability comes at the expense of agility. Not needing all the functionality of your ERP system is fine, of course – but if you need your ERP solution to do something slightly different or just differently, you are likely to be out of luck.
Nonetheless, such stability and reliability have been a terrific boon for industries such as manufacturing. In such scenarios, large numbers of components from a large number of suppliers need to arrive at the right time and in the right quantities to enable the manufacturer to keep manufacturing at the required rate to meet downstream orders.
And ERP solutions do this extremely well because where an ERP really excels is that it manages supply chain resources in a well planned manner, i.e. in respect of supply chain management, upstream from the organization operating the ERP.
Downstream processes require a different solution from upstream processes
For a retailer, however, the challenges are slightly different. Any brand or retailer faces obvious supply chain challenges upstream: making sure it is neither over- nor under-stocked, and that stock is in the right locations at the right time, for example.
But, in the e-commerce era, a new key challenge has emerged: the management of orders downstream. This encompasses everything from when a customer places their order to when it is delivered. And it is here that the specialized nature of a
high-performance Order Management System comes into its own.
An OMS manages the entirety of the order fulfillment process, integrating closely with all the relevant business functions associated with this ‘downstream’ process with agility and flexibility: store systems, e-commerce, business intelligence and analytics, merchandising and supply chain management, and sales/marketing. It provides and benefits from unfettered inventory visibility, enables ordering from other stores, shipping from store, ordering online from the PoS, click-and-collect, store-to-store transfer and ordering/returns associated with online, phone or catalog sales.
Why is an ERP system not a substitute for an OMS?
Ultimately, why an ERP system is not a substitute for an OMS boils down to a handful of core issues. All the evidence suggests that these issues are of overwhelming importance to modern retailers if they are to be successful. But, ultimately, it’s a decision that an organization which already has an ERP solution and is considering whether it also needs an OMS, must make for itself.
Those core issues to which it all boils down are:
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The real-time visibility into any given order that an OMS provides enables accurate decisions to be made relating to inventory management, shipping logistics, and customer service. On the other hand, an ERP may not provide real-time visibility into order status – because that’s not what it was designed to do.
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An OMS also provides better inventory management by tracking inventory levels in real-time across multiple channels. This ensures accurate and timely decision-making on these matters, helping to avoid occurrences of out-of-stock and over-stocking situations (bothe expensive to the business, the first being also annoying for the customer). Again because they are not designed explicitly for managing orders, ERP systems tend not to provide real-time visibility into inventory levels at the same level of granularity.
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In a similar vein, ERP systems are unlikely to provide great customer experiences – again, because that’s not what it was designed to do. An OMS ensures that, regardless of channel, every customer order is fulfilled quickly, accurately and efficiently, providing a higher degree of customer service.
A high-performance OMS enables you to respond and adapt quickly, modifying or creating whole new processes or experiences, in a way that an ERP will not. All the downstream components of order fulfillment (as described above) have changed much more quickly and more recently than the upstream, supply chain-related components. And, as customer expectations and technology continue to evolve, competition continues to intensify and barriers to entry continue to fall, the order fulfillment aspects of retailing will continue to evolve at rapid rates, necessitating systems that can also evolve rapidly.
Do you need an OMS if you already have an ERP system?
Can an ERP system be configured to manage the order fulfillment process? Well, the answer is a qualified yes: it probably can. But the opportunity cost of doing so is that your order management fulfillment process will always lack the sophistication, efficiency, flexibility and agility of a dedicated OMS. There are some elements of common functionality, but these two types of solution are far from the same – the fundamental question to ask is if your company’s paradigm is a customer-centric one or an operation-centric one. If you are in any sense a retailer willing to deliver best-in-class customer experiences, an OMS will serve you better.