What is an order management system

Today, more and more businesses are turning to an integrated order management system to help optimize their order management process; saving them time, money and manpower and ensuring efficiency and customer satisfaction are top of the agenda.

Definition of order management system:

An order management system is a software that enables customer order entry and processing.

What is order management?

Order management is the order-to-cash sales process that sits at the heart of any goods-based B2C and B2B company. Put simply, it’s the end-to-end cycle of receiving and processing a customer order through to fulfillment. Order management is not conducted in isolation; it relies upon almost every department in a company: from a customer service team to the warehouse staff, the accounting department through to delivery partners. When mastered effectively, order management ensures a business’s workflow runs smoothly by establishing efficient processes to keep it moving forward; maintaining customer satisfaction and protecting a company’s reputation.

A complex system

Order management involves a series of interconnected touchpoints and stakeholders who work collaboratively together to enable customers to order the right products, for the right price and receive them at the right time. The order fulfillment system (as it is also known) not only secures that order-to-cash (O2C) processes run smoothly, but also gives businesses the opportunity to build customer profiles and keep track of inventory volume and sales records.

The order management process: step by step

The key to order management involves a series of synced steps, fluid processes and constant communication to create a fluid order-to-cash flow. The smoother and faster the flow, the more orders the company is able to process, and the quicker the business is able to grow.

Here’s a breakdown of how end-to-end order fulfillment works:

Step one:

The process begins when a customer places an order; either online, in-store or over the phone with a customer services representative. The customer’s details are then stored, including order history, volume of orders and payment preferences. Lastly, the customer order is sent to the warehouse.

Step two:

The inventory is then checked by a warehouse manager and continuous supply from vendors is recorded. If inventory runs low, or runs out completely due to a large order, then an order will be placed to the purchasing department.

Step three:

The order is then sent to the accounts department, where it is recorded as either cash sales or accounts receivable. The sale is logged in the ledger, an invoice is generated and sent to the client, and the payment is recorded.

Step four:

A third-party shipping service (or a company’s own LTL) will then deliver the goods to the consumer and the order is fulfilled.

The challenges of order management

The more touchpoints and stakeholders involved in the order management process, the more obstacles there are to its success. Some of the key challenges for businesses include human error and process backlogs, inventory visibility, transportation errors, and poor communication, which can all seriously negate customer satisfaction and ultimately negatively impact loyalty.

The solution: an order management system

In order to establish a fast-moving, cost-effective, and accurate order management cycle, both B2C and B2B companies are choosing to use an integrated and responsive order management system (OMS). The OMS integrates directly with a business’s ERP and is set up to work alongside the human workforce in order to obtain the most productive and profitable order management cycle possible.

The top six benefits of an order management system

An order management system has several key benefits for businesses including visibility at every step of the sales process, time efficiency, reduced risk of human error, and improved accuracy. Here are the top six benefits to an OMS:

Automation efficiency

An OMS operates on automation, and an automated order processing system saves costs on manual labor, decreases the risk of human error across invoicing and order data, and frees up time for companies to focus on growth and customer satisfaction. It also increases data security as there is less need for manual intervention.

24/7 Access

Businesses can access their order management system online from any destination, which means they’re are able to process orders remotely and at any time. This results in greater data control, better customer service, and more efficient order processing.

Focus on growth

The automation of the order-to-cash system quickly creates a standardized process from one single platform, freeing up company time to collect and analyze data in order to leverage business intelligence for further growth and tackle any issues.

Inventory management

The real-time capabilities of an order management system benefit inventory management, by distributing data in real-time regarding items sold, returned, or exchanged. This saves companies from over-selling inventory, and once again, ensures customer satisfaction.

A centralized view

The ease of a centralized order management system gives companies a single view of the complex e-commerce fulfillment ecosystem and protects against order errors, customer dissatisfaction, or lost revenue due to common glitches like low inventory, incorrect invoicing, or unforeseen transportation errors.

Real-time information

Thanks to the real-time data display of an OMS, companies are able to react faster to any issues that may arise, rather than risking customer dissatisfaction with errors or delays. It also ensures that product and payment data are up to date, giving companies more insight into their current state of the business.

Why is an order management system important?

High volume, high velocity, high expectation; the three key consequences of the rise of e-commerce and customer expectation in today’s ‘always on’ society. The popularity of digital and e-commerce means that customers expect to order whatever they like, whenever they like and from a platform that suits them. In our 2018-19 Digital Transformation Report, we found that ‘the number of businesses using e-commerce to support their digital transformation has risen from 73% to 87%’ so the demand for e-commerce fulfillment has never been more prevalent. Customers expect a one-click process, and in order to encourage loyalty and repeat business, companies need to do as they demand.

Go to the e-commerce terms

Other interesting read

View all resources
10 strategies to grow your e-commerce business revenue
Blog

10 strategies to grow your e-commerce business revenue

Read the blog
How to start your B2B e-commerce project: 10-step guide
Blog

How to start your B2B e-commerce project: 10-step guide

Read the blog
How to select the best e-commerce solution provider: 7 factors to consider
Blog

How to select the best e-commerce solution provider: 7 factors to consider

Read the blog