Here's a comprehensive overview of what is Order Management System, how it works, and why it is beneficial for businesses of all sizes. The completion of an order delivery represents a crucial milestone in a business and its profitability, and this is based on how the order journey goes about. Therefore, you must get the process of order management right.
An order management system boosts revenue streams, increases customer loyalty, and lowers costs. Let's read more to know what is an order management system and why it's vital for manufacturing businesses.
What Is Order Management System?
An order management system (OMS) is a software for managing orders, inventory, and fulfillment. An order management system oversees the entire order processing and fulfillment process.
It is a gateway for complex business logic and workflows that flow from the cart to the customer. In some scenarios, people, processes, and partnerships can also be monitored by an OMS. OMS automates essential purchases and fulfillment steps for you and your customers. Order fulfillment begins automatically after an order is placed and a delivery method has been selected. The OMS platform allows easy shipping from the nearest and most economical location or supports preparing items for in-store pickup.
Also, it manages other steps in the customer lifecycle, including returns, to prevent stockouts and backorders. By allowing your employees and customers to see and track each order, the system will enable you to analyze the overall efficiency of the process.
Using a powerful OMS platform, businesses can monitor key performance indicators. Product management software can track delivery times, fulfillment costs, and return rates. Watching these KPIs and more is essential to identifying inefficiencies and devising a plan to eliminate them.
Why Is Order Management System Important?
As you have now understood what an order management system is, it is time to look at why you need it. There is a direct relationship between order management and nearly all aspects of the supply chain.
Without effective order management, your sales teams can experience difficulties in tracking orders when multiple partners are involved, such as assembly and packaging services, component and parts suppliers, or distribution centers. Consequently, manual processes are required to fill and deliver the order to avoid errors. With OMSs, you can reduce errors, control costs, and generate revenue by reducing the number of manual tasks.
From an external perspective, order management directly impacts customer perceptions of a business. When looking at an omnichannel environment, a seamless customer experience is expected.
Though orders can be placed online, the customer may call the customer support center to ask questions about the transaction. The customer expects to receive emails in the process of fulfilling their order. If the product has a problem, the customer may wish to return it to a physical store.
An order management system can enhance the customer experience at each customer journey stage and boost revenue and retention. Furthermore, omnichannel marketing offers up-sell and cross-sell opportunities.
How Does Order Management System Work?
Having understood the concept of what is order management system, let's look at how it works in detail. OMS allows users to easily track available-to-promise inventory (ATP) within the store and from third-party providers, such as drop shippers and third-party logistics. In this way, inventory planning can be made more accessible.
Thus, an order management system (OMS) records and validates orders, approves them, picks, packs, and ships them, and communicates with customers.
A full-featured order management system facilitates easy payments after placing an order and shares that data with financial systems. When a customer wishes to return a product, the OMS can handle everything from processing returns through exchange requests, crediting customer accounts, and managing the disposition process.
Types of Order Management Systems
Orders have traditionally been managed in various ways by companies. It has evolved from using a notebook and pen for keeping ledgers to storing spreadsheets on the computer. Order management has evolved into a modern solution in the intervening years.
Enterprise and individual systems
OMS software can be purchased in standalone modules not integrated with other business processes. However, OMSs can be combined with other software modules to store all data in one location. This approach can incorporate OMS data with customer relationship management (CRM), supply chain, finance, and other core business applications. In this way, your order management becomes more straightforward and automated, and you can generate more robust reporting showing the impact of your strategy.
On-premises and cloud-based options
An OMS system can be delivered as an onsite software solution or a SaaS or cloud service. As a SaaS solution, OMS is more flexible, quicker to deploy, easier to scale, and accessible from anywhere. Additionally, vendors maintain and host applications, ensuring better interface and reliability.
Order Management Process
Managing orders involves three steps: receiving, fulfilling, and managing after-sales. To conclude, the store checks in with its customers to ensure they are satisfied with their purchases. Steps involved in order management include:
Stage 1: The customer sends an order
A customer's order begins the order management process. The act of receiving involves the acceptance of a customer's order and in some cases the collection of advance payment. The warehouse can start preparing the goods for shipment once the purchase details have been received.
Stage 2: Processing the order
Following the order placement, the order must be processed and fulfilled. Three steps make up this stage: Making a selection - Order fulfillment begins with picking items from a warehouse. Packaging - Packing stations do more than just package and ship items. In addition, products are categorized appropriately to ensure they arrive in good condition to the customer. The shipping process - Following pick and pack, the order must be shipped.
Stage 3: Post-sales management
The after-sales process is an integral part of an effective order management process. Businesses use this process to ensure customers are satisfied with their purchases and to handle returns and refunds as necessary.
Benefits of Order Management System
As part of implementing an OMS, businesses also look for bottlenecks and areas where improvements can be made to their supply chains. OMS improves sales and margins by optimizing fulfillment across all channels. OMS also has many other benefits associated as follows:
Efficient Inventory Management
You can minimize excess inventory while meeting customer demand if you provide better visibility into sales. The consolidated view allows you to keep track of stock across multiple locations to avoid missing a sale.
Data Entry Processes Enhancement
As the sales and fulfillment process utilizes the same information across various areas, it reduces the need for data entry, thus reducing time and