30 Sep
A good order management software works behind the scenes to streamline your order process, make it easier to manage your fulfillment, and update your inventory without any input from you.
Not only that, but the most popular platforms blur the lines between inventory and order management for an all-inclusive approach. If you’re an online merchant, you know the challenges that come with ecommerce order management related to capturing, tracking, and fulfilling orders.
Not only do you have to align your inventory and orders across multiple channels, but you also must manage complex shipping schedules and order profiles. From there, you’re caught dealing with tracking fulfillment through third-party logistics.
What is ecommerce order management?
Ecommerce order management is the back-end process for managing and fulfilling online orders. This includes everything from order routing and printing shipping labels to returns and subscription management.
Historically, order management relied on clunky ERPs and manually-updated spreadsheets. These legacy systems and outdated processes cannot support today’s brands and marketplace sellers. To stay competitive, brands need flexible, scalable and adaptable solutions. They need operational technology that can scale to meet demand and industry shifts. This is where an order management system comes in.
Order management systems (OMS) provide automation and integration – across every step of the order journey. This allows brands to deliver consistent customer experiences at scale across every channel. Ecommerce order management systems enable operators to manage orders coming in from multiple sales channels, and going out of multiple fulfillment points. It facilitates automation between service providers, and aggregates data within a single interface.
Real-time data is at the core of an effective order management strategy. Retail data now travels through multiple layers of sales channels, technology platforms like BigCommerce and operational infrastructure. With so much data, it’s impossible to rely on static spreadsheets.
As businesses embrace multichannel retail, order management systems have become essential.
How does ecommerce order management work?
The goal of an order management system is to get a product into a customer’s hands as efficiently as possible. It manages the journey of each item in the customer’s order, from the time it goes into their cart to the moment it arrives on their doorstep – and any returns that may follow.
1. The order fulfillment process
Every company has a unique approach to fulfillment. This can be based on customers, fulfillment locations, returns processes and vendors. While processes can vary, most order fulfillment processes include the following steps:
- The company receives an order from the customer.
- The company enters the order into their system.
- The customer gets a notification that the company received the order.
- The order is routed to the nearest warehouse or fulfillment center.
- An employee picks the order from the shelf.
- The company prepares the order for shipping and prints shipping labels.
- The company ships the order.
- The customer gets a notification that the order is on its way.
- The order arrives.
2. Order management systems facilitate order fulfillment
An order management system’s job is to make the fulfillment process as streamline, cost-effective, and automated as possible. It optimizes these steps to reduce shipping and overhead costs, increase data quality, and pick and pack in the most efficient way possible. Many order management systems also have functions to streamline returns management and credit card processing. The best operational software will integrate with the leading ecommerce tools and platforms to adapt to the way you do business.
When a customer pays for an item, the order management system might update your quickbooks accounting system, generate an invoice, and print a shipping label. When an order ships, the ecommerce order management software can even track the order’s progress by integrating with your 3PL, FBA or shipping carrier like FedEx or DHL. Once an order leaves a warehouse your customer is able to track it’s progress until it reaches their door. In many cases, this is facilitated by the OMS.
Functions of an order management system for ecommerce
1. Order Tracking
Order management systems keep a track of all your orders across channels- website, phones, or in-person. You’ll be able to access order details and its status from anywhere as your OMS will centralize the entire process.
Your OMS will also track all pending orders for your customers and customer service teams. It will keep updating them on the order status so that they always know which at stage of order fulfillment their purchased item is.
2. Locating inventory
More than 43% of retailers say that inventory management is their biggest challenge. This is because keeping a track of products going out and coming in, correctly updating the systems, and managing inventory across different locations can be complicated and confusing.
Improper management can lead to shortages and delayed fulfillment, eventually compounding into revenue losses. An order management system simplifies and centralizes this process by using practices like item-level tagging, RFID technology, and automated inventory management.
3. Order fulfillment
Online shoppers are generally willing to wait for 1-2 days to receive orders or 2+ days if the shipping cost is free. Delivery speed obviously plays a big role in determining a store’s revenue and sales.
