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Choosing a Multi-Channel Order Management System: A Decision Brief by Monsoon Commerce

It is easy to put off important business decisions when they involve investing precious time, resources, and money. As an independent multi-channel retailer, most of your efforts are focused on keeping your business moving forward, hiring key employees, managing your team, as well as servicing your customers. And there’s never enough time for keeping track of your competition, let alone strategic planning activities. “When so much of your attention is devoted to operating your business it can be difficult to know when you’ve reached the point of needing to implement an automated order management system,” says Ernie Schell, director of Marketing Systems Analysis, a firm that helps clients select and implement integrated order management systems. “Most merchants do fine initially getting off the ground using either a manual, homegrown order processing and fulfillment solution or an accounting package. But, as business volumes expand and customer expectations grow, many find that these same systems are not enabling growth and are even hindering operations.”

Experts agree that when a merchant’s volume reaches ten or more orders per day, they must automate order processing and fulfillment operations to effectively compete in today’s hypercompetitive retail marketplace and have hopes of growing their business. To run a successful multi-channel retail business, you must ship orders promptly and correctly. Delays and mistakes can destroy your reputation. Inventory must be adjusted accurately. Backorders must be managed efficiently. Shipping status must be visible and easily accessible so you can respond to customer inquiries with accurate, up-to-date data. Given the vast number of retailers from which to choose, customers seldom give you a second chance. You need to get it right every time. The fact is your methods for processing and fulfilling customer sales has a significant impact on your business. This critical process is an ideal target for automation and can result in in greater order accuracy, quicker fulfillment, improved organizational efficiency, and ultimately, higher customer satisfaction. Fortunately, affordable software solutions are available to help even the smallest of merchants automate their business.

Conventional Order Management Systems Were not Built for the Multi-Channel RetailerToday’s complex value chain configuration presents both challenge and opportunity for the savvy multi-channel retailer whether just starting a business or a mature market leader. Consumers have

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come to expect to effortlessly shop via the Internet, on an online marketplace such as eBay or Amazon, through a product catalog, or in a physical store. Small businesses can sell merchandise internationally but hold little or no inventory, relying instead on a worldwide distributed fulfillment network to provide inventory availability and ship products directly to customers. And everyone expects access to real-time, accurate information concerning order status, inventory availability, backorder implications, and shipping confirmations.

Central to these requirements is a system that can automatically route an order to the best source to fulfill each line item, a solution that can prioritize backorders, software that can seamlessly notify customers of delivery time and, most importantly, can address exceptions. Unfortunately, the needs of the multi-channel retailer are not typically addressed by most of today’s order management systems. The reason? Many companies attempt to standardize on accounting systems or general business management software and, while these systems indeed have huge impact upon the many functions within a business, their approach to addressing the unique order management and fulfillment needs of the multi-channel retailer is not optimal.

The fact is that most software companies simply have not built their offering to manage sales from multiple channels, account for virtual inventory, fulfill orders and backorders using a distributed supplier network, deal with exceptions, exchanges, or returns and keep customers constantly informed of real-time status. Designed for high-volume “routine” orders and conventional “buy

– hold – sell” business models, these systems are unable to deal with a customer who wants to buy without using a purchase order. They cannot address nor adapt to the complexity of today’s sales and marketing options, including loyalty programs, promotions, kits, upsells, configurations, and add-ons as well as fulfillment and shipping options that customers have come to expect from the retail experience. In short, these applications were built to run enterprises with efficiency and regimented consistency using inflexible data models and process flows.

The Ideal Order Management System for the Multi-Channel RetailerSo just what is the ideal order management solution for the multi-channel retailer? While the specific range of functions of each vendor’s offering will vary, any software solution under consideration should address the following areas:

♦ Customer Management – A system should collect, organize, manage, and analyze all of your vital customer information, preferences, and loyalty levels to streamline the purchasing, ordering, and fulfillment process.

♦ Purchasing – A system should reduce out of stocks and excess inventory by managing vendor information, automating the ordering/reordering process, maintaining purchase orders, confirming receipt of products, and generating payments.

♦ Product Catalog and Pricing – A system should allow users to create, classify, and maintain product information, attributes, brand assets, and pricing tables as well as configure kits, upsells, and cross-sells.

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♦ Order and Inventory Management – A system should provide visibility, control, and efficiency over your web, online marketplace, catalog, or in-store orders, enabling you to increase sales by improving customer service, maximizing inventory turns, and decreasing costly shipping errors.

