In this week’s Logistics Insights podcast: a look at the most important logistics software you’ve probably never heard of.
A relatively new and certainly not well understood type of software is having a dramatic impact on supply chain execution. Called distributed order management, or DOM, and it can be defined as a software system that provides integrated fulfillment planning and execution across multi-echelon, multi-node, multi-partner, and multi-channel supply chain networks.
More completely, a DOM 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.
We know that’s a lot to process, but it goes to show the power of the application.
While the software was first developed for e-commerce fulfillment applications, it is now expanding its reach well beyond retailing and into other industries.
Although its industry profile is changing greatly, DOM has not received significant attention from the supply chain trade press and analyst community, leaving it relatively unknown compared with many other types of supply chain software. In spite of this lack of attention, DOM, with its Swiss Army knife-like assortment of capabilities, is becoming the central force of the supply chain execution ecosystem.
A common question is how distributed order management differs from traditional order management systems that have been around for years. The answer is they are related, but different.
DOM systems were first developed at the end of the 1990s by a very small number of software firms, primarily to solve issues with the then just evolving e-commerce business model. Many of the new “dot coms” were only electronic storefronts, which didn’t maintain their own inventories and instead relied on vendor drop shipping to fulfill orders. They therefore needed systems to check vendor inventories, communicate order information, and receive vendor acknowledgements, among other functions.
The order management systems available at the time primarily focused on order processing and addressing all the activities needed to successfully complete that task, including pricing, promotions, credit checks, and credit card processing, to name just a few. They were not able to handle the order management needs of the new e-commerce companies. And so distributed order management software was born.
In contrast to more traditional order management systems, DOM systems are order-fulfillment centric.
They look at how to source an order in a way that meets customer service commitments at the lowest total cost or in a way that fulfills some other objective of the company. At the heart of a DOM, therefore, is a powerful, configurable rules engine that enables companies to define sourcing and fulfillment policies and logic. As a further point of differentiation, a DOM system often sits over top of multiple traditional OMS systems.
With the bursting of the dot-com bubble in 2001, interest in DOM waned for a few years. Since about 2010, however, as omnichannel commerce has exploded, DOM has become essential for managing e-fulfillment, and it is now expanding into other non-retail applications.
We’ll end this week’s Logistics insights podcast there, with that introduction to distributed order management. Next week, we’ll take the conversation further with a look at DOM use cases.
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