Order Processing Made Easy
Modern-day retailers need to be able to keep track of complex processes and satisfy diverse customer demands. Customers want products to be available when they want them, to be ordered quickly, and received without delay. In addition, retailers may sell products via physical shops, websites, marketplaces, apps, social commerce platforms, and other sources of demand. Managing these disparate streams of demand and ensuring orders are received and processed seamlessly presents a serious challenge for businesses. That’s where an order management system comes in handy.
Purpose of an Order Management System
An Order Management System, or OMS, is designed to help businesses track and manage customer orders. In the context of retail, they allow firms to consolidate information received via various sales channels and oversee the entire order cycle – from the receipt of the order to warehouse allocation and fulfilment, delivery, returns, and refunds. An order management system helps to ensure a high level of order processing efficiency while also providing excellent customer service.
Key Definition: What Is an Order Management System?
An order management system is a digital tool designed to help companies track their orders and ensure a seamless fulfilment process.
For retailers, an order management system serves to aggregate information received from multiple sales channels, provide unified order and inventory data, and oversee the entire order lifecycle. A retail company, for instance, has a variety of sales channels to choose from. They include physical retail stores, company-owned e-commerce sites, marketplaces, mobile apps, social commerce outlets, and business-to-business (B2B) sales. All these sales channels require orders to be tracked, items to be allocated from inventory, and payments to be processed. In addition, the allocation of stock needs to be optimised to ensure that the most viable option (in terms of cost and delivery speed) is selected for each order. An order management system helps to consolidate these processes and make them more efficient.
How It Works: Order Processing Cycle
An order management system typically starts working as soon as a customer places an order. First, the information concerning the order is captured – either manually or automatically, depending on the technology stack chosen by the retailer. The order management system can then help to ensure that the right products are allocated from the available stock and processed for delivery. Here’s how typical order processing works:
- A customer places an order – either online or in a physical store.
- The order management system captures the order information.
- The system checks the available inventory.
- It allocates the ordered stock.
- An appropriate fulfilment location is selected.
- The store/warehouse prepares the order.
- The order is packed and shipped.
- Delivery information is tracked.
- The customer receives the goods.
- The order management system processes the refund or exchange.
By digitising and automating some parts of this cycle, businesses can ensure faster, more seamless, and more reliable order processing.
Reasons Retailers Need an Order Management System
Retail order processing is growing in complexity. Customers are increasingly using multiple channels (social commerce, mobile apps, online stores) and demand seamless experiences across platforms. It can be challenging to keep inventory on hand in multiple channel types and ensure that there is sufficient stock for each purchase. Additionally, customers pick up items online and choose to pick them up in stores and return them online to physical stores – a use case that requires proper inventory management. An order management system helps to consolidate these processes and make them more efficient.
Key Benefits of an Order Management System for Retailers
- Increased Inventory Visibility
Increased visibility into inventory is one of the most important benefits provided by an order management system. Most retailers deal with the challenge of having stock in multiple warehouses, company-owned stores, and other facilities owned by third parties. Without proper inventory management, it can be hard to know what items are available in each channel. An order management system helps to provide a comprehensive view of available stock and ensure that the most viable option (in terms of delivery cost and speed) is selected for each order. Better inventory visibility also helps prevent overselling and ensures that customers aren’t led to believe that a product is in stock, when, in fact, it is not. Additionally, it can help to optimise stock allocations to ensure that high-demand items are prioritised.
- Faster Order Processing
Order processing can be a tedious task – especially if there are multiple sales channels and fulfilment methods to choose from. Employees may have to manually capture order data, send invoices, call customers, update order statuses, and update inventory levels. An order management system can streamline some of these processes by automating routine tasks, helping to speed up processing and reduce the likelihood of human error during the transition. Faster processing also means that more orders can be handled per day – without compromising on quality.
- Better Omnichannel Retailing
Modern-day customers are omnichannel shoppers who use multiple platforms to research, purchase, and return items. An effective order management system helps to enhance the customer experience while building a stronger backbone for retailers who want to provide fulfilling omnichannel retailing without breaking a sweat. Some of the services offered by omnichannel retailers include:
- Buy online, pick up in-store
- Buy online, return in-store
- Ship from store
- Home delivery
- Click-and-collect
- Store-to-store fulfilment
These options improve customer convenience while also optimising stock management.
- Reduced Fulfilment Errors
Processing mistakes can result in losses due to incorrect items being shipped, wrong quantities being delivered, and incorrect inventory levels being recorded. These issues, in turn, can lead to customer complaints, returns, and dissatisfied customers. An order management system helps to reduce these errors by standardising key processes and providing employees with accurate data about orders. In addition, a standardised system reduces the likelihood of errors during the transition between warehouses, stores, and third-party logistics providers.
- Improved Customer Experience
More and more customers are demanding a transparent and personalised experience while buying items online or in a physical store. Once the order has been placed and the payment captured, customers expect to be informed about the processing and delivery status. An order management system helps to provide accurate order status information that can be easily shared with consumers. Better transparency leads to happier clients and more positive reviews. In addition, reliable order processing helps to ensure that customers are more likely to continue shopping with the company.
