OMS vs. ERP: Why Retailers need Order Management

Managing operations efficiently is crucial for success. Many believe they can tackle this specialist area with their existing ERP but the fact is that for those selling across channels, with high volumes, perhaps cross border or via several marketplaces, an ERP just doesn’t cut it. Despite always needing an ERP to run their business, retailers can only fine-tune their retail operations with an OMS, a retail-specific order management system that sits well alongside an ERP and gives the enterprise visibility, control, and optimisation it needs to succeed in online retail.

 

What is an Order Management System (OMS)?

An Order Management System (OMS) is the backbone of your retail operation. It focuses specifically on managing inventory-related decisions from the moment a customer clicks the buy button to the final delivery. An OMS ensures seamless order orchestration for retail sales across multiple channels. Key functionalities include:

• Inventory Management: Real-time tracking of stock levels across various locations.
• Order Routing: Efficiently processes orders identifying the best fulfilment options.
• Fulfilment Options: Offers multiple delivery and pickup choices to customers.
• Shipping Integration: Partners with various shipping providers for smooth logistics.

Use case for OMS

Imagine a retail chain selling products both online, across various marketplaces and in physical stores. An OMS can help manage inventory effectively by synchronising stock levels across all sales channels. When a customer places an order online, the OMS routes it effectively finding the available stock in your network, ensuring appropriate delivery, aligning with the right partner and keeping a real-time overview of what, when and where.

 

What is an Enterprise Resource Planning (ERP) System?

An Enterprise Resource Planning (ERP) system is designed to manage back-office processes that are essential for the overall functionality of an organisation. Unlike an OMS, which is focused on inventory and order management, an ERP covers a broader range of business functions, including:

• Production Scheduling: Plans and schedules manufacturing activities.
• Material Planning: Manages raw materials and procurement processes.
• Accounting and Reporting: Handles financial transactions and generates detailed reports.
• Human Resources: Manages employee data, payroll, and benefits.

Use case for ERP

Consider a manufacturing company that needs to streamline its operations. An ERP system can integrate various departments, from production and inventory to finance and HR. For instance, when a new order is received, the ERP can check material availability, schedule production, and update financial records—all within a unified system. This integration ensures that all departments work in harmony, reducing inefficiencies and improving overall productivity.

 

Key differences between OMS and ERP

Focus and scope

• OMS: Concentrates on retail operations, managing orders, inventory, and fulfilment processes.
• ERP: Encompasses a wide range of back-office functions, including production, material planning, finance, and HR.

Use cases

• OMS: Ideal for retail managers and ecommerce businesses needing efficient order orchestration and inventory management.
• ERP: Suitable for business owners and IT professionals looking for comprehensive enterprise resource planning to integrate various organisational functions.

Integration and Flexibility

• OMS: Typically integrates with ecommerce platforms, warehouses, and shipping providers to streamline retail operations.
• ERP: Offers extensive integration capabilities, connecting different departments within an organisation for cohesive operations.

Implementation and complexity

• OMS: Generally easier to implement and use, focusing on specific retail needs.
• ERP: More complex and time-consuming to implement due to its broad scope and integration requirements.

 

Conclusion

Both Order Management Systems and Enterprise Resource Planning systems play vital roles in modern business operations. An OMS is perfect for retail businesses that need to manage orders and inventory efficiently across multiple channels. Alternatively, ERP systems help companies streamline all aspects of their operations, from production and material planning to payroll and accounting and human resources, and understanding these key differences will help businesses choose the right system.