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Supply Chain News: The Six Use Cases of Distributed Order Management

DOM is Perhaps the Most Interesting Supply Chain Related Software Application There is Right now - and Increasingly One of the Most Important

Distributed Order Management or DOM is perhaps the most interesting supply chain related software application there is right now - and increasingly one of the most important.

I was around at its inception, as a supply chain software analyst in the late 1990s. The first I heard of DOM - and don't know that was the name it went by at the time - was from an Indian software company called Yantra, which was then primarily known for trying to become a major player in the Warehouse Management Systems market.

In the very early days of ecommerce, Yantra's DOM was positioned as a tool to connect ecommerce websites with suppliers. The idea was in part that the ecom sites might actually carry no inventory at all, simply providing commerce functions, and thus (greatly simplifying) a system was needed to confirm inventory availability from suppliers and send them orders for drop shipping to the end consumer.

A bit later, i2 Technologies also developed a DOM product, though I am unsure how that developed. But for a long while, Yantra and i2 were the only DOM games in town. Ultimately, Yantra was acquired by Sterling Commerce, which was then acquired by IBM. And in fact, IBM's current DOM has its roots in that original Yantra solution.

As for i2, I think its interest in DOM faded when the dot com bubble burst, then it ran into financial difficulties in the mid-2000s before it was finally acquired by JDA. I believe, as with a number of i2 products back then, its DOM simply faded away. JDA now partners with IBM on DOM.

So, what is a Distributed Order Management system? That, it is clear, depends in large part whom you ask.

DOM is often described as providing order "orchestration." Again, what does that mean? My take is that it means DOM makes intelligent decisions about order execution, based on a variety of factors and checks, and then automates the delivery of that order (of multiple types) to the appropriate point or node for completion, without need for manual reviews or other processes.

So, you may say, that sounds like what we have always called an Order Management System (OMS) - what's the deal?

Well, there is currently some level of overlap between DOM and OMS - and I expect that overlap to grow. But there are important differences between DOM and OMS, as illustrated below:

Here is a rather detailed but more complete definition: A Distributed Order Management system serves as a powerful hub that enables Omnichannel commerce, integrates the extended supply chain, optimizes inbound and outbound order routing, provides real-time network inventory visibility, allocation and management, automates complex channel and customer requirements and maximizes profitability while meeting customer service commitments.
That's a mouthful, but DOM is in fact becoming something of a Swiss army knife for supply chain execution and planning.

DOM seemed to almost disappear for a few years after the dot com bubble burst, but has seen tremendous resurgence in recent years as the engine to power Omnichannel commerce, especially in retail. But that Omnichannel opportunity is far from the only application for DOM technology.

Last year, I collaborated with Dinesh Dongre, VP of product strategy at Softeon, a provider of DOM as well as WMS and other supply chain software solutions, to identify six distinct use cases. I think that number might actually have expanded by one or two since then, but this week and next we will review the six we were able to define in some detail, starting with the most prominent:

DOM User Case Number 1 - Omnichannel Enablement and Optimization: As noted above, this is the use case that lately has really put DOM again on the map, with DOM almost becoming a "must have" for Omnichanel success in retail, consumer goods and beyond.

Omnichannel is creating whole new points of interaction (POIs), points of fulfillment (POFs), such as retail stores, and point of return (PORs). How do all the these POIs, POFs, and PORs get stitched together, and how do new process flows like order on-line, pick-up in store become technically enabled without major and expensive modifications to existing systems?

DOM can be the answer, connecting disparate systems and orchestrating the flow of orders between the myriad combinations of POIs, POFs, and PORs, often allowing existing systems to keep merrily going on doing what they are doing without realizing they are now part of the Omnichannel world.

But DOM generally does a lot more than just enabling these Omnichannel connections and processes. It optimizes fulfillment performance A DOM usually determines how to source an order in a way that meets customer service commitments at the lowest total cost or some other objective.

Generally at the heart of a DOM is a powerful, configurable rules engine that enables companies to define sourcing and fulfillment policies and logic in great detail. Those rules would by driven many factors and attributes, including inventory availability across the entire, extended network, rules around that inventory (such as minimum quantities say to be maintained in-store), customer service requirements, shipping costs, labor or other capacities and more.

