Outsourcing Order Management – The Ins and Outs

Many people consider order management the heart of any enterprise resource planning (ERP) system. It’s heresy in many manufacturing companies even to talk of changing from a home-grown order-management system to an outside ERP system.

One world-class distributor is an example of one reason why. It has an ERP system finely tuned to its distribution centers located globally, and delivers pick, pack, ship status and margin with precision. It’s home-grown and was the cornerstone of the career of a now-retired CIO, who was its creator and champion.

To change from this ERP system would mean redefining all sales- and channel-facing applications. This is a daunting task when you consider that this company averages 1 percent return on sales in a good quarter, when everything runs smoothly and there are no interruptions.

Yet there is talk in this company of outsourcing order management.

Breaking With Past

Why are manufacturers, distributors and even services companies looking to outsource order management now, given the fact that many have a combination of purchased and home-grown ERP systems running their businesses today? It’s because many ERP implementations have failed to deliver on what matters most: order management and the synchronization of orders across channels.

Let’s take a quick look at why so many manufacturers increasingly view vendors who claim order management expertise as being the Pinocchios of enterprise software, or maybe it is that every time they claim a new feature, their PowerPoint slide deck grows.

Only a few vendors really understand order management, and the rest fake it.

Manufacturers and distributors are showing an increasing interest in order management — not in isolation, but in conjunction with other sell-side strategies, including sales and product configuration, guided selling, call center synchronization and managing their indirect channels, contracts and compliance.

This is a very complex sale, even to a manufacturer who has less than US$100 million in sales and has the majority of its revenue coming through indirect channels.

Yantra has proven itself here and has references that point to both supply chain integration and support of sell-side strategies. There are more than two dozen vendors who claim order management expertise, and Yantra is one of the few with references that align with the company’s claims.

Broken Processes

Global outsourcers successfully target broken processes. Put yourself in the position of any services and outsourcing company, and look at the manually intensive approach many companies take to manage their orders, typically across multiple systems.

Various companies, including Infosys and WiPro, see this and create entirely new practice areas to capitalize on the pain companies have in managing their orders. Complexity is any vendor’s friend, and for outsourcers it’s the sign of a new market opportunity.

The time is ripe for consolidating order-management systems globally. Ironically, many companies are looking to unify their order-management systems across continents so that all proposal, quotes and orders generated can be fulfilled from any factory at any location globally.

Even smaller companies that have factories in Europe only, for example, are trying to find an order-management system that will allow them to fulfill local demand, regardless of where the order originated. That sounds easy but is very difficult to do. Outsourcers are seeing this and are quickly becoming the platform for this order-management infrastructure.

There is no double standard for outsourcing. Even companies with less than $10 million in sales have international customers now.

Global Cost Competitiveness

There are high-growth businesses that generate a greater percentage of revenues from Europe, Asia-Pacific, China, Australia and other regions of the world than the United States. Yet at the same time, there are cost pressures on these companies to drop their prices, and outsourcing the cost of processing orders is now seen as potentially viable. Early adopters have already taken this step, and more will follow.

The bottom line is that even small and medium manufacturing businesses are generating global revenues, and global cost competitiveness has to follow. Outsourcing order management is one approach to unifying order fulfillment across geographies, and it will continue to grow.