Order handling seems easy enough for small firms. An order comes in, the product gets prepared, payment is verified, and the product gets delivered. As sales increase, however, and as a firm starts selling through several sales channels, order handling becomes much more difficult.
An order could be received through the firm’s website, online marketplace, brick-and-mortar stores, sales representatives, distributors, applications on mobile phones, or B2B sites. Without the right system, staff might be required to update inventory, customer accounts, shipment details, billing documents, and the status of orders across several different systems.
An order management system makes sure that all this happens efficiently within one system. It gives companies a broader picture of the entire process from when an order is made until it is fulfilled and shipped or returned and refunded.
For smaller and medium-sized firms, an order management system will make things easier and will help their business grow. For bigger firms, the order management system helps link up all the different sales channels, warehouses, suppliers, logistics providers, and customer service centres.
What Is an Order Management System?
Order Management System, also referred to as OMS, is computer software that controls and monitors customer orders through the order fulfilment process.
This software usually includes features for
- Order capturing from various sales channels
- Check for the product availability
- Update on inventory levels
- Payment processing
- Fulfilment location selection
- Invoicing and packaging of documents
- Warehouse operations coordination
- Delivery tracking
- Cancellations, returns, and refunds management
- Order status update provision for customers
The aim of an order management system is to allow the flow of correct data between the sales team, inventory team, warehouse team, financial team, logistics team, and customer service team.
The company does not have to use spreadsheets, emails, paper forms, and other tools in order to manage orders’ activities.
Why Order Management Becomes More Difficult as Businesses Grow
When a firm deals with few orders, manual tracking is possible. However, as the order volume and complexity grow, such a practice turns out to be problematic.
For instance, a retailer may receive orders via its website, social media pages, marketplaces, and brick-and-mortar stores. In case of a business-to-business supplier, purchase orders should be managed from a number of corporate clients with different terms, prices, delivery dates, and approvals.
In absence of a unified order management system, the following difficulties may arise:
- The same inventory can be allotted to various customers;
- Employees can mistakenly input data on customers and products;
- An order can be delayed due to the incorrect allocation of warehouses;
- A customer will be provided with false data on inventory availability and delivery;
- Finance staff may have difficulties matching orders, invoices, and payments;
- The sales team will lack necessary information about the order status;
- Management will have no up-to-date information to make decisions.
All these factors may lead to increased expenses and decreased customer satisfaction. Besides, they may become a barrier to expansion of sales channels and markets.
Benefits of an Order Management System for SMEs
SMEs usually work with a small number of employees and resources. In such cases, the employees have to handle sales, stock, delivery, and customer inquiries simultaneously. Order management software will assist the SMEs in becoming more efficient without necessarily increasing their workforce.
Reduced Manual Work
Order entry through manual processes is both time-consuming and error-prone. An order management system would help in capturing the order details automatically from sales channels and feeding them into the concerned departments.
This will eliminate the need for double data entry and would give the staff extra time to spend on more productive tasks.
Improved Inventory Accuracy
An order management system updates the inventory status when the order is made, cancelled, returned, or fulfilled. This provides an insight into the inventory status for SMEs.
Having better accuracy of the inventory can help avoid overselling, understocking, excess inventory, and overpurchasing.
Faster Order Processing
Automated workflows help speed up order processing from order placement to order fulfilment. Orders can be placed directly in the relevant warehouse, store, vendor, or fulfilment partner.
This process will help companies reduce their delivery time to customers.
Better Customer Experience
The customer expects that the company should give them accurate information about product availability, order confirmation, shipping, and delivery.
An order management system enables customer service agents to have the updated order information without having to consult different departments. Automated notifications may also be issued to the customers at different stages of the order process.
Greater Scalability
The SME can start off with one outlet and then move into new markets or even countries.
The order management system is scalable in such a way that it can process more orders and channels without changing its business processes.
Benefits of an Order Management System for Enterprises
Big corporations tend to handle large volumes of orders, many warehouse locations, large product mixes, and greater complexity in customer demands.
In such organisations, the order management system does more than simply track orders. The order management system serves as a coordinating hub for the entire supply chain.
Centralised Order Visibility
Enterprise order management systems gather together orders from various channels and places. Management is able to track order quantities, order fulfilment, delivery, and any exceptions using dashboard reporting.
This increases the integration between various departments and allows management a greater understanding of operations.
Intelligent Order Routing
Large companies could supply goods from their regional distribution centres, local warehouses, stores, suppliers, or third-party logistics providers.
A sophisticated order management system could help identify the right place to fulfil the order based on certain criteria, including but not limited to:
- Availability of stock
- Proximity of customer
- Traffic cost
- Time of delivery
- Storage capacity
- Priority of order
- Contractual agreement
- Nature of products
Support for Omnichannel Operations
Consumers today are switching from one channel to another while shopping. For instance, they will search for a particular product on the Internet, purchase the same via a mobile app, collect it from a physical store, and finally return it from another store.
Some of the features that an order management system can be used for include:
- Buy online, pick up in store
- Ship from store
- Reserve online and purchase in store
- Same-day delivery
- Split delivery
- Cross-channel returns
- Supplier direct fulfilment
Improved Governance and Control
Businesses frequently have requirements for approval processes, audit trails, access control, price management, and compliance.
An order management system can standardise the ordering process in different departments and different geographic locations and maintain logs of significant activities and modifications.
