How to optimize the order management process for businesses with consignments?
Businesses are all different. They offer specific products or services, cooperate with other companies in a specific way, follow specific approaches in the work with their clients. How can one expect a software as a service solution, which is created to satisfy average demands, to be a perfect match for specific business needs of the company, especially when it comes to order management process?
SaaS services are highly appreciated for affordable price and ready functionality, which can be immediately embedded in the working process. But the companies using them often have to adjust their processes to the possibilities of the software they are using. This isn’t the right approach.
The software should serve the needs of the company and scale along with it, instead of restraining the changes with limited functionality.
As you could already guess, our client had to work with a SaaS order management system, which wasn’t able to satisfy the specific needs of the company. A decision to develop their own custom order management software tailored to the processes inside of the company brought them to the cooperation with Clockwise Software.
Strapping is a fashion and lifestyle brand for gays. The company offers complex looks composed by professional stylists who consider the size, preferences, and lifestyle of every individual client. Depending on the chosen plan, the client receives packages with trendy looks for every season.
The packages are delivered, and the client can try out all the clothes and accessories, keep those they like, return the rest to the company, and pay for the items they keep. Such a model minimizes the risks for the Strapping’s clients and helps the company to grow their client base.
The level of cooperation with suppliers is also important. Some items arrive in the warehouse after an upfront payment, while others are provided on consignment, which means that the supplier is only paid for the goods after these are sold.
This approach is widespread within the retail business, but the problem these businesses face is almost always the same; lack of effective inventory management. As a result, all information is entered manually.
As the business and the number of processes orders grows, manual input becomes a problem - the paperwork takes too much time and is prone to error, causing many mistakes and leading to unnecessary expense and reduced customer satisfaction.
Existing order management systems (OMS), such as Tradegecko could partially solve the problem. This OMS enabled Strapping to efficiently process client orders, however, all supplier cooperation information was kept in Excel tables and on paper records. As a result, the human factor affected the business processes and caused frequent mistakes, which cost the company a lot of time and money.
The inability of existing order management solutions to consider all the aspects of every particular business case led Strapping to collaborate with Clockwise Software.
The challenges our client faced
Strapping’s business processes caused several order management challenges, which could not be solved with existing OMS. Our task was to create the optimal solution to resolve the needs of our client.
Stock management with manual input resulting in frequent mistakes
In cooperation with suppliers, Strapping follows two completely different models: upfront payment, and consignment. Combining these two approaches wasn’t easy. The stock management systems available on the market at that time couldn’t offer a solution flexible enough to combine these two completely different models.
One of the major problems was consignment management. Following this business model, the supplier provides the retailer with the goods, but doesn’t charge anything until the goods are sold. If the goods aren’t sold, the retailer returns them to the supplier, without any additional costs.
The path of every product item isn’t straightforward.
- The supplier delivers the item to Strapping on consignment, without any charge.
- The item is inventoried and sent to the warehouse.
- Using the system, the stylist orders the goods and sends the order to the warehouse.
- Warehouse workers pack the items, which are then delivered to the client.
- The client keeps the items he likes and pays for them. Strapping then pays the supplier.
- Items the client doesn’t wish to purchase are returned to Strapping’s warehouse, and the process resumes at step 2.
- If the item is not sold within a certain time, it is returned to the supplier, with no additional charge.
The company processes hundreds of items daily, keeping track of every single item is essential to keep clients and business partners satisfied. With manual order tracking, mistakes had become more and more common. There was certainly a need for a custom solution that would automatically keep track of all items. At the same time, the software needed to monitor the stages at which payment was required.
Solution: We designed an order tracking module, which tracked all the stages mentioned above. A separate “PO/Consignment” tab in the order management system keeps track of payments between the company and its suppliers. The system can also generate sales reports.
Weaknesses in stock management systems
Current stock management systems couldn’t cover all processes. One of the major problems was the inability to track items shipped by suppliers with different conditions and prices.
For example, a supplier shipped 20 T-shirts with the same design at the price of $40 each. Two weeks later, another 20 T-shirts arrived, but the unit price had increased to - $45.
All the T-shirts had to be recorded in the system as the same article, but there was no way to enter different prices. Also, it was impossible to indicate which of the T-shirts was to be sold at the lower price, and which at the higher price.
Solution. We included an additional field in the order management system so that warehouse staff could enter the number of items that came in at a different price. In addition, the system follows the “first in - first out” approach (FIFO). This means that the items which were delivered first are also sold first at the corresponding price.
