Retailers Move Towards SaaS to Solve Omnichannel Order Management Challenges
The omnichannel movement is impacting every area of the traditional retail model. The new demands of omnichannel — i.e., consistency, access, availability, fulfillment and pricing, among others — challenge order management decision-makers to develop new execution strategies. Their mandate is to deliver the right product any time, anywhere at the right price for the consumer and retailer, and invest in the right tools to make it possible.
To learn about the omnichannel impact on order management, OrderDynamics partnered with Forrester for an industrywide study that looked at which processes and technologies are most important for retailers as they look to improve profitability and deploy new technology.
Room for Improvement
In terms of top order management priorities, most retailers agreed that increasing order-level profitability is a critical area for growth in 2016, with nearly half of all retailers claiming this as their top goal. Additionally, a significant number mentioned the need to leverage enterprise inventory across locations more effectively, understand customer order costs, and take advantage of cross-channel opportunities such as increasing store traffic through buy online/pick up in-store capabilities. This comes as no surprise, since the study found that optimizing inventories at individual locations and improving order profitability are among the most sought-after benefits of distributed order management.
Lack of order management system (OMS) integration into critical business technology portfolios is a barrier at this point, however. On average, only 42 percent of retailers have integrated OMS with core enterprise applications such as point of sale (POS) and enterprise resource planning (ERP) — a huge opportunity for solution providers and retailers alike. When technology solutions don’t work together, efficiency and profitability can’t reach their full potential.
Today, less than 40 percent of retailers leverage advanced omnichannel OMS functionalities. These underutilized features include configurable order orchestration rules, advanced reporting, and the capability to reserve online and pick up in-store. These features are, unfortunately, either missing or underperforming in standard OMS configurations.
Retailers are finding that the best way to develop these capabilities and achieve efficiency is to move from traditional on-premise systems to a software-as-a-service (SaaS) model. This offers speed of deployment, the scale to keep up with product demand, and greater affordability since there's no upfront investment and no hardware or software to deploy. These are all key reasons why 84 percent of medium- and large-sized organizations have already incorporated SaaS or plan to over the next two years. Sales, commerce and fulfillment solutions — a category that includes OMS — currently represents the highest software priority for retailers with more than 500 employees.
Limits of On-Premise
The cost of licensing and maintaining in-house systems were easily the two most acknowledged factors for discarding on-premise OMS, according to the study. Resources, time and expertise are critical for maintaining cutting-edge systems, and most retailers simply don’t have that in-house. The study also found that the inability to keep up with upgrades was a contributing factor in moving to SaaS.
Similarly, limited features and functionality and insufficient integrations with other technologies were the biggest problems with traditional in-house systems. The complexity of constantly managing increasingly technical and feature-laden systems has led to over a quarter of the retailers polled to prioritize SaaS for any application across the business, with three-quarters investing in proprietary technology only when no suitable service exists on the market.
Significant Business Impact
When it comes to making radical change and investing in new technology, retailers have traditionally been slow to react and risk averse. However, once benefits start showing big dollar signs, the game changes.
With SaaS-based OMS, 62 percent of retailers surveyed have experienced or expect improvement across 11 critical metrics, including sales, faster time-to-ship and greater order fill rate. From a customer loyalty and employee satisfaction standpoint, at least half of respondents see gains in satisfaction feedback. SaaS simply makes things work better, which makes both retailers and their customers happy.
Engaging in the overhaul of a system as essential as OMS comes with its own set of natural barriers. When asked why they don’t make the leap, survey respondents highlighted contending with data security and compliance requirements, which, depending on your relationship with your provider and the protections they have in place, can actually become much less of an issue.
On the flip side, less than a quarter thought they would lose control or end up spending more by making the switch. Similarly, scalability is a minimal fear, namely because SaaS is the ultimate method to make sure your technology tools grow with your business and adapts in real time to market and demand pressures.
Given the nature of retail and the unpredictability of its rapidly evolving future, it’s clear the technology investments of today will have a major impact on profitability tomorrow. Whether you’re ready to migrate now or just beginning to review the pros and cons, a switch to SaaS-based OMS can be a critical investment for the future of your business.
Steve Bielawski is senior vice president of sales and marketing at OrderDynamics, a provider of omnichannel order management systems.