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What Is Order Management?
by Jaidyn Farar
As your business grows, it’s exciting to see sales numbers steadily rise. And it’s even more exciting to get great online reviews as satisfied customers rave about your products.
But growth comes with challenges too. As your company expands to new sales channels, you might struggle to keep data organized and fulfill orders promptly. To save money and keep your logistics operations running smoothly, we recommend learning the principles of good order management and investing in an order management system (OMS). This guide will walk you through what you need to know.
What is order management?
Order management is the process of tracking orders from the time they’re received until the customer receives their package. You can think of order management as every process that happens after an ecommerce customer has clicked “Check Out.” These processes can include payment processing, order entry, fulfillment, data analytics, inventory management, and customer service.
Today, many brands and retailers have moved to an omnichannel experience, one that bridges physical and digital channels. Order management is a vital part of keeping the omnichannel buying experience seamless, no matter how customers interact with your business.
Whether you use a single-channel, multi-channel, or omnichannel strategy, an optimized order management process helps you meet customers’ high expectations and create an outstanding post-purchase experience. This boosts customer loyalty and increases retention, ultimately leading to increased revenue.
What is the order management process?
While the order management process includes many steps and activities, we’ll break it down into three main stages: the customer places an order, your team receives and fulfills it, and new inventory is ordered.
1. A customer places an order
The order management process begins when an online shopper places an order on your website. They provide essential details like their name, address, and contact information, which are automatically passed to your order management system.
These details are either double-checked by a salesperson or verified automatically by the system, and your website automatically updates inventory counts so other shoppers can see whether the product is still available.
2. The order is received and fulfilled
Now the fun begins! Staff members prepare the customer’s order by picking and packing items, then using shipping software to generate a label.
This process often takes place in fulfillment centers, but orders can also be shipped from stores. Depending on your omnichannel capabilities, you might even offer customers the option to pick up their purchases from a nearby store.
If a customer decides to have their product shipped, they receive a tracking number so they can monitor their shipment’s progress.
3. Inventory is replenished
Based on data from your OMS, your warehouse management system (WMS) updates inventory levels. Once inventory levels drop below a certain point, your business orders new inventory to ensure you can continue to meet demand.
What is an order management system (OMS)?
An order management system (OMS) is software that automates order management and shows you all of your customer order information in one place. With the real-time visibility provided by an OMS, businesses can improve order management processes and create a better customer experience while keeping costs low.
“An OMS enables businesses to centralize all of their orders. This is particularly beneficial if you've got multiple sales channels [or if] you're selling in various markets, maybe even globally. All of your orders are housed in one place for visibility and management.” — Gemma Shaw, Leveraging an OMS for Growth
Key components of order management
Order management involves many different processes and systems. It’s not just a matter of collecting order information and sending out packages; you also need to consider payment processing, inventory management, customer service, and more.
Let’s take a closer look at some of the key components of order management.
- Order entry. Order entry is the process of capturing order details. While order entry can be done manually with spreadsheets, automating the process increases accuracy and saves time. If a business sells on multiple channels—such as their ecommerce store, a brick-and-mortar store, and an ecommerce platform like Amazon—their OMS will store all their order data in a central location.
- Payment processing. Payment processing involves handling customer transactions, including verifying and completing payments. An OMS can integrate with payment processing platforms to ensure that paid-for orders are fulfilled in a timely manner.
- Inventory management. Inventory management falls under the umbrella of order management. When a business has real-time inventory visibility, it can easily track stock levels across all locations, preventing stockouts and overstock situations.
- Order fulfillment and tracking. Orders are fulfilled in logistics centers (and sometimes physical stores) as workers pick and pack products, then prepare them for shipping. Shipment tracking lets each customer monitor their package’s location during transit and plan around any delays.
- Customer service. Customer service teams support customers before, during, and after their purchases by resolving issues and answering questions. Focusing on customer service increases both customer loyalty and retention.
- Returns management. Returns management is an important part of order management. Merchants should handle returns and exchanges efficiently, making the experience hassle-free for customers.
- Analytics and reporting. Every system used in the order management process collects data. For example, an OMS collects data on customers, including details like their previous purchases, lifetime values, and locations. With this information, brands can provide personalized offers for past customers and create marketing campaigns that appeal to their target demographic.
Benefits of optimized order management
Optimized order management has many benefits, including faster processing times, fewer errors, lower costs, and greater customer satisfaction.
- Faster order processing times. With optimized order management, ecommerce businesses can get orders out the door faster. This means more efficient fulfillment centers, fewer shipping delays, and happier customers.
- Fewer errors. The order management process has many stages, and mistakes can crop up at several different points. A business might include the wrong products in an order (or leave something out), send a package to the wrong address, or simply fall behind in fulfillment and delay packages by a day or two. Automating the order management process decreases these errors, making for a more accurate and consistent fulfillment process.