In this example, the stock management system would indicate a price of $40 for the first 20 items shipped to the clients, and $45 for the remaining items.
Lack of instant synchronization
Another stock management problem for Strapping was the lack of instant synchronization, which led to mistakes in order processing.
This affected the work of the stylists the most. Every Strapping client is assigned a stylist, who composes the looks and provides personal advice concerning style. The stylists were using the order management system to compose the looks, however, the software didn’t sync automatically, which led to multiple mistakes.
For example, a stylist was composing a look for a client and decided to add a pair of colorful socks to the package. The OMS showed that there was one pair of that particular socks available, so the stylist added it to the package. At the same time, another stylist chose the same pair of socks in the OMS and added it to the order. When the orders moved to the warehouse where the items are packed for delivery, the workers two different orders had requested the same pair of socks.
As a result, the orders were returned to the stylists, the delivery was postponed, the two clients had to wait longer for their packages. Instant synchronization can prevent order duplication and therefore make order management more efficient.
Solution: To avoid the human factor, and to make sure that stylists create the looks only from the items available in the warehouse, we added double synchronization.
First, the system instantly syncs after each order is placed, so that each stylist can select only the items that are currently available.
Second, before the whole order is confirmed by the stylist, the order management system automatically checks whether all the items are still available in the warehouse.
Moreover, the stock adjustment module is able to check the current availability of some items in the warehouse on request.
Lack of a solution for automatic payment processing
According to Strapping’s business model, the payment for the goods occurs only after the client receives their parcel, tries out the clothes, and decides which item to keep.
The client should then return all items they do not with to keep. Warehouse staff then check the condition of all returned items. . Only then should the client pay for the goods kept and for those damaged.
The question was, how should this payment occur? Would Strapping have to send the invoice to the client and wait for payment? This wasn’t the optimal option.
Solution: Every package should include a personalized letter with recommendations from the stylist and a price list for the items delivered, so that the client knows the price of the clothes immediately and can decide which to keep If none are kept, everything is returned to the company. If the client likes the clothes and decides to keep them, this means that Strapping can automatically charge the client the cost of these items.
We suggested integrating Stripe to automatically process payments. When a user subscribes to Strapping’s services, payment details are entered, and new subscribers are charged a fixed subscription fee. Also, after inspection of the returned items from each delivery, Strapping automatically charges the user for the cost of the items kept and for those that were damaged.
Such a payment option saves time for the client and makes the transactions fast and secure.
Technologies used to develop the OMS
Here are the other advantages of the MEAN stack, which perfectly matched the specifics of the project:
- High speed with Node.js
Node.js ensures the high performance of the server side software. This is important for projects that have multiple users and require instant synchronization. Moreover, the system becomes scalable.
- Database scalability with MongoDB
The scalability of MongoDB was one of its main advantages over SQL, which enforces strict adherence to the structure of the database. MongoDB, on the contrary, enables ad hoc changes to the database structure. As the project relies on analyzing different types of client information to match their preferences, the ability to expand the structure of the database was essential.
- The same data format everywhere - JSON
The MEAN stack makes sure that all the data speaks the same language, and this language is called JSON. Having the same format across all the layers saves time, as it doesn’t need to be converted. Therefore, the system responds quickly and shows better performance.
The order management system development process
Developing an order management system is a complex task, and usually takes quite long to build. But we didn’t want to make an effective and tailored stock management system a long-term project for our client. So, after a conversation with the customer we found a balanced solution, to start with an MVP.
We started the development from scratch, with only one developer on the project. The first version of the system was released in just 4 months. The basic stock management system went into production immediately and was implemented in the working process on the client side.
We let our client use the basic version of the stock management system, receiving feedback and simultaneously improving the functionality. The development team started to grow.
The real-time feedback from actual users helped us develop a product that exactly meets the needs of the company. No redundant features, and no integrations that affect the performance of the software. The order management system included some unique features and managed to significantly improve the internal processes of the company.
The entire development process lasted 10 months and involved two developers, one QA engineer, and a project manager.
After around a year of cooperation we released a competitive order management system. The main goal of the project was successfully achieved - we managed to build a software system tailored to the specific needs of the business.
Actually, developing perfect corporate software is a never-ending story. As the business processes improve, the software should be adjusted in a timely manner, to ensure it is kept up to date and remain efficient.
We managed to minimize the human factor and to put all the responsibility on the system. This enabled the order management process to become independent and reliable, and significantly improved the internal processes of Strapping.