Glossary
09 Feb 2025

What is Order Management?

Subhasis Sahoo (Founding Member - Marketing)

Order Management Definition :

Order management refers to the comprehensive process of receiving, tracking, and fulfilling customer orders in a business. It encompasses every step from the moment a customer places an order to the delivery of the product or service, ensuring smooth and efficient operations throughout the entire transaction lifecycle. Effective order management systems (OMS) help businesses streamline workflows, improve customer satisfaction, and enhance overall operational efficiency.

Table of Content :

  1. Order Management Definition
  2. The Order Management Process
  3. Why Effective Order Management is Critical for Your Business
  4. Key Challenges in Order Management
  5. Order Management Systems (OMS): What You Need to Know
  6. How to Choose the Right Order Management Software
  7. Best Practices for Optimizing Your Order Management Process
  8. How Order Management Affects Your Bottom Line
  9. Conclusion

The Order Management Process

The order management process is multi-faceted, consisting of several stages:

  1. Order Receiving: The first step occurs when the customer places an order either online, in-store, or via phone. The order is confirmed and payment is processed.
  2. Order Processing: Once payment is processed, the order is sent to the warehouse for picking and packing. This is where inventory is checked to ensure that the item is available.
  3. Shipping: After the order is packed, it is dispatched to the customer. The shipping process also includes updating the customer with tracking details to ensure transparency.
  4. Returns and Exchanges: If the customer wants to return or exchange the product, this stage is essential to managing the return process smoothly. It involves inspecting returned items, restocking inventory, and issuing refunds or exchanges.

Why Effective Order Management is Critical for Your Business

Effective order management offers a wide range of benefits that can directly impact your business’s bottom line:

  • Improved Customer Satisfaction: Ensuring that orders are fulfilled quickly, accurately, and efficiently improves customer satisfaction and loyalty.
  • Operational Efficiency: Automating and streamlining the order process reduces manual errors and increases the efficiency of operations, saving time and reducing costs.
  • Inventory Optimization: By tracking inventory in real time, businesses can avoid stockouts or overstocking, which improves operational costs and customer satisfaction.
  • Data-Driven Decision Making: A good order management system offers detailed analytics on sales trends, customer preferences, and inventory levels. This data can be used to optimize the entire order management process.

According to a study by the National Retail Federation, 86% of consumers are willing to pay more for a better customer experience, which highlights the importance of efficient order management.

Key Challenges in Order Management

While order management is crucial, many businesses face challenges in the process:

  • Order Inaccuracies: Manual order processing can lead to errors in inventory management, order details, and shipping addresses, which can impact customer satisfaction and operational efficiency.
  • Inventory Mismanagement: Without real-time inventory tracking, businesses risk having stockouts or overstock situations, leading to lost sales or excess inventory that ties up capital.
  • Multiple Sales Channels: Managing orders from multiple platforms—such as an eCommerce website, brick-and-mortar stores, and third-party marketplaces—can lead to inefficiencies and confusion.

These challenges can be addressed with an automated order management system that integrates with all business functions, from sales and shipping to inventory management.

Order Management Systems (OMS): What You Need to Know

An Order Management System (OMS) is a technology solution designed to automate and streamline the order process. The system allows businesses to track orders from all sales channels, manage inventory, process payments, and facilitate returns. Some key features of OMS include:

  • Real-Time Order Tracking: Ensures that businesses can monitor the progress of each order and provide customers with up-to-date information.
  • Inventory Management: Automatically tracks stock levels and helps prevent stockouts, overstocks, or inventory discrepancies.
  • Multi-Channel Integration: Supports orders from different channels (e.g., online, physical stores, or third-party platforms), enabling businesses to manage all orders in one place.

Popular OMS solutions include Shopify, Oracle NetSuite, and Zoho Inventory, each providing different features suited to businesses of various sizes and needs.

How to Choose the Right Order Management Software

Choosing the right OMS is essential to optimizing your business’s order process. Here are some factors to consider when selecting an OMS:

  • Integration: Ensure that the software integrates seamlessly with your existing systems like customer relationship management (CRM), enterprise resource planning (ERP), and accounting software.
  • Scalability: Choose an OMS that can scale with your business as it grows, ensuring that it can handle increasing order volumes without compromising performance.
  • Ease of Use: Look for software that is user-friendly and does not require extensive training, making it easier for your team to adopt and use.
  • Customer Support: Reliable customer support can help you resolve issues quickly, ensuring minimal downtime and disruption to your business operations.

Best Practices for Optimizing Your Order Management Process

To get the most out of your order management system, follow these best practices:

  • Automate Order Processing: Automating order processing will reduce human errors and speed up fulfillment.
  • Integrate Sales Channels: Use an OMS that integrates orders from all sales channels to avoid manual entry and reduce errors.
  • Keep Inventory Updated: Regularly update your inventory levels to avoid stockouts and ensure that your orders are fulfilled on time.
  • Set Clear Return Policies: A transparent return policy improves customer trust and helps streamline the return process when necessary.
  • Train Your Team: Ensure that your team is trained on using the OMS to ensure smooth operations and avoid any potential issues.

How Order Management Affects Your Bottom Line

Effective order management has a direct impact on a business’s profitability:

  • Cost Reduction: By automating order fulfillment and inventory management, businesses can significantly reduce operational costs.
  • Revenue Growth: Faster and more accurate order fulfillment can increase sales and improve customer retention, which drives long-term revenue growth.
  • Competitive Advantage: Businesses that can efficiently manage orders and inventory are better positioned to adapt to market changes and customer demands, giving them an edge over competitors.

In fact, businesses that implement an automated order management system can reduce their fulfillment costs by up to 20%, according to research by the Aberdeen Group.

Conclusion

Order management is a vital process that businesses must optimize to meet customer expectations, improve operational efficiency, and reduce costs. By leveraging the right order management system and following best practices, businesses can improve their fulfillment speed, reduce errors, and create a better overall experience for their customers.

If you want to take your order management to the next level, explore available OMS solutions and start automating your processes today. The right system will ensure that your business is prepared for growth and able to meet the demands of an increasingly digital and fast-paced world.