- Lower costs. Manual order management processes are great for businesses just starting out, but they’re not cost-effective in the long term. On the other hand, automated order management leads to reduced labor costs, optimized inventory levels, better cash flow, and higher revenue.
- Greater customer satisfaction. With optimized order management, the post-purchase experience is consistent across all touchpoints. Packages arrive on time, customer service is ready and waiting to help, and the returns process is a breeze. The result? Better customer satisfaction across the board. According to Forrester analysts, customer satisfaction is a driving force behind the rising popularity of order management systems: “Business investments to meet soaring customer expectations for excellent experiences are driving the OMS market growth.”
How to optimize order management
How can your ecommerce store optimize order management? This section will run through six strategies that will help things run more smoothly.
1. Automate processes
This article has talked a lot about the benefits of using an OMS to automate order management. But is your business ready to invest in an OMS? Fast growth can be a sign that it’s time, but the complexity of your business also comes into play. For example, an OMS is useful when selling on multiple channels.
Gemma Shaw, head of partnerships at Order Desk, gives an example of a situation when an OMS would drastically simplify operations:
“Let's say a customer has a Shopify store. They also sell on Etsy and eBay and Amazon, and [they’re] managing all of those four separate channels. … You can connect those integrations to your OMS. They'll automatically import into the system. You can have complete visibility over them. You can flag them and tag them as being an Amazon order or Shopify order. And then you can route them automatically … [to] where they need to go. So what used to take you hours takes seconds or minutes in the background.”
2. Integrate systems
While an OMS is a powerful tool, it works best when integrated with other technology. Depending on your business size and needs, you may need to integrate with the following to get the most out of your OMS:
- Enterprise resource planning (ERP) system
- Customer relationship management (CRM) system
- Warehouse management system (WMS)
- Ecommerce platform
- Shipping software
- Payment processing platform
- Fraud detection software
- Accounting software
“Integration is the cornerstone, the powerhouse of an OMS. [An OMS is] able to integrate with the sales channels that you want to partner with, the suppliers that you're partnered with, the shipping solutions and the accounting software that you want to use.” — Gemma Shaw, Leveraging an OMS for Growth
3. Improve inventory visibility
Good inventory visibility is the backbone of an efficient order management process. Every time a customer places an order, your WMS and ecommerce platform should automatically update to reflect the current inventory levels. If you sell at physical stores, it’s important to show online shoppers whether products are available for pickup at a location near them.
When you have a clear view of inventory levels, you know exactly what products are available for sale, which prevents overselling and disappointing customers with out-of-stock notifications after they’ve placed an order.
4. Communicate with customers
Customers don’t want to be left in the dark after they’ve placed an order. Most of them expect your business to communicate with them. Has their order gone through? When will it ship? When will it arrive? Use automated emails and notifications to proactively answer these questions.
Improving communication sets clear expectations and builds trust with shoppers, who want to be kept informed about their order status, delivery times, and any potential shipping delays.
Clear communication can also help minimize questions and complaints, freeing up your team to focus on other aspects of order management.
5. Improve fulfillment operations
Improving fulfillment operations helps you pick, pack, and ship orders more quickly and accurately. This results in fewer errors and delays, which in turn decreases returns and complaints.
The following ideas will help you improve your fulfillment operations:
- Invest in technology like a warehouse management system (WMS) and shipping software to automate fulfillment tasks.
- Use batch picking to handle multiple orders at once, saving time and reducing labor costs.
- Organize your warehouse layout to minimize travel time.
- Train staff to be familiar with processes, safety standards, and warehouse technology.
Additionally, keep the customer experience in mind when designing your fulfillment process. To increase sales and keep customers coming back, provide multiple shipping options so shoppers can choose the one that fits with their budget and schedule. With shipping software like EasyPost, you can keep rates low and make sure you’re using the most reliable carriers.
6. Optimize returns management
An efficient returns process can turn a potentially negative experience into a positive one, reinforcing customer loyalty and trust. By handling returns smoothly, you’ll reduce the time and cost associated with processing returned items, restocking inventory, and managing customer communication.
Start by establishing a clear returns policy that’s easy for customers to understand and follow. You can also use technology to make the returns process easier on buyers. For example, customers should have access to a self-service returns portal instead of needing to go through a customer service representative.
Once products have been shipped back to your facilities, workers should be able to quickly assess them and decide whether they should be restocked or disposed of.
Elevate your order management with the right shipping solution
EasyPost streamlines the shipping and order management process for businesses of all sizes. With carrier integrations, rate discounts, address verification, package tracking, insurance, and more, the system saves both time and money. And with 99.99% uptime, you can trust EasyPost to stay up and running 24/7—meaning your customers can trust you with their delivery.