While it may seem like a simple process, managing customer orders can become complicated as your business grows. You’re having to manage orders from multiple sales channels, with your stock being held in multiple locations. You need to ensure that your customer orders are accurate and you’re communicating updates on time.
Without an efficient order management system in place, your business could be experiencing issues such as misplaced orders, inaccurate stock information, late deliveries, and unhappy customers.
What Is An Order Management System?
An order management system is a piece of software designed to help your business manage customer orders. This can include capturing, processing, tracking, and managing your orders in one place. It connects all parts of your business, including sales channels, stock, warehouse, logistics, and customer service.
Rather than using spreadsheets, emails, and other systems to manage your orders, an order management system will allow your business to keep track of your orders in one place.
When a customer makes an order, this can automatically be logged. The system will check if the items are in stock, allocate your stock, and begin to fulfill your order. As your order moves forward, the status can be updated so your staff and customers know what is happening.
An order management system can be incredibly beneficial for businesses who have a high volume of orders, multiple sales channels or complex supply chains. It is commonly used within retail, e-commerce, wholesale distribution, manufacturing and logistics.
How Does An Order Management System Work?
An order management system manages the different processes involved in fulfilling customer orders.
Depending on your business, there are typically 6 steps involved in your order management process.
Order Placement
Your customer places an order via your online store, sales rep, marketplace or other sales channel.
Your order management system will log the order. This will include the products, quantities, delivery address and any customer requirements.
Order Validation
Your order management system will validate your order against your business rules. This includes checking if the product is in stock, prices, customer details, and payment/credit requirements.
This can help identify any potential issues.
Inventory Allocation
Your order management system will check if there is stock available to fulfil the order. If your business has multiple warehouses or distribution centres, this can help you know which warehouse to fulfil the order from.
Order Fulfillment
Once your order has been confirmed, your order management system will send the required information to your warehouse. The staff can then pick, pack, and prepare your order.
Shipping and Delivery
Your order management system will receive updates from your logistics/transportation systems. This will allow you to track your order. Customers can also be sent automated updates regarding dispatch, delivery and expected date of delivery.
Returns and After-Sales Support
If a customer wishes to return or exchange an item, your order management system can help you manage this. Your order will be logged and your stock updated.
An order management system can help to reduce any duplication of manual data entry and improve collaboration between departments.
Top 8 Benefits Of An Order Management System
Using the right order management system can help improve your business processes. Especially if you’re dealing with a high volume of orders or complex supply chains.
- Increased Order Accuracy
Orders can be prone to errors if you’re manually processing them. This can be due to having to input information from one system to another.
If there are issues with the quantity of products, delivery address, or stock availability this can cause incorrect orders to be sent, causing delays and extra costs.
An order management system will help reduce manual data entry. It will automatically log and process your order.
Having everything logged in one place ensures your orders are accurate and will reduce any avoidable errors. This is especially useful if you’re managing hundreds or thousands of orders per day.
- Better Inventory Visibility
Having visibility of your stock levels, where they’re held and what has been allocated is crucial for ensuring your orders are fulfilled accurately. Without accurate stock information, your business could be accepting orders for products that aren’t available. Or have too much stock due to uncertainty.
Using an OMS with integration to your stock and warehouse management systems can help you gain up to date stock information. This can help you:
- Reduce overselling and out of stocks
- Improve stock allocation
- Improve stock replenishment decisions
- Reduce excess stock holding costs
You’ll also be able to give your sales team more accurate information on product availability.
- Faster Order Processing and Fulfilment
Speed can be a key factor in customer satisfaction.
If you’re manually processing your orders, this could cause delays. This could be due to having to manually check emails and other systems.
An order management system will help streamline your processes. This can reduce the amount of repetitive tasks required by automating capturing orders, validating, allocating stock, and instructing fulfilment.
Orders can be passed between departments quickly with less admin. This means your staff can focus on any exceptions and more complex customer requirements.
If you’re fulfilling from multiple locations, an order management system can help you decide which warehouse to fulfil from. This can help make your process more efficient.
- Enhanced Customer Experience
Customers now expect their orders to be accurate, easy to purchase from and have visibility of their order.
If your customer service team can’t see up-to-date order information, simple queries can take multiple calls/emails between departments.
Using an order management system will give you all your order information in one place. Depending on what features are available, your system can provide automated order confirmation, shipping notifications, and tracking.
Your customer service team can respond more quickly to queries. They can identify any potential delays. This will improve the overall customer experience. It helps improve confidence in your business and encourages customers to buy again.
- Reduced Operational Costs
If you’re not using an efficient order management system, you could be paying unnecessary costs. This can be due to manual admin, incorrect orders, duplication, and returns.
