Order management: The process and how to pick a system

For a product-based business, prompt and efficient order management is arguably the most critical process to get right. After all, if you're not getting your product to customers, you're not making successful sales—and that's not exactly a strategy for business growth. 

Most businesses start with a manual order management process, which can work well, but when you scale you’ll have to level up. As your business grows, manually processing customer data can hurt your bottom line. In fact, according to a QuickBooks survey, up to 91% of companies report a negative impact caused by manual data processes.

In this post, we'll define the order management process and demonstrate how efficient order management systems can streamline tasking, minimize manual data entry errors, and increase your operation's profitability.

Jump to:

• What is the order management process?
• How does the order management process work?
• Why is an order management process important for your business?
• The role of an order management system (OMS) in your process
• How to choose an order management system: 5 key features and benefits to look for
• Boost productivity and enhance profitability

What is the order management process?

The order management process is everything a business does to ensure customers receive their orders on time. This process involves a series of coordinated (and often intricate) steps, from the moment a customer makes a purchase to the instant they receive their product. 

While some steps may vary based on the product your business produces, most order management processes will include functions like shipping, precise inventory management, and workflow coordination. This process is a big part of any product-based business's performance. 

How does the order management process work?

Businesses typically execute order management through three core steps, although omnichannel operations can sometimes get more complex.

Generally, however, most order management processes will look something like this: 

Step 1: Order placement

Order placement encompasses the processes a business performs when a customer purchases. For business-to-consumer (B2C) or business to business to consumer (B2B2C) sales, customers commonly use online or physical shopping cart systems, where these processes occur. 

Business-to-business (B2B) sales may offer more options, like phone or email, since their offerings may be more based on client needs. Either way, the outcome is the same: when the customer clicks buy or signs on the dotted line, that's order placement. 

Understanding these varied sales channels helps businesses tailor their order intake, so think carefully about what sales channels you want to utilize when starting your business. 

Step 2: Order fulfillment

Order fulfillment is a crucial stage that ensures delivery to the end customer. A fulfillment team verifies item availability, identifies the optimal stock location for the order, and determines the most efficient shipping method. Subsequently, a warehouse worker—or in automated settings, a robot—meticulously picks, packs, and dispatches the order. 

An internal or external logistics team then makes the final delivery to the customer. This entire process benefits from optimized operational technology, such as cloud-based inventory management.

Step 3: Inventory management

Inventory management is the background process that enables efficient order fulfillment. This component includes continuous tracking of all parts and orders throughout the supply chain, sophisticated analysis of historical trends, and proactive inventory forecasting. 

The goal is to maintain optimal inventory levels across all warehouse locations, preventing both stockouts and excess inventory. Modern inventory management systems allow businesses to track orders and items precisely using various identifiers, including product name, SKU number, UPC number, dimensions, and price.

Why is an order management process important for your business? 

Effective order management directly reduces costs and significantly boosts efficiency across all operational areas of your business. This process serves as the cornerstone of the supply chain, coordinating the flow of materials into production and ensuring the timely delivery of products to your customers.

Understanding and optimizing this process can lead to better demand planning, automation of more critical processes, and seamless information flow throughout your business. 

An optimized order management process can yield the following benefits for your operation: 

• Ideal inventory levels: Maintain the right amount of stock, with no overstocking or shortages.
• Free up cash flow: Reduce capital tied up in excess inventory.
• Reduce human errors: Automate tasks to minimize manual mistakes.
• Improve the speed and accuracy of hand-offs: Ensure smooth transitions between different stages of the order process.
• Increase visibility: Gain a clear, real-time overview of all order-related activities.
• Avoid bottlenecks: Identify and resolve potential slowdowns before they impact operations.
• Pinpoint inefficiencies and wasted costs: Uncover areas where resources are underutilized or squandered.
• Troubleshoot fulfillment issues: Quickly identify and address problems that arise during order delivery.

Ultimately, these improvements result in more cost-efficient operations for your company and a higher-value service delivered to your customers. It's a win-win scenario that will only profit your business in the long run. 

The role of an order management system (OMS) in your process

An order management system (OMS), also known as order management software, is a digital platform that tracks every stage of a customer order, giving you a clear, bird's-eye view of all ongoing orders. 

It includes information on:

• Customer data
• Current order status
• Real-time inventory levels
• Detailed product information
• Payment specific
• Shipping updates

An OMS system automates many repetitive tasks within the order workflow. This includes capabilities like automatic invoicing, intelligent order routing, instant inventory updates, and sending automated customer notifications. Almost every order-fulfillment-related task your team completes manually can be sped up with an OMS. 

How to choose an order management system: 5 key features and benefits to look for

When selecting an order management system (OMS) for your business, focus on finding the features that benefit your business in tangible terms. You want a system that will directly improve your operation by reducing inefficiencies in the right places.