Let's take a simple example: say a retailer has several DCs in different time zones across the US. As the day proceeds, even orders from the East coast may be routed by the DOM to DCs going further west in order to meet cutoff times for parcel carrier pick up, depending on service commitments to individual customers.

So a customer that chose free ground shipping with somewhat loose commitments for order delivery would be routed to the DC that would incur the lowest shipping costs, whereas the orders for customers paying for one or two-day delivery would have their sourcing points dynamically moved throughout the day to take advantage of later cutoff windows further west. Delivery commitments would be made with the knowledge of these rules and sourcing options.

There are many far more complex examples of such fulfillment logic - and my research indicates companies often start with somewhat basic rules, which they make more sophisticated and nuanced over time.

There is so much more. One fast growing consumer goods company (becoming a very well known brand) is primarily using DOM very similar to how it was originally envisioned by Yantra, supporting drop shipping processes (tracking all the way to the end customer) across hundreds of its vendors.

The benefits of this first DOM use case:

• Omnichannel enablement without cost/effort of modifying existing systems, and/or just speeding idea to enablement.
• Faster time to market with new channels/services and sourcing options
• Profit optimization though lowest cost fulfillment within defined constraints
• Multi-channel inventory visibility and control
• Automation of many existing manual processes relevant to order fulfillment

So there is the most prominent use case for DOM, but Dongre and I defined at least five more, including probably the next most common, DOM as an "order hub" to tie together disparate ERP/OMS networks - as well as several other use cases you might not be familiar with.

I'll be back with that in the next week or two.

DOM is becoming one of the hearts of integrated planning and execution - the other being systems supporting/driving the S&OP process - and it would be good for many of you get up to speed. Will have other some resources for you next time.

What do you see going on in the DOM market? Is it a must have in Omnichannel commerce? What would you add to our discussion on this use case? Let us know your thought at the Feedback section below.

Understanding Distributed Order Management in Supply Chain

DOM is Becoming the Epicenter of Supply Chain Execution

I am absolutely convinced that so-called Distributed Order Management (DOM) systems are and will have an important impact on supply chain processes and technology.

I wrote a column a few weeks ago in which I started this conversation and offered the first (and most common) "use case" for DOM technology. (See The Six Use Cases of Distributed Order Management.)

As I started that column, I recalled a presentation I had seen in the early 2000s from well-known supply chain consultant Dr. Chris Gopal, which wonderfully presented a vision for an integrated supply chain execution system, which connected order management, warehouse management, transportation management, and visibility.

He was among the first to articulate such a concept and I wanted to use it to contrast then and now, but alas, Gopal was unable to track down that almost 20 year old powerpoint, so I will just make the key points.

Off and on, the notion that "the order is king" again gains some currency in supply chain thinking, and I believe obviously there is much truism in that. But of course there are many types of orders, such as make-to-stock models, make-to-order, configure-to-order, etc., each with its own requirements and nuances.

But now comes ecommerce and Omnichannel fulfillment, changing dramatically how not only retailers but many others must think about and process orders. Target stores, as just one example, famously in 2016 announced it was largely scrapping commercial order routing, inventory allocation, and replenishment applications for home grown systems that would more precisely meet its needs in an Omnichannel world.

Gopal’s vision almost 20 years ago was highly integrated systems, but if memory serves me right, somewhat linear in its thinking. What I see happening now is more non-linear, network-oriented thinking, with order management processes - and DOM technology for many - at the center of this web. The order is still king.

So, what is a Distributed Order Management system? That, it is clear, depends in large part whom you ask.

DOM is often described as providing order "orchestration." Again, what does that mean? My take is that it means DOM makes intelligent decisions about order execution, based on a variety of factors and checks, and then automates the delivery of that order (of multiple types) to the appropriate point or node for completion, without need for manual reviews or other processes.

As I noted in Part 1, last year I collaborated with Dinesh Dongre, VP of product strategy at Softeon, a provider of DOM as well as WMS and other supply chain software solutions, to identify six distinct use cases.

In that first column, I wound up having room to discuss just one of those use cases, the most common one: Omnichannel Enablement and Optimization.

