DOMS vs. ERP – Competitors or Power Duo?

Distributed Order Management Systems (DOMS) and Enterprise Resource Planning (ERP) systems are both valuable software systems for modern retailers. While the ERP system has been an important system for various kinds of businesses for decades, the DOMS is a rather new software system that was developed to handle requirements that get more and more complex. But what is the difference between a DOMS and an ERP system and who can profit from them?

An ERP system supports companies to include and manage all processes that are necessary while running a business within one system. Depending on the industry and the company, this includes finance, human resources, production, supply chain, logistics, services, procurement, etc. For example, sales uses the ERP system to manage client orders while finance uses it to get an overview over and handle payments. The goal of using an ERP system is to manage all different kinds of processes in one system to use available resources as efficiently as possible.

Like other technological features, ERP evolved rapidly during the last years. Modern ERP systems are often cloud-native and work with algorithms and AI to make processes more efficient, more agile and faster. At best, all data of the company is located in the ERP system, so it works as a central data source for the company. The system consists of different modules that communicate with each other and access a common database. If used efficiently, the advantages for the companies using an ERP system are higher productivity, deeper insights, accelerated reporting, lower risk, simpler IT and improved agility.

An ERP system can also be helpful for retailers to profit from the benefits mentioned above. Especially for a retailer with existing online and offline retail business and several distribution channels it is useful to manage the different channels, locations and processes efficiently. It can cover areas like product planning, costs, marketing, supply chain and payment. However, the ERP system is not a flexible system you can easily adjust to your needs. It is usually built for general use cases and to handle a broad variety of business functions. But it reaches its limits when it comes to managing complex orders and to enhancing the retailer’s customer journey. Therefore, a DOMS is critical for retailers, especially those with an online and offline business. 

A DOMS is a specialist in the field of order management, especially designed to cover very complex requirements regarding the order fulfillment process. It is a software solution that manages and coordinates all on- and offline orders, from order placement to product delivery and returns. It simplifies the retailer’s fulfillment process by consolidating all order and inventory data and smartly matching customer preferences with the complete distribution network. With a modern DOMS, retailers can very specifically customize rules and criteria that the system then takes into account while orchestrating orders. It enables order splits, can take factors like cost-optimized and faster deliveries and customer’s wishes into account, enables offering diverse delivery options, more information and options during checkout for customers as well as handling of returns. Also, the DOMS increases product availability because it consolidates stock, making the entire inventory accessible across the network. This reduces the risk of articles being out of stock when demand arises. All of this enhances the customer journey and therefore customer satisfaction.

A DOMS is especially beneficial for retailers with different fulfillment locations, for example central warehouses, stores, micro hubs, drop shippers, etc, because it connects your whole fulfillment network with your online business. In that way, retailers can create a seamless omnichannel experience for their customers and implement concepts such as Ship-from-Store or Click & Collect. 

An ERP might cover some functions to handle orders but it does not include the innovative order management capabilities of a DOMS. 

With a DOMS retailers can set very specific and sophisticated rules and features like pre-order and backorder functions and other functions that are outside of the basic standard, while an ERP is not designed for that. 

When ERPs are used as DOMS, this involves a lot of customization which makes the whole process very complicated and time-consuming to make sure that everything is set correctly and works reliably. And while, in an ever changing environment like retail, it might be necessary to make changes in the present system, this is very expensive and complicated with an ERP system as well.

An ERP is not designed for managing specific orders and requests in a very short amount of time. This can lead to customer orders being delayed or not edited correctly, because ERPs are not made to keep up with the pace and complexity of direct-to-customer orders, especially if the retailer has a large fulfillment network. Therefore, it is difficult for retailers who only use an ERP to meet today’s high customer expectations. 

To put it in a nutshell, while an ERP system covers a broad variety of functions, some of which are similar to those of an DOMS, a DOMS is a very specific agile and flexible solution to optimize a retailer’s order management process. It was built for this specific purpose and is therefore the better choice when it comes to managing complex orders.

However, an ERP system and a DOMS do not necessarily compete with each other. A DOMS can rather be seen as an addition to an existing ERP system that complements its functionalities, so both technologies can focus on what they do best. 

Software solutions following a best-of-breed approach focus exclusively on their expertise, developing optimal and specific solutions for unique needs. They are also very flexible so individual systems can be seamlessly connected and a smooth and scalable exchange of data can be ensured. In that way, a retailer can seamlessly integrate a DOMS into an existing IT landscape which might also include an ERP system. Retailers who are looking for best-of-breed solutions receive guidance from the MACH Alliance that advocates and supports open, future-oriented technology ecosystems.