A woman reviews her order management process after learning the answer to the question, "What is order management?"
Midsize business

What is order management? A small business guide

Order management definition

Order management is the process of organizing the way a company receives, fulfills, and manages its customer orders.

As a customer, placing an order is pretty simple. You pick the product, enter your information, and voila! But as a business owner, you know that the steps are much more complicated. This process is otherwise referred to as order management.

But what is order management exactly?

Everything you do behind the scenes to ensure your customer gets their correct order on time is part of the order management process, from shipping to inventory management.

To help you better understand how order management works, what an order management system is, and the benefits it can provide your business, follow this small business guide.

How does order management work and what does it entail?

An illustration overviews the definition of order management, answering the question, "What is order management?"

Order management is the process of organizing how a company receives, fulfills, and manages its customer orders. From the moment a customer makes a purchase to the time they receive their product, order management coordinates the entire process to make it as efficient as possible.

While order management is different for every company, it typically involves three core steps: order placement, order fulfillment, and inventory management. But with consumers' omnichannel expectations, order management is now far more nuanced.

Order placement

Order placement refers to the processes carried out by a business once a customer makes a purchase. Business-to-consumer (B2C) sales are most common with an online cart or physical cart at a store location. In addition to online and physical sales, business-to-business (B2B) sales may have more purchase options, including fax, phone, email, or electronic data interchange (EDI).

Order fulfillment

Order fulfillment may be the most important part of the process, as it ensures the order is delivered to the end customer. A fulfillment team or mechanism verifies that the appropriate items are available, determines which stock location to fill the order from, and how to ship it to the end customer.

Then, a warehouse worker, or in some cases a robot, will pick, pack, and dispatch the order for delivery. An internal or external logistics team will carry out the delivery to the customer.

Inventory management

Inventory management is the background process that makes order fulfillment possible. Not only does inventory management entail tracking all parts and orders from one end of the supply chain to the other, but it also includes analysis of historical trends and inventory forecasting to achieve optimal inventory levels at each warehouse or depot location. 

With a modern inventory management system, businesses can track orders and items by product name, SKU number, UPC number, description, size and dimensions, weight, and price.

Why is order management important?

Order management is important as it can help your business reduce costs and boost efficiency in almost every operational area. It is a central process of the order management supply chain that pulls materials into production and sees value-added products and services delivered to the end customer.

By leveraging data for better sourcing and demand forecasting, automating processes, and facilitating the flow of information, you can:

  • Optimize inventory levels
  • Free up cash flow
  • Reduce human errors
  • Improve the speed and accuracy of hand-offs
  • Increase visibility
  • Avoid bottlenecks
  • Pinpoint inefficiencies and wasted costs
  • Troubleshoot fulfillment issues

All of this amounts to more cost-efficient operations for your company and a higher value service delivered to your customers, both of which will bring returns to your company for years to come.

What is an order management system?

An illustration details how order management systems work, further answering the question, "What is order management?"

An order management system (OMS) tracks everything in the order management process, providing a digital way to manage the life cycle of your orders. This helps provide a bird's-eye view of your order management processes and access to real-time data, including:

  • Customer information
  • Order status 
  • Inventory levels
  • Product information
  • Payment information

Using an order management platform can also help you automate business processes such as invoicing, helping you spend less time sending invoices and more time growing your business.

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

An illustration showcases the benefits of order management systems, further answering the question, "What is order management?"

Now that you understand what order management and order management systems are, let’s take a look at the key features and benefits you should look for when selecting an order management system for your business.

1. Access to real-time data 

If your small business has more than one sales channel, then you know how difficult it can be to make sense of your data when it’s not in one easily accessible place. Utilizing an order management system allows you to analyze real-time data in one place to help guide your business decisions.

Whether you have your inventory scattered throughout multiple warehouses or you accept payments on your website, through social media, and in brick-and-mortar stores, a cloud-based order management system can help simplify your processes and give you the data you need.

2. Less human error

As you grow your business, it can be tougher and tougher to fulfill orders without mistakes. Whether it’s a typo on a delivery address or a missing item, it’s only human to have a slip-up now and again.

While these errors may seem minor in the grand scheme of things, they can negatively impact your customers’ experiences and lead to customer frustration.

An order management system can help automate everyday tasks such as invoicing. This can help cut down on manual entry and reduce the risk of human error.

3. Saved time

If your business doesn’t use an order management system, you likely know the time-consuming tasks that can spring up out of nowhere. Whether you’re manually tracking down a lost order, or allocating inventory data, what seems like short tasks can add up over time.

With an order management system, you can access everything you need in one place, saving you time if something goes wrong and requires your attention.

4. Increased visibility

With a big-picture view of your small business’s entire order management process, you can easily pinpoint areas of concern and potential improvements to your order fulfillment processes. This can help you make informed decisions to make your order management process run more efficiently.

5. Improved customer experience

A customer order management system can help your business receive, fulfill, and manage orders more efficiently. While these benefits may seem immediate to you and your staff, they’ll also positively affect your customers.

Additionally, software like QuickBooks Commerce can provide your business customers with the same online customer experience they’d expect from a B2C e-commerce business.

From quicker fulfillment times to real-time order updates, an order management system can give your customers a better experience, no matter what type of business you’re running.

Navigate midsize business challenges and opportunities

Now that you've answered the question, "What is order management?", you might want to start thinking about improving your business’s order management process. Consider using order management software to help automate and streamline this process, helping you save time and minimize human error.

What is order management FAQ


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