In this mode, DOM connecting disparate systems and orchestrating the flow of orders between the myriad combinations of points of interaction (POIs), points of fulfillment (POFs), such as retail stores, and point of return (PORs), often allowing existing systems to keep merrily going on doing what they are doing without realizing they are now part of the Omnichannel world.

But DOM generally does a lot more than just enabling these Omnichannel connections and processes. It optimizes fulfillment performance. A DOM usually determines how to source an order in a way that meets customer service commitments at the lowest total cost or some other objective.

There is a lot more here, but those are the basics. Here are the other six use cases, in rough order of popularity:

Enterprise Order Hub Enablement: With the incredible pace of mergers acquisitions and divestures these days, many companies are stuck with disparate order management systems across business units and factory sites, creating something of a real mess. A popular use of DOM is to deploy the technology as a layer above all these individual traditional order management systems, creating what is called by some an "order hub."

The benefits? First, the ability to more efficiently process orders across a disparate OMS environment without the need to migrate all business/plants to a common OMS.

Second, improved customer service from the ability to take orders across business units/plants in one place, generating a single invoice. Third, improved visibility to order flow and fulfillment.

Inbound Inventory Deployment Optimization: Some DOM providers can in effect turn around the functionality related to outbound order sourcing optimization to do the same for where to position inbound receipts.

As goods are received, say at US ports, the DOM system makes automated decisions about where each of those SKUs and in what quantities should be sent (standard DCs, efulfillment DCs, 3rd party DCs, wholesalers, direct to stores, etc.), based on on-hand inventory levels, in-transit inventories, forecasts, targets, promotional plans and more.

As a result, DOM provides constant inventory rebalancing based on all these variables, maximizing inventory performance and automating what is frequently a manual process without DOM. This approach can be tied in with a "vendor portal" for suppliers to provide visibility to coming goods, print labels, create ASNs, etc.

Complex Customer Requirements Management: This one is a little difficult to explain, but in many sectors - more than many may realize - the "rules" for how orders must be processed differ substantially from customer to customer.

This is true obviously for many 3PLs, but can be the same for many regular companies as well.

How can all these myriad rules by encoded, and how can new customers be quickly brought on-board? Most companies spend many weeks and months with such on-boarding, because traditional order management systems are not really set up to handle a wide range of customer processing rules.

But DOM solutions are typically based on a powerful rules engine, which can be used to determine the optimal sourcing location, as described in the first use case, but which may also be used to configure and enforce specific customer order processing requirements. This is why DOM is overtaking traditional OMS is an increasingly dynamic world.

Multi-Echelon Order and Returns Management: Many sectors have field operations, most commonly in those with service repair requirements. These operations are generally characterized by three factors: (1) hundreds or thousands of field technicians; (2) multi-level inventory management, from master DCs to regional and local DCs to the service tech’s van.

In great summary, DOM can address each of these challenges, starting with providing real-time visibility to all that multi-level inventory, down to the tech’s van, and determining when a part is needed where the best place to source it is.

Think about it - why is this challenge in inventory visibility and sourcing all that different from an efulfillment sourcing problem? It isn’t, and that is why DOM can play a key role, including reversing the logic and determining where to send returned parts for restocking, repair or disposal.

Field Channel Order Management and Visibility: This is certainly the least common of the six DOM use cases, and is related to companies that have perhaps a network of company owned and independent distributors.

DOM can as usual provide benefits by routing inbound orders to the right channel/location based on pre-determined business rules and what inventory is where. It can also increase sales by locating and transferring needed inventory across the network - a process that is often handled manually and poorly today across independent distributors.

In some scenarios in this use case, DOM can help increase sales and reduce inventory by adding forecasting/replenishment extensions to the DOM, as DOM again rebalances inventories and optimizes order flow across the dealer network.

So there admittedly in rather shot gun fashion are the six use cases for Distributed Order Management, though that number will certainly expand a bit over time. I do not believe anyone else has laid this all out for DOM, which is usually discussed only in an ecommerce context.

But I will say emphatically that DOM is well-suited to many of the current and emerging challenges in supply chain, and will for many become the technology epicenter for supply chain execution.