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What is order management?

Apr 18, 2024 - Lars Anderson
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What is order management and how does it work? |

Originally published January 26, 2022, updated April 18, 2024 by A.Wolfe.

For customers, a successful transaction occurs when an item they ordered arrives at its intended destination. For businesses, success requires affordability and continuity. Effective order management is what makes successful transactions possible. In simple terms, order management is the process of receiving, fulfilling and tracking customers’ orders. It begins when a consumer buys a product and ends when they receive it.

To explain, let’s take a closer look at order management, how it works and why it matters to brands and consumers.

What is order management, and how does it work?

Order management is the process of receiving, fulfilling and tracking customers’ orders. It begins when a consumer makes a purchase and ends when they receive their product(s). The specific steps of the order management process can vary from business to business. But typically, order management involves the following:

  • Order placement: The consumer places their order on a storefront, marketplace, social platform or mobile app. Once they click “purchase,” an order management system (OMS) receives it, verifies it and begins to process the information. Ideally, the OMS centralizes sales channels, giving full visibility and control of orders while keeping inventory synced.
  • Fulfillment: This step includes receiving the order, picking and packing, and shipping it.
  • Inventory management: The procurement, storage and order fulfillment of products. It includes activities such as inventory tracking, demand forecasting and optimizing stock levels to ensure sufficient inventory to meet customer demand without overstocking. Effective inventory management contributes to improved efficiency, cost savings and customer satisfaction.
  • Customer service: Throughout the fulfillment process, customers receive notifications and are supported with shipping changes, returns or issues with a product upon its arrival.

As a business grows, automating the order management process is important. Otherwise, it’s easy to be overwhelmed by the number of orders coming in, and mistakes are more likely to occur. While companies can improve their Perfect Order Rate (POR), mistakes happen, and dealing with them quickly and effectively makes all the difference. Repeated errors and fulfillment issues can seriously tarnish a brand’s reputation, and ultimately, these issues may damage the customer relationship beyond repair.

What is an order management system?

An OMS is a digital platform that allows brands to manage the life cycle of an order. Modern order management solutions provide powerful capabilities and will integrate with other operational software, giving critical, comprehensive visibility.

With a robust OMS, companies can:

  • Streamline order processing from placement to fulfillment
  • Centralize inventory management for better visibility and control
  • Optimize inventory levels to prevent stockouts or overstocking
  • Reduce order processing times and improve order accuracy
  • Provide real-time visibility into order status for enhanced customer service
  • Enable integration with various sales channels and fulfillment centers
  • Automate order routing and allocation based on predefined rules
  • Facilitate returns management and exchanges efficiently
  • Generate reports and analytics for better decision-making
  • Scale with business growth and adapt to changing requirements
  • Provide customer care

An OMS streamlines the entire order fulfillment process, from order placement to delivery. By centralizing order processing and inventory management, an OMS helps businesses optimize inventory levels, reduce order processing times and enhance order accuracy. An OMS gives you real-time visibility into order status, enabling you to provide better customer service and improve overall operational efficiency.


Why is order management important?

Order management is at the heart of everything a business does. It directly impacts the customer’s experience and affects profitability. Here’s how.

Helps prevent inventory issues

Overstocking and understocking are two of the most common inventory issues companies encounter. Overstocking products is expensive as it requires more physical space for storage, while understocking can lead to delays in fulfillment, affecting the customer experience negatively. Order management helps companies identify inventory trends and accurately estimate the quantity a company needs to have on hand to meet consumer demand. In the long run, this saves money and improves customer satisfaction.

Influences the customer experience

Today’s consumers expect a seamless purchasing process, transparency about their order’s status and hassle-free returns. All of these things are important aspects of the order management process. When it’s all said and done, order management can make or break the customer experience and directly influence a brand’s reputation. An automated OMS helps ensure customers receive the correct order, on time and that the process is effortless.

Improves productivity

With accurate and effective order management, brands can spend less time fixing order issues. Instead, they can focus on meeting the demands of consumers, maintaining continuity and, as a result, making a profit.

Reduces fulfillment mistakes

With more orders come additional opportunities for mistakes. Unfortunately, many companies today don’t handle the entire order management process in-house. Instead, they rely on fulfillment, supply chain and logistics providers like suppliers, packaging services or distribution centers to manage their orders. With more players in the game, keeping track of orders and controlling every aspect of the order management process can be more challenging. As a result, businesses often spend more time and money ensuring that orders are correctly fulfilled and delivered. With an effective order management system (and strong providers), brands can protect their reputation and guarantee that consumers will receive the goods they ordered accurately, damage-free and on time.

Provides valuable insights

Order management systems collect crucial information and provide real-time data. For example, companies can use their OMS to isolate valuable information about fulfillment timelines, current and historical orders and details on which products are commonly purchased together. Brands can leverage these insights to make wiser decisions that positively impact their bottom line.

5 fundamental factors for successful order management

Order management has a significant impact on a brand’s profitability and reputation. As a result, the key question is this: How can brands establish and maintain a successful order management process? The following five factors can help companies avoid common issues that can derail their order-to-cash operations.

1. Visibility

For best results, brands need a 360-degree view of their supply chain. With robust visibility, a company can more easily identify and anticipate potential roadblocks and establish efficient processes to bypass them. This transparency also enables them to perform quality checks and easily view order details, like who placed the order, what products they ordered and where they’re going. It’s also easier to access and compare information on storage and other factors that could impact deliverability and the customer experience.

2. Scalable systems

Although it’s tempting to only consider current needs, a company should always consider its future needs too. For example, maybe a young company can handle order fulfillment manually now, but can it keep up once its product gains popularity? An effective OMS will grow with the business and easily adjust to sales fluctuations. As the business expands and its customers’ expectations evolve, the OMS should be able to accommodate those needs. With the right OMS, a brand can avoid unnecessary growing pains and streamline its processes from the get-go.

3. Intelligent omnichannel fulfillment

Today’s consumers expect more, so it’s not enough to just fulfill orders. As a critical part of the customer journey, the post-purchase experience should be optimized. Fine-tuning the order management process based on a brand’s needs and performance goals will empower the company to deliver a stellar customer experience. And that’s what creates loyal customers instead of sending them to a competitor. With intelligent order fulfillment and management, companies handle all of their orders with the utmost care and in the most effective way possible. In turn, this also optimizes their inventory management, reduces their overhead costs, increases their omnichannel fulfillment efficiency and elevates the customer experience.

4. Reliable inventory

Real-time inventory information makes it easier to see valuable data immediately instead of waiting for reports to review. With up-to-the-minute updates, a company knows right away what’s in stock, running low or out of stock. Brands can also save money because they won’t have to expedite product shipments or constantly overstock just to avoid inventory crises. As consumer demand increases, accurate information and proactive inventory management become more important. A brand’s order management process has to be quick and precise every time, and a reliable inventory management system makes that possible.

5. Customer engagement

Throughout the order management process, customers should have access to their information and receive regular updates on their order status. Whatever OMS a company uses should give the customer-facing team the ability to view order information and inventory data to assist consumers with any issues. In addition, brands should use automation to notify important events, such as when an order is received, processed, shipped and delivered. An OMS that supports customer success will improve a brand’s ability to manage the life cycle of an order and deliver a positive customer experience that leads to repeat business.

Improve your order management process with

Effective order management is the foundation for any brand’s success. If you’re looking for ways to improve your process, can help. Contact our team today to learn more about our OMS and 3PL services. 

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