Order Management System vs. Inventory Management System
Order management and inventory management are separate functions, although they are highly intertwined. While order management is concerned primarily with processing customer orders and tracking their statuses, inventory management deals with stock levels, inventory counts, and replenishment. The two back-end processes complement each other, providing retailers with a reliable system for ensuring that customer demand is matched with the supply on hand. Most order management systems today work in tandem with inventory management systems to ensure that customer orders are only processed if the necessary stock is available. In addition, once an order has been processed, inventory management software can update the stock levels to ensure that no items are oversold.
Order Management System vs. Warehouse Management System
Many order management systems work in tandem with warehouse management systems, or WMS. While OMS primarily deals with order processing, WMS focuses on day-to-day operations of the warehouse. Some of the functions of a warehouse management system include receiving, putaway, warehouse inventory management, picking, packing, warehouse transport, and dispatch. Whereas an order management system determines what needs to be processed, a warehouse management system deals with how this will be achieved. By utilising both digital tools, businesses can maximise their operational efficiency while minimising errors during the order processing cycle.
Critical Features to Look for in an Order Management System
Not all order management systems are equal, which is why businesses should look at their long-term needs before deciding on which provider to choose. Most order management systems, however, tend to provide similar core features:
- Multichannel order management
- Real-time inventory visibility
- Intelligent order routing
- Returns management
- Integration capabilities
- Reporting
Multichannel Order Processing
An efficient OMS should be able to aggregate all orders from disparate sales channels in one place.
Real-Time Inventory Visibility
Many retailers operate multiple warehouses and physical stores, making it hard to know what items are in stock at which location. A good OMS should be able to provide real-time inventory data across warehouses, stores, and other sales points.
Intelligent Order Routing
A powerful OMS should be able to determine which sales channel to utilise for a given order based on customer demand, stock availability, and other factors.
Returns Management
Returns are a crucial part of the retail lifecycle. A good order management system should provide robust returns management functionality to help ensure a seamless returns process.
Integration Capabilities
Most businesses use multiple digital tools to run their operations – from e-commerce platforms to ERP and warehouse management systems. An efficient OMS should be able to integrate with these tools to ensure that data is consistently shared between systems.
Reporting
An OMS typically generates valuable data about the order processing lifecycle. Most systems provide reporting functionality to help users get insights about cancelled orders, processed orders, average processing time, and more.
How an Order Management System Can Help Grow Your Retail Business
As a retail business grows, so does the complexity of its order management lifecycle. A single shop and a few dozen online orders may be processed with a simple Excel spreadsheet. As the company opens new stores, warehouses, and online sales channels, however, the complexity increases exponentially. An order management system provides a great opportunity to scale with confidence, streamline the order processing cycle, and improve the customer experience.
Order Management System for Small and Medium-Sized Retailers
While large retail networks benefit massively from an OMS, small and medium-sized businesses (SMEs) can also see considerable improvements by digitizing their order processing operations. Some of the most common challenges faced by SME retailers include:
- Stock inaccuracies
- Manual processing
- Inefficient processing
- Limited channel visibility
- Slow fulfilment
- Increasing order volumes and sales
- Scaling operations
The Right Order Management System Can Solve These Problems
SME retailers should identify their key requirements and look for an OMS that prioritises these features.
Choosing the Right Order Management System
Before choosing an order management system, it is crucial to understand the unique needs and requirements of the business. Some of the most common questions to ask include:
- How many orders do we process on average per day?
- Which sales channels do we utilise?
- How many warehouses and stores do we have?
- What fulfilment options do we offer?
- Which systems do we need to integrate with?
- How do we process returns?
- Where do we experience the most issues?
- How quickly do we anticipate our growth to be?
Once the requirements have been identified, it is possible to select an OMS that addresses these pain points.
Improving Your Retail Operations with an Order Management System
While implementing an OMS typically focuses on digitizing the order processing lifecycle, businesses should also take a close look at their existing processes to see where enhancements can be made. For example, the approval process for orders or the way in which inventory is allocated may be streamlined to make things more efficient. Looking at order processing and inventory management from a holistic perspective can lead to significant improvements in the overall retail operations.
After implementing an order management system and optimising some of the key processes, retailers should analyse their performance using a series of critical performance indicators and determine whether some processes need to be fine-tuned. Some of the most important ones include:
- Order processing time
- Accuracy rate
- Fulfilment lead time
- Cancellation rate
- Return rate
- Inventory visibility
- On-time delivery
The Future of Retail Order Management
eCommerce customers will continue to demand faster, more flexible, and more transparent retail experiences. Meanwhile, the retail supply chain is becoming more integrated. Stores are no longer just sales points – they can act as pickup stations, return centres, inventory warehouses, and more. Enhanced order management systems will enable retailers to embrace this new reality and utilise a diverse range of fulfilment options. As artificial intelligence, automation, and big data become more mainstream, order management systems will continue to evolve, offering end-to-end visibility into the supply chain while optimising the allocation of resources. By investing in enhanced order management capabilities today, retailers can ensure that they are well-prepared for the future.
Conclusion
An order management system is a tremendously valuable tool that helps retailers manage increasingly complex sales and fulfilment processes. By aggregating information from multiple sales channels, improving inventory visibility, automating routine processes, and streamlining various operations, companies can ensure higher efficiency and an improved customer experience. No matter the size of the retail network, effective order management is crucial to ensuring reliable and consistent sales. As more and more retail transactions take place online, the right OMS will play an even bigger role in managing the supply chain, improving fulfilment efficiency, and building long-term customer loyalty.