You can only maintain fast and consistent delivery if you assign warehouses that are nearest to the customers. Your order management system can help you assign the right warehouses depending on inventory availability, and also ensure orders are packed and shipped with correct shipping labels.
4. Manage order returns
Customers return their orders often in ecommerce. Keeping a track of return orders, updating inventory, returning money, updating sales and revenue records, etc can be tricky. An OMS can help ecommerce shops see hand processing of returns and refunds.
5. Multichannel integration
You can manage sales from across all channels in your order management system, thereby centralizing the entire procedure and minimizing duplication errors. An OMS will help you keep an eagle’s eye on all your sales records, helping you sell and fulfill orders with more accuracy.
How to choose the best order management system ecommerce
1. Integration
Your OMS should integrate with your ecommerce platform seamlessly, and you shouldn’t have to alter your website’s backend structure just to fit in the OMS. Most order management systems designed in a way that they can be easily integrated with all ecommerce platforms out there.
2. Supplier consideration
Your OMS should make the process of purchasing your products from suppliers easier. Complex supply chain procedures should be simplified, and your inventory and records should be updated easily after products have been received.
3. 3PL, warehouse, and fulfillment integration
Most ecommerce stores outsource warehouses, shipping, and fulfillment. An OMS has to work with the people who pack, ship, and deliver your order. It should check for orders frequently and effortlessly send them to warehouses or 3PLs for fulfillment.
4. Scalability
As an ecommerce company grows, its sales, suppliers, need for inventory, sales channels, etc grow with it. An OMS system should be able to handle all these aspects if your online store is to grow in size. It is important to determine what functionality your business needs now and could need in the future. A lot of order management systems have limitations and don’t offer all the features a large business would need, so weigh your options wisely.
5. API
All businesses have different management requirements. While all OMS will provide you with most functions, there still might be a few operations you’d need to add on your own. Check if your OMS gives you access to their API so that you can improve the system and tweak it for your benefit.
6. Reporting & forecasting
Apart from sending through orders and updating information, an OMS should be able to report the trend in your sales and revenue. It should forecast and identify issues that you could face (such as stock shortage), so that you’re able to plan for those issues ahead of time.
7. Automation
The entire point of getting an OMS is to automate mundane and tedious order management tasks so that you can concentrate on growing your business. An OMS automates manual tasks such as sending orders to warehouses, updating sales reports, generating invoices, tracking orders, etc.
It’s advisable to go through your OMS’s catalog properly and assess how many tasks are being automated and how many will have to be done manually.
8. Customer-centric functionalities
A lot of e-stores cater to customers across the globe, so clearly there will be differences in language, taxation procedure, currency, etc. An OMS can minimize the difficulty in managing all these differences and support all language, currencies, etc to provide a better customer experience.
Reasons why ecommerce order management systems are important
Most ecommerce brands are unable to grow without an order management system in place. Customers expect efficient, cost-effective, and personalized order fulfillment. There is no room for manual error. Employees should be focused on optimizing the brand experience, not triaging backorder SKUs, calling carriers, or printing documentation.
1. Faster delivery
In an era where two-day shipping has become the norm, companies have to find ways to push out orders faster and faster. Fulfillment windows are narrowing. The automation an order management system can provide here is key.
When a customer places an order, an OMS can immediately choose the warehouse or fulfillment location that’s closest to the destination of the incoming order. It can use order details and even order history to dictate the method of fulfillment. It will then send an automated fulfillment request to that warehouse so its staff can prepare the order as soon as possible and get it sent out via a cost-effective carrier.
2. Fewer mistakes
An order management system cuts down on human error. Human-derived errors are an enormous time-and-money waster for businesses, and it’s the top source of fulfillment mistakes for many warehouses. An order management system can perform multichannel inventory management and warehouse optimization by sending you alerts to know when stock levels get too low, or when you have too much and need to liquidate. This will prevent delays in shipping, marketplace fees, and lost customers.