♦ Fulfillment and Shipping – A system should automate order routing, process returns, and exchanges, and streamline the shipping process with multiple carriers including UPS, FedEx, and USPS.

♦ Executive Information and Alerts – A system should include an analysis toolset that features standard reports and graphical displays as well as ad-hoc reporting capabilities and an exception management that puts unlimited actionable intelligence at your fingertips for proactive, informed decision making.

♦ Extensibility – A system should be easy to customize and seamlessly integrate with eCommerce platforms, online marketplaces, point of sale systems, payment gateways, and third-party accounting packages.

The Telltale Signs that You Need an Order Management SystemThere are four primary telltale signs that it’s time to investigate the purchase of an order management system – indicators that you should start seriously weighing the benefits of business automation.

1. Too many mistakes in data entry, shipping, purchasing, invoicing, and accountingErrors are costly – from mistakes typing addresses or credit card numbers, to over or under ordering stock, from picking or packing the wrong merchandise, to shipping to the wrong customer. As a company grows in size, revenue or SKU count, its complexity increases, and so do the chances for making mistakes. “After a few years, we were managing more than 7,200 styles, sizes and colors of support hose,” says Art Witkowski of Healthy Legs, who implemented Monsoon Stone Edge. “The sheer level of detail and volume was becoming overwhelming. We were making costly mistakes – not always shipping on time and not knowing what stock needed to be purchased for replenishment. In addition, handling merchandise returns accurately was a real challenge. Without a good order management system it seemed that no matter what we tried, we were making costly mistakes that could have been avoided.”

2. Trouble keeping up with customer demandTimeliness is essential for order processing and good customer service. How long does it take to process an order? How long does it take to respond to a customer inquiry about their order? Are employees spending more time chasing down information about fulfilled orders than handling new ones? As Schell advises, “This situation has a ‘creeping’ effect—at first it may involve just a few instances, but before you know it, the problem can involve enough orders to really tie up resources.” As order volume grew at GPS Discount, Scott Farris, a Monsoon Stone Edge customer, found he was spending more and more time just trying to keep up with demand. There were days he would come into the office before 6:00 am and not leave until 7:00 pm. “The sales volume got to a point where we didn’t have enough man hours to handle the day’s orders. Now with an order management system if an order comes in at 4:45 pm, it is packed and out by 5:00 pm. All we have to do is approve it. The time to process orders is a fraction of what it was before we automated.”

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3. Too many inventory surprisesRunning out of stock, or worse yet, not knowing you are out of stock, can lead to lost revenue. On the other hand, purchasing too much merchandise ties up funds and increases the risk of losing money on unsold merchandise. Inventory control is the lifeline of a retail business. A merchant needs full visibility into stock levels, plus a view on SKU history to track sales trends. “Inventory tracking seemed so basic,” says Monsoon Commerce customer Lee Amon of Kate’s Caring Gifts, “Except for when it was missing!” Kate’s Caring Gifts carried a few different seasonal chocolates. In January, the owners needed to determine what they should order for the upcoming season. How many milk chocolate hearts? How many dark chocolate hearts? How many chocolate hearts filled with cherries? “In past years,” Lee says, “We tried to remember how many we had ordered the prior year and guessed. This year, we looked at last year’s shipping history in Stone Edge and we knew exactly how many of each type we sold last year.”

4. Rising payroll costsIs your payroll heading higher and higher because your immediate solution to handling an increase in sales is to hire more staff or pay for overtime? Conventional wisdom is that more sales usually leads to increased revenue, but how can you be so sure? Compare the cost of an order management system designed and priced for your size company versus additional payroll costs. An order management system may be a lot less expensive—and it may end up being one of the best investments your company could ever make. “Like most online businesses, ours started off as a one-person shop. We grew along with the Internet and it was necessary to hire and pay more staff,” says Jimmy Hilburger of SwitchHits.com. Since managing costs is always important, the owners carefully scrutinized their options and chose to implement an order management system instead of expanding the payroll. As a result, they more than doubled their annual revenue each year for eight years while maintaining the same high level of customer service with just one person in the customer service department. “Monsoon Stone Edge allows us to look and operate like a larger company even as we have outgrown the basement and moved into a 7,000 square foot office and warehouse.”