Key Features of an Order Management System
The capabilities that an order management system provides depend on the software used and on the industry.
Nevertheless, there are some features that are significant for SMEs and large companies alike.
Multichannel Order Capture
The system must collect orders via all relevant channels, such as e-commerce websites, marketplaces, point-of-sale solutions, direct sales representatives, electronic data interchange, and customer portals.
Centralised order collection eliminates fragmentation and enables the staff to have a single source for processing orders.
Real-Time Inventory Visibility
Businesses must be able to track their stock at warehouses, retail stores, suppliers, and fulfilment partners.
There must be a distinction made between physically available stock, available stock, reserved stock, damaged stock, and incoming stock.
Order Workflows Automation
The workflow automation feature enables businesses to specify how the orders will be processed.
For example, the orders may be automatically approved while others, which may be considered exceptional, must be reviewed.
Fulfilment and Shipping Management
Integration is possible with a warehouse management system, transport management system, couriers, and third-party logistics service providers through the order management system.
This helps in processes related to picking, packing, shipping, tracking, and delivery confirmation.
Returns and Refund Management
The return process is an essential component of the customer experience, and the system must be able to manage return authorisations, product inspections, inventory management, replacement orders, refunds, and reason analysis.
The analysis of return reasons could also reveal product, packaging, and fulfilment problems.
Reporting and Analytics
Dashboards available for management may help in providing information regarding:
- Order volume
- Time cycles of orders
- Fulfilment rate
- Cancellation rate
- Return rate
- Availability of inventories
- Delivery rate
- Sales across channels
- Order exceptions
- Service level of customers
How an Order Management System Integrates with Other Business Solutions
Order management system systems deliver maximum benefit when they are part of another company system.
An order management system could be linked to:
- Enterprise Resource Planning software
- Warehouse Management Systems
- Transport Management Systems
- CRM systems
- E-Commerce Platforms
- Marketplace Accounts
- Point-of-Sale systems
- Accounting software
- Payment Gateways
- Supplier Management systems
- Business Intelligence
For example, an order placed by a customer could be checked for inventory availability, fulfilment details could be sent to the warehouse, a customer record would be updated, payment would be processed, and data would be delivered to the finance system.
The process saves time and inconsistency among different departments.
Choosing the Right Order Management System
Organisations should not consider an order management system simply by comparing feature sets. The solution needs to fit the organisation’s processes, sales model, technology environment, and future needs.
Some key considerations include:
Business Requirements
The business should determine its current order process, sales channels, fulfilment locations, customer needs, approvals, and process challenges.
This will enable the organisation to determine which features are important and which are nice to have.
Integration Capabilities
The order management solution should integrate into the existing systems within the business. The business needs to determine if the solution offers connectivity through standard connectors, application programming interfaces, or custom integration capabilities.
Scalability
The solution should have scalability to handle increases in orders, products, users, locations, and sales channels.
An order management solution that does the job today but does not scale will become costly to replace in the future.
Ease of Use
The business needs to ensure that employees can operate the system easily. A complicated user interface will decrease productivity.
Businesses should include users from their operations staff in evaluations and tests of the order management solution.
Configuration and Flexibility
All companies have their own policies for order fulfilment and customer service requirements. The order management system must support the ability to configure workflows, alerts, approval levels, and routing rules without extensive customisation.
Security and Reliability
There may be sensitive customer information, price data, payment data, and operational data stored within the system. Companies need to examine such issues as access controls, data encryption, backups, availability, and compliance with regulations.
Implementation of an Order Management System Successively
Just technology cannot guarantee the success of order management. Implementation involves proper planning, clean data, process alignment, and engagement of employees.
First of all, businesses must map the existing order process and find inefficiencies in the process, duplication, manual interventions, and gaps in the control.
Data about products, customers, inventory, pricing, and fulfilment locations need to be examined prior to migration. Poor quality of data can influence order accuracy even if the system works properly.
Testing must include both regular orders and special cases like:
- out-of-stock products
- partial fulfilment
- split orders
- order modifications
- refused payments
- customer cancellations
- returns and exchanges
- failed deliveries
- busy order period
Training needs to be customised according to the individual roles of employees. Training programs for sales, warehouse, finance, customer service, and management might differ. Organisations must keep track of performance indicators after implementation and get feedback from employees and customers.
The Future of Order Management
The order management software is becoming smarter and more interconnected. Technologies like artificial intelligence, prediction tools, automation, and machine learning may assist organisations in making forecasts, detecting order risks, suggesting fulfilment points, and spotting abnormal order transactions.
Cloud systems are also enabling smaller companies to enjoy advanced order management features without the need for complex IT infrastructure.
For bigger organisations, the order management system is turning into a platform for orchestration of the order process across digital commerce, physical retail, warehousing, suppliers, and logistics.
Conclusion
An order management system allows SMEs and enterprises to have better control over the entire order process. This is achieved by integrating all the processes involved in sales, inventories, fulfilment, shipping, finance, and customer services into one process.
An order management system will be beneficial to SMEs by decreasing the administrative workload, increasing accuracy, and creating a strong foundation for the business. For enterprises, an order management system enables centralised visibility, intelligent fulfilment, omni-channel integration, and better control of operations.
Due to the increased expectations of customers, businesses need to handle orders more efficiently, get more accurate data and ship products through increasingly complicated networks. A well-designed order management system can help organisations increase efficiency, reduce costs, and improve customer satisfaction.
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