A Back to Basics Explanation of Supply Chain Management Systems

Information technology in the supply chain, and specifically systems that manage the flow of goods and information across the supply chain, is becoming ever more advanced. With this advancement, complexity is growing as expansions in functionality start to overlap traditional boundaries.

So, we thought we’d take the opportunity to do a back to basics explanation of the primary systems that all physical supply chains should have deployed as a minimum.

What Are the Primary Supply Chain Management Systems?

The goal of all supply chains is to capture an order and manage the flow of materials and information to fulfil that order as efficiently as possible.

With this in mind, there are primarily three key systems that facilitate this, they are Order Management System (OMS), Warehouse Management System (WMS), and Transport Management System (TMS).

These three systems may be a modular part of a wider Enterprise Resource Planning (ERP) system, such as SAP, Oracle or IFS, or they may be independent systems. In the main, smaller companies will tend towards independent systems but ultimately, as a business grows, it is more likely to migrate towards a fully integrated ERP system.

That said, very often independent systems have a functional advantage over modules within an ERP and so it is not uncommon for some independent systems to be ‘bolted on’ to an ERP system.

Increasingly, as systems development grows and the market gets ever more competitive, we’re seeing an overlap in systems functionality. So, an OMS may also have some elements of a WMS functionality and a WMS may have some elements of a TMS functionality. However, this does not detract from the core functions required from each system type which we explain below.

What Does an Order Management System (OMS) Do?

An OMS is the very first system most companies will deploy from start-up. An OMS manages customer engagement, from enquiry through to order confirmation, across all sales channels. The function of the OMS is to capture, process, and allocate orders to fulfilment points, be that a specific warehouse, store, or manufacturing site.

The OMS will then track that order by interfacing with the WMS and TMS, providing visibility of the order’s status at all points in the chain.

Typically, an OMS will have access to accurate inventory records (often by interfacing with the WMS) in order to confirm stock availability to facilitate the order to the customer’s requirement. Most OMS will also manage the replenishment of this inventory by placing orders on external suppliers or internal supply points.

The OMS can be considered the ‘boss’ system. It states what’s required to meet the customer order and then hands over responsibility for picking, packing, and dispatching that order to the WMS.

What Does a Warehouse Management System (WMS) Do?

Based on instruction from the OMS, the WMS will manage material flow within a warehouse across five key areas: receipt, putaway, inventory location, retrieval and despatch.

The first task of a WMS is to receive goods from suppliers and confirm back to the OMS that those goods have been received before allocating a specific location within the warehouse where those goods should be placed.

The OMS then knows what quantity of goods is in stock, whilst the WMS knows exactly where in the warehouse those goods are located. The WMS may facilitate this process through barcode scanning, RFID, or simple manual confirmation.

When the OMS instructs the WMS of customer orders, the WMS allocates these orders to a pick instruction. Depending on how the WMS is configured, this may be an instruction to pick the full order, or it may be an instruction to pick a specific line of the order for marshalling and consolidation.

Once the full order is picked or consolidated, the WMS will then instruct the packing of the order and will trigger the required despatch labels and documentation.

Once the order is complete and marshalled for loading, it’s time for the TMS to takeover.

What Does a Transport Management System (TMS) Do?

A TMS plans and tracks the movement of the order from point of despatch to final customer delivery. The planning element can cover many aspects, from the type of vehicle to be used and how the vehicle is loaded, through to the route the vehicle should take and in what order the vehicle should make deliveries.

Throughout each stage, it is now common for the TMS to provide real-time tracking updates which are communicated back to the OMS or direct to the end customer.

Further to planning and tracking, a TMS will also typically provide key performance information on the delivery route to allow the transport provider to monitor and analyse efficiency. This key performance information will very often include distance travelled, fuel consumption, route variance, and driver performance.

Once the final delivery has been made, the TMS will manage the confirmation of Proof of Delivery (POD) which will then be fed back to the OMS and the order will be closed.

Is it Really This Simple?

In the systems that are available on the market today, there are many overlaps between OMS, WMS, and TMS, in addition to a plethora of extended functionality. This causes complexity when selecting systems, which is further exacerbated as many systems don’t specifically identify with the traditional supply chain functions of order management, warehouse management, and transport management.

There are ‘fulfilment’ systems that cover OMS and TMS functionality, but don’t have WMS functionality, and there are ‘telematics’ transport systems that don’t have routing or POD functionality. The reality is that to deliver the three core areas of functionality, many companies may have to deploy a multitude of ‘sub’ systems that interface…hopefully.

If you’re considering a new system, or systems, to manage your supply chain, then the very first task is to map your required process – from receiving an order right through to final delivery. Ensure each element of the process is optimised and fully explained and then use this process map as the key requirements document with which to approach systems providers.

If you need any assistance with supply chain systems selection then please contact one of our supply chain consultants today.

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Tamsin Giles, Client Service Coordinator, contact photo

Hello! I’m Tamsin, Client Services Coordinator at Paul Trudgian. Please get in touch by phone, email or the contact form and I’ll make sure your enquiry is dealt with promptly and passed to the right member of the consulting team. We look forward to hearing from you!