Decision Criteria to Utilize When Evaluating the Purchase of a Multi-Channel Order Management SystemThere are 3 main factors to consider when evaluating the purchase of an order management system:

1. Business ImpactWe recommend starting with determining the business impact that can be realized through the implementation of an order management system. While automation can certainly effect revenues and profitability it’s also worthwhile to consider the net effect of a software solution upon full time equivalent headcount, training requirements, the elimination of errors, increased production and efficiency gains, time savings from automation, decreased employee turnover, and the quality of management decisions. Monsoon Commerce customer online stores attributed sales growth from $13mm to almost $35mm in 2011 to its implementation

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of Monsoon Stone Edge through the management of over 13,000 products and 100,000 SKUs from 6 online stores as well as 4,000 orders per day. But it was the indirect impact of automation that caught the company by surprise. “Monsoon Stone Edge improved employee turnover rates, overall workplace productivity, and helped us increase customer satisfaction by more than 50 percent,” says Kevin Hickey, Vice President of Operations.

2. Total Cost of OwnershipAnother factor to consider when investing in any product or service for your business is the total cost of ownership, which is the long-term expense of the solution. Total Cost of Ownership, or TCO, includes software licensing, implementation, and annual support fees; training, education, technical support, system integration, and customization charges; and additional software, hardware, and peripherals. In considering TCO, the key question is: will the savings you gain exceed the cost? From a cost perspective, using conventional accounting software or general business management software may initially seem like the best approach, since this strategy initially appears to be least expensive. This approach was first taken by Monsoon Commerce customer Ryan Gormady of Chowdaheadz, a Boston slogan and sports apparel merchant, who found that this approach provided minimal relevant functionality, required extensive costly modifications to adapt to his business model and compromised his sales and internal operations due to system limitations.

3. Return on InvestmentWhereas TCO calculates only cost factors of utilizing an order management system, Return on Investment, or ROI, quantifies both the costs and the expected benefits of a specific project over a specific timeframe, usually three to five years, and is another option with which to evaluate a software implementation. Monsoon Commerce customer Lee Amon, President of Kate’s Caring Gifts, had a firm grip on the costs of implementing Monsoon Stone Edge, but underestimated its business benefits and the direct impact upon their bottom line. “Manual processes previously cost the business 50 percent of all orders plus lost lifetime customers,” says Amon. “Incorrect orders, duplicate shipping, and misplaced returns were all eliminated with Monsoon Stone Edge, a benefit that directly led to improved sourcing and purchasing practices that increased our profitability.”

Finding the Best Solution for Your BusinessPrompt and correct order processing is vital to the growth of your business. As you consider options for automating your order management and fulfillment process, be sure to consider both the immediate and long-term impact of your decision. Keep the metrics of cost, control, and customization in mind. Mapping your business’s priorities and needs to these metrics can help you identify the best solution for your requirements. Being realistic about if and when you need to invest in an automated order management system is critical to the health and profitability of your eCommerce company. Don’t put off an important decision—especially when an order management system can save you time, money and, most importantly, allow your business to grow.

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Monsoon Stone Edge: The Leading Order Management System for Multi-Channel RetailersAt Monsoon Commerce, we haven’t tried to be everything to everyone. Since 2001, we concentrated on designing, implementing, and supporting enterprise software for small and mid-sized multi-channel retailers. Today, Monsoon Stone Edge is trusted by over 2,500 online merchants to run their business operations – from single-person companies processing as low as 10 orders per day to multi-million dollar enterprises fulfilling over 5,000 orders per day, including several in the Internet Retailer 1,000. We attribute this success to superior products, attentive customer service, unrivaled expertise, rapid implementations, and enterprising employees.

♦ Unrivaled Industry Expertise – Our team includes some of the industry’s leading multi-channel retail technology experts. With the lowest turnover rate in the industry, we are constantly building on our knowledge and resources. Our employees are also the driving force behind our

“customer-first” philosophy. ♦ Customer Focus – Product design involves collaboration with multi-channel retailers to assist us in identifying industry needs. The result is a product that meets—and surpasses—customer expectations.

♦ Superior Product – By investing over 20% of our revenues in research and development—one of the highest percentages in the industry—our solution sets the standard for the industry.

♦ Rapid Deployment – Our efficient implementation methodology brings your operation online much more quickly than our competitors, whether we work directly with your team or in partnership with a consultant.

♦ Higher Value – Monsoon Stone Edge offers more value for your investment due to its reasonable licensing, implementation and support fees coupled with its depth of functionality. In fact, customers often remark that comparable order management software is usually 10 to 20 times more expensive.

For more information on the order and inventory management system that optimizes billions of dollars of customer orders per year and was named as the overall category leader by Internet Retailer in 2013, please contact stoneedgesales@monsooncommerce.com or call 1-800-520-2294.

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