What Is an OMS and How Does It Relate to the ERP and the WMS?

It is the first week of the seasonal promotion and orders are coming in through four doors at once: field sales reps, the wholesale customer portal, a marketplace store and the electronic data interchange with the retail chain that buys the most from you. By mid-morning, the marketplace sells the last cases of a product that the northern territory rep had already committed by phone to a distributor. The warehouse picks whatever appears first on its screen, the retail chain's order ships incomplete and the marketplace penalizes your seller rating for the cancellation. Which order had priority was a decision nobody in your company made; it simply happened.

An OMS governs the order: it receives it from every channel, promises against real inventory, decides where it ships from and tracks its status. The ERP supplies customer, price and invoice; the WMS carries out the picking.

The order nobody governs between the sale and the warehouse

In many distribution companies, the order changes hands several times before it ships. Sales enters it, credit releases it, the warehouse picks it, transportation delivers it and billing collects on it. Each area controls its own step and none of them controls the complete order. While there is a single channel and a single warehouse, that chain runs on goodwill; when channels multiply, goodwill stops being enough.

Each channel promises with its own inventory figure

The first symptom is that each channel checks inventory in a different way. The sales rep looks at a report from the morning, the portal reads a stock level that updates every so often and the marketplace shows a quantity someone adjusted by hand on Monday. All three see stock the warehouse has already committed to other orders, and all three sell the same units. The physical inventory is correct; what fails is the promised inventory.

Priority is decided by order of arrival

The second symptom appears when inventory falls short of covering everyone. Without an explicit rule, the warehouse picks in the order in which orders reach its screen, and the customer with a service level agreement ends up behind a lower-margin retail sale. Deciding whom to serve first is a commercial decision, and in that company it is being made, by default, by the floor operator.

What an OMS does and what changes when your company has one

An order management system (OMS) makes those decisions explicitly, with rules your company defines. Its raw material is the order: it receives it, validates it, promises it, decides where it is fulfilled and follows it until the customer has it in hand.

Capturing and validating orders from every channel

The OMS brings into a single queue the orders that arrive through sales reps, the portal, e-commerce, marketplaces or electronic data interchange with large customers. Before accepting them, it verifies that the customer exists, has available credit, that prices match their price list and that the delivery address is valid. An order with problems is stopped at the entrance, where it can still be fixed with a phone call.

Available-to-promise inventory

The function that changes the operation the most is the promise. The OMS calculates available-to-promise inventory: what is on hand, minus what is already reserved for other orders, plus what will arrive on a confirmed date. When a channel checks availability, it receives that figure in place of the warehouse's gross stock. When the order is confirmed, the quantity is reserved and stops being available to the other channels at that same instant.

Sourcing assignment and order splitting

With several warehouses or branches, the OMS decides where to fulfill each order from according to the rules you define: the warehouse closest to the customer, the one with complete stock, the one with the lowest shipping cost or the one that needs to move a lot close to expiration. If no warehouse has everything, it decides whether to split the order into several shipments, wait until it is complete or ship partially and leave the rest as a backorder. The priority rule between customers also lives here, written down and applied the same way for everyone.

Status tracking and returns

The OMS keeps the status of every order visible to sales, to customer service and, where it applies, to the customer: entered, released, in picking, shipped, delivered. It also manages the return path, returns and exchanges, so that product coming back re-enters available inventory and the ERP issues the credit note against the right order.

Where the ERP ends, where the WMS begins and where the OMS fits

Confusion between these systems is common because all three touch the same order. The clearest way to separate them is by the question each one answers.

The ERP answers who is buying, at what price and how it gets collected

The ERP owns the customer, the product catalog, the price lists, credit, the invoice and accounting. The OMS queries that data to validate and promise the order, and at the end it hands the information back so the sale can be invoiced and recorded. When a standalone OMS keeps its own copy of customers and prices, the first source of differences appears between what was promised and what gets invoiced.

The WMS answers where the product is and who moves it

The WMS turns the order the OMS released into floor tasks: which locations to visit, on which route, with which operator and at which dock to consolidate. It confirms what was actually picked, by lot and by serial number, and that confirmation goes back to the OMS to update the status and to the ERP to invoice what shipped. The division of labor is simple: the OMS decides what to pick and the WMS decides how to pick it.

The TMS answers how and when it arrives

When the order leaves the warehouse, the TMS assigns it to a route, a vehicle and a driver, generates the transfer documents and confirms delivery. That confirmation closes the order cycle in the OMS and gives customer service the answer the customer is asking for on the phone.

The risk of adding a fourth system with its own copy of inventory

Many companies solve the order problem with a specialized OMS connected to the ERP and WMS they already have. It works when the integrations are solid, and it adds a risk worth measuring before signing: there are now three systems that store inventory, and every connection between them opens a window in which the figures do not match.

Syncs that arrive late at the worst moment

An integration that syncs every few minutes is enough on a normal day and falls short on promotion day, exactly when several channels are selling the same product at the same time. If the OMS reservation takes time to reach the WMS, or the picking confirmation takes time to come back, the overselling the OMS was supposed to prevent comes back in through the integration door. On top of that, every connector is one more piece someone has to monitor, update and repair when one of the systems changes versions.

When a standalone OMS does make sense

A dedicated OMS makes sense in high-volume e-commerce operations, with many fulfillment points, physical stores that fill online orders and very sophisticated allocation rules. For many mid-sized distributors, logistics operators and manufacturers in Mexico, the real need is narrower: a single available inventory figure, reservations on confirmation, clear priority rules and status visible to everyone. Those functions can live inside a platform that already integrates ERP and WMS.

Order management on the same database

At Oasys we start from one premise: the order, the stock and the invoice have to be the same data seen from different areas. Our platform integrates ERP, WMS, TMS and Production on a single database, on our own servers, so the order sales confirms reserves inventory at that same instant, the picking the warehouse confirms feeds the invoice and the shipment, and the delivery the carrier confirms closes the cycle with no reconciliation between systems.

For external channels, such as online stores, marketplaces or customers who send their orders through electronic data interchange, the platform exchanges information in real time with any system that supports REST or SOAP services, and in whatever protocols the other party requires. That way, every channel checks and reserves against the same inventory the operator sees on their RF handheld.

The signs your company already needs to manage orders with rules

The order has already outgrown the goodwill of your departments when you sell through more than one channel from the same inventory, when cancellations for lack of stock have become normal, when you fulfill from more than one warehouse, when customers with different service levels are served in order of arrival and when customer service needs three internal calls to give the status of an order. With two of these signs present, order management deserves a formal decision, whether with a standalone OMS or with an integrated platform.

Frequently asked questions

Does an OMS replace the ERP?

The OMS governs the order cycle and depends on the ERP for customer data, prices, credit and the invoice, so the two work together. Without an ERP behind it, the OMS promises orders that nobody can later invoice or book correctly in accounting.

Do I need an OMS if I sell through a single channel?

With one channel and one warehouse, the order functions of an ERP integrated with the WMS are usually enough. The need grows with the number of channels, warehouses and priority rules between customers, because each one multiplies the decisions someone makes by hand.

What is the difference between stock on hand and available-to-promise inventory?

Stock on hand is what is physically in the warehouse. Available-to-promise inventory subtracts what is reserved for confirmed orders and adds what will arrive on a firm date. Promising against gross stock is a frequent cause of overselling when several channels sell at the same time.

If your channels sell the same product twice and the warehouse decides whom to serve first, your company needs to govern the order before adding another channel. At Oasys we integrate ERP, WMS and TMS on a single database, on our own servers, so every order is promised and picked against the same inventory. Find out how at https://www.oasys.com.mx/en