An order management system might also improve fast and direct communication to multiple warehouses at the same time about which inventory to pick and pack. Staff are thus less likely to cause delays by forgetting or misplacing orders.
3. More scalability
An order management system will be able to grow alongside your company. Unlike legacy systems or manual entry, an increase in omnichannel fulfillment needs will not overwhelm a well implemented order management system. Its specially designed software will be able to keep pace with the company and scale as you grow.
4. Greater multi-channel opportunities
Nowadays, ecommerce isn’t limited to buying from a company’s ecommerce site. Brands need to be direct-to-everywhere. We live in an age of multichannel and omnichannel sales that range across websites, marketplaces like Amazon, and social media sites including Facebook, Instagram, Pinterest, and YouTube. Order status can become very complicated to track and fulfill when they’re arriving from so many places and customer traffic is flowing through distributed platforms. This can impact fulfillment speed and customer satisfaction.
Order management systems are able to centralize and track data, inventory turnover ratio, and order routing across channels. This is one of the biggest advantages of an ecommerce order management system in today’s ecommerce environment.
Key features of effective order management
To capitalize on the acceleration of ecommerce, brands should look for an order management system that supports their existing infrastructure. Order management functionality can make or break your business. Here are some features to keep in mind.
1. It integrates across company systems
An essential function of a distributed order management system is its ability to integrate across company infrastructure, service providers, and supply chain technology. Most order management systems will integrate with your accounting system, inventory manager, warehouses, customer service departments, and more. Some even have an App Store or at the very least, an open APIs to build third-party connections if they are unavailable. Integrations with your current systems will ensure order management is as seamless and automated as possible.
2. It eliminates manual processes with automation
The fewer manual processes, the better. Manual processes can never compare to the speed of order management software, and they are far more prone to human error. An order management system provides automation wherever possible, from calculating shipping costs, to sending fulfillment requests.
3. It provides an international service
We live in an increasingly globalized world. Brands are taking orders from beyond their borders on a daily basis. Most order management systems can facilitate cross-border ecommerce orders and payments from any country and currency type. This not only expands a brand’s retail footprint, but allows them to learn and grow from their experiences in new markets.
4. It reports and forecasts stock needs
Many order management systems can predict how much safety stock you’ll need to avoid over-ordering, or worse, overselling. This can be especially important in Q4 and during times of unexpected demand fluctuations. An order management system that connects to your inventory channels can also support a merchant-fulfilled strategy. This can give you more autonomy and control over order management operations.
5. It works on every channel
Order management systems can fulfill customer needs across all of the ecommerce platforms and sales channels you’d expect, including your website or ecommerce store, marketplaces, or whatever primary sales channel you sell on. Managing these orders through single channels will become increasingly unwieldy as your business grows. Each channel has its own logins and processes, and without a way to integrate the sales orders and data from each one, your staff will experience burnout and an increased potential for mistakes.
An order management system can integrate all of your channels into one user interface. This will drastically cut down the time your staff spends fulfilling orders and training new staff. It will also give you a big-picture view of orders and data, and cut down on mistakes by putting all the information you need into one accessible place based on real-time data.
The ecommerce order management process step by step
The lifecycle of order management is guided by providing a great customer experience. From order placement to delivery, and even returns and refunds, an order management system strives to fulfill customer needs from beginning to end.
1. Discovery
The order management process starts even before the customer places a sales order. The order management system may note when a customer places an item in their online cart and automatically adjust inventory. The system can also send you a notification that the item is in the cart, or if it’s been abandoned.
2. Order placement
When a customer does decide to purchase, the order management system communicates with your back-office systems to verify credit card payments and process order details. Once the order has been approved it can be routed to fulfillment.
3. Order fulfillment
Based on the order details, an OMS will optimize warehouse selection by its proximity to the order destination. It will then automatically calculate shipping costs and the fastest carriers based on preset criteria. It might also print the packing slips, shipping labels, and communicate the change in inventory levels with your warehouse management system.
