How to Reconcile your Order, Inventory and Returns

Omnichannel retailing is a strategy that offers a seamless shopping experience from the first touch point to the point of buying and continued engagement after that. This is no longer an idealistic option for retailers and has become a basic customer expectation. Customers today demand a choice of where they can order from, and from where they can pick up their orders, and they want their experience to be seamless. Retailers who can facilitate top customer experience across their sales channels and fulfillment options are preferred options and can often demand a premium for the services they provide. More and more customers start their buying journey online and then make their purchases in their preferred sales channel.  This poses a myriad of challenges for the retailer and some of them include:

• What SKUs (Stock Keeping Unit) should be available for sales in each channel and the quantity available for sale?
• How much inventory should be available for each SKU?
• How to manage the order flow from each channel and where should it be routed for fulfillment?
• From which location should the orders be fulfilled?
• Which transporter should be used for fulfillment?
• How do you keep track of the delivery from start to finish?
• Should there a customer return, where should the item be returned?
• How to provide visibility to the customer on the order status from start to finish?
• How to reconcile orders, inventory levels after order fulfillment net of returns?

A brand or a retailer sells SKU in multiple channels. They require the orders to be consolidated in a single view of all the orders as shown in Fig 1. 

Fig 1. Order consolidation from different sales channels.

Consolidation of orders is achieved in software such as Vin OMS (Vin Order Management System) which integrates with the ecommerce website, store systems and the various marketplaces in which the goods are sold. The quantity available for sale in each of these channels can be preconfigured in the sales channels.

An order management system (OMS) is also capable of 

• Verifying the completeness and accuracy of orders before they are passed on to downstream systems for fulfillment.
• Route the order to any fulfillment location where items are in stock. These could include a store location, a warehouse, distributor location or directly to a vendor location from where the items are drop-shipped. Other reasons could include the orders are routed to the closest warehouse to deliver goods, items are available only at a particular store, quickest means of delivery to the customer, etc.
• Prioritize the orders according to preferred rules. This could be related to something such as a preferred customer placing an order or an item that must be prioritized for shipment.
• Split the order when the system recognizes that order cannot be fulfilled all at once or at one location.
• Once the order has been fulfilled or partially fulfilled, update the OMS first and then pass this information back to the sales channel from where the order originated from.
  

Fig 2: Routing of orders to a warehouse, store, distributor, or a vendor

An order management system works in conjunction with a warehouse management system such as Vin WMS to manage the process of fulfillment. A WMS system takes care of managing the inventory across all the locations where the items are stored. In addition to this, a WMS system manages the following functions shown in Fig 3:

• Manage the process of picking the items for the order.
• Tracking the process of packing the items
• Shipping the items with a preferred logistics partner such as Delhivery, DHL, Fedex, Blue Dart.
• Passing the information of shipping including any tracking information received from a logistics partner to OMS, which will in turn update the sales channel from where the order originated.
  

Fig 3: A simplistic view of the functions managed by a WMS in outbound flow.

So far, we have seen the flow of orders to fulfillment in a normal flow. There are other things that could happen to disrupt this normal flow. These events could be:

• An order could be canceled while the order is being processed.
  In this case, the item has never left the warehouse or store, so the process of fulfillment is stopped, and the inventory is adjusted after the item is returned to the storage location. 
• An order could be canceled while the item is enroute to the customer.
  In this case, depending on the logistics partner capabilities, the item can be stopped from delivery, or we must inform the customer that a return will have to be initiated when the items are received. Return adjustments can happen only after the items are received back at the return’s storage location. Software such as Vin Reco is used for reconciliation of commissions and inventory levels, particularly when a third party returns warehouse is involved.
• A return could be requested by the customer after it is received. A return could happen for reasons such as a wrong item was shipped, customers changed their mind and there was damage enroute. There are additional complications when the returns are not received at the storage location where the returns are to be received. Software such as Vin Reco can help manage the adjustments in terms of inventory, adjustments in commissions applicable to a third-party warehouse or a warehouse managed by a marketplace.

The entire returns process, also known as Reverse Logistics, is more complicated than an outbound process where the process is more streamlined and straightforward. For Reverse logistics, the process starts with an OMS starting a returns process and the returns are updated in a WMS when the items are received in the warehouse or storage location. Software such as Vin Reco is helpful in managing the reconciliations and discrepancies that occur in a returns process.

To learn more about Vin OMS or Vin WMS or Vin Reco, please contact us at www.vinculumgroup.com.