An order management system can help improve your business processes. It will reduce the amount of repetitive tasks and will improve the accuracy of your order information.
If your order management system is integrated with your warehouse and transport management systems, you can make better fulfilment decisions. For example, you could allocate orders to warehouses closer to your customers, reducing unnecessary travel.
Improved collaboration will also help reduce time spent finding information and correcting any issues with processing. Whilst there will be some costs to implement an order management system, it can help reduce your costs over time.
- Seamless Omnichannel Order Management
More and more businesses are selling across multiple channels. This can include physical stores, online, marketplaces and B2B.
If you’re not using an order management system, you could be having issues with fragmented order information. This can be due to having multiple systems for different sales channels.
Using an order management system will help you manage orders from multiple channels. This will make it easier to manage your sales, allocate stock, and ensure your orders are processed consistently.
For example, if you’re a retailer and receiving orders from your online store and physical stores, you can use an order management system to manage fulfilment. This will help you manage the stock you have available.
You’ll be able to easily expand into new markets/sales channels.
- Better Reporting and Business Decisions
Order information can give you great insight into your business. However, if your information is split across multiple systems, it can take time to create reports.
An order management system will help you have all your order information in one place. This will help you understand how your business is performing. You can track:
- How long you’re taking to process orders
- Accuracy of order fulfilment
- Volume of orders
- Delivery performance
- Cancellation and return rates
- Orders outstanding/delayed
This will help you identify any bottlenecks in your processes. Over time, order information can help with demand planning, resource allocation, and improved decision-making.
- Greater Scalability and Business Growth
As your business grows, your order management processes will need to cope with increased volumes of transactions, more customers and more fulfilment locations.
A manual process may have worked for a small business but can become difficult to maintain. A scalable order management system will give you a more structured foundation. By having standardised processes and integrating your systems, you can manage increased volumes without needing to increase your admin.
An order management system can help you scale your business into new distribution channels and markets.
Key Features To Look For in an Order Management System
Not all order management systems will offer the same features. It’s important to look at what your business needs, what systems you currently have in place, and what your growth plans are.
Some key features to consider:
Centralised order processing – Manage orders in one place.
Inventory visibility – Up-to-date stock levels across your warehouses, stores and distribution centres.
Automated order workflow – Business rules for validating, allocating, routing and processing orders.
Order tracking – Track the progress of your order fulfilment, shipping and order.
System integration – ERP, WMS, TMS and E-commerce integration.
Reporting and analytics – Dashboards and reports to help you track order performance.
Returns management – Manage cancellations, returns, and exchanges. Update stock.
Business should also consider system reliability, security, ease of use, implementation, and technical support.
Order Management System Vs Warehouse Management System
An order management system is very similar to a warehouse management system. An order management system is used to manage your customer orders. This includes capturing, allocating stock, tracking fulfilment, and after-sales.
A warehouse management system is used for managing your warehouse. This includes receiving goods, storage, picking, packing, and stock movement.
When a customer places an order, your order management system will log the order and decide how to fulfil. The warehouse management system will then manage the warehouse processes.
If your systems are integrated, information can be shared between your systems. If you have a complex distribution process, combining your order management system with your warehouse management system and transport management system can help create a more connected supply chain.
How AI Is Changing Order Management
AI is creating new opportunities for improving your order management processes. Modern systems can now incorporate AI features. This can help analyse order information and identify patterns. This can help improve your decision-making.
AI can help forecast demand, identify any unusual orders, and suggest more efficient fulfilment locations. Predictive analytics can also identify any potential delays. This means you can investigate any issues.
Combined with warehouse automation, IoT, and integrated logistics systems, AI can give you greater visibility. However, this will only be effective if you have accurate data, integration, and clear business processes. Consider what features will add real value to your business processes.
Choosing The Right Order Management System
When choosing an order management system, it’s important to consider what issues you are facing with your current order management.
Are you experiencing delays with orders? Unreliable stock information? Too much time spent moving information between systems? Are customers struggling to get accurate updates?
Knowing what issues you have will help you identify what features you need to see real improvements.
Consider how well the solution will integrate with your current ERP, warehouse management system, transport management system, and other systems.
Consider if it’s scalable. Will it help you grow your order volumes, distribution locations, and sales channels?
Also consider the support, training, and overall cost.
The right order management system should help with your current needs and allow you to improve in the future.
Conclusion
An order management system is an important tool to help connect your sales, stock, warehouse, logistics, and customer service. It can help improve your order accuracy, stock visibility, fulfilment, and communication with your customers. This can reduce complexity within your business.
As your business grows and you’re selling across multiple channels and markets, having an effective order management system in place is key. Investing in an integrated order management system can help your organisation become more responsive, efficient and scalable.