4. Warehouse management
If a SKU is out-of-stock, the OMS can communicate with your vendors and suppliers to have the inventory sent to that warehouse in advance. Stock-outs can also be prevented if your order management system is able to automatically issue a purchase order when inventory levels are low or hit a reorder point. The system can increase employee efficiency by indicating where in the warehouse employees can find the item, warehouse KPIs to monitor, what items to ship together, and whether the item requires specialized handling.
5. Shipping
When the warehouse picks, packs, and ships the products, the order management system can send a notification to the customer that their order has shipped. It can also tell them when to expect it based on their shipping address and order information. Both you and the customer can track the package as it travels to its destination, whether that’s the customer’s home or a store location.
6. Returns and refunds
Even if a dissatisfied customer returns an item, an efficient return and refund system can go a long way toward rebuilding goodwill. An order management system can instantaneously process a refund request and communicate with your back-office systems to process the refund. It can also connect to your returns provider to ensure data is accurate and updated as the process moves along.
Challenges of order management
Before you take the plunge into implementing an order management system, you must be aware of the challenges. Despite the advantages of order management systems, there are some obstacles to adopting them as well.
1. Difficulty of choice
With so many order management softwares on the market, it’s challenging to find the perfect OMS to meet all of your online store needs. Some of the challenges you may run into include the following:
- An order management system that doesn’t integrate well with your existing website or ecommerce platform
- Also, an order management system that doesn’t continually update based on evolving customer needs or requirements
- An order management system that makes it more challenging to have inventory visibility and order from your suppliers
Do your research, ask questions, and look into multiple options before choosing one.
2. Cost
The cost of an order management system varies widely, often from a thousand to multiple thousands of dollars per month. If your company can’t afford a full-featured ERP system, you may need to choose a more concentrated operations system.
3. Complicated implementation
One of the biggest things holding companies back from order management software is the fear of a complicated system they can’t understand. To solve this issue, look for a vendor that offers a demo, guided implementation, and ongoing support. Don’t be afraid to ask questions, once you implement an order management system that doesn’t work, it can be challenging to switch.
Benefits of an ecommerce order management system
Once you implement an order management system, you’ll wonder how you ever managed without one. An OMS is a must in today’s digitally transformed retail environment where changes in demand can happen from one moment to another. Here is a recap of the benefits of an ecommerce order management system.
1. Controlled costs and increased revenue
Automation is your friend when it comes to keeping costs down and revenue up, and an order management system provides the automation capabilities you need to thrive. For one thing, the system can provide inventory control by automatically generating reports on your inventory, telling you exactly where you’re getting low and what to liquidate. It can use historical data to predict future inventory trends so you know what items to budget for and when to have them in-stock.
Automation has another advantage: it removes manual processes wherever possible. Human error will lose you money, and customers. It also eats into profits and diverts your employee’s attention away from high-value, brand-building activities.
2. Better employee experience
Replacing manual processes with an order management system has a positive impact on your employees as well. As your business grows, they won’t need to adjust slow manual processes to meet higher demand. They can focus their attention on where it matters most, your customers.
Employees will also appreciate the increased efficiency that comes with an order management system. By delivering instant information and integrating that data across the supply chain, the system will empower employees to do a better job.
3. Better customer satisfaction
The most important benefit of an order management system is its positive effect on the customer experience. Order management systems are ultimately designed to get the product to the customer faster, reduce mistakes, and provide a more personalized experience. When you implement an order management system, your customers will experience the benefits as well.
4. The modern experience you and your customers need
An order management system is designed to fulfill orders efficiently across every sales channel in your ecommerce ecosystem. Without modern, integrated, and dedicated order management software, your company will struggle to keep up with the competition.
When your customers think of you, you don’t want them to associate your company with words like “dated,” “slow,” and “old fashioned.” With the right order management solution, they’ll notice the elevated customer experience you can provide, and your company will grow as a result.
Wrap up
Choosing the best order management system eCommerce can be a tough task and it must not be taken lightly if you don’t want to lose revenue due to inventory stock-outs, delayed delivery, etc. Just understand the criteria properly, list down your priorities, and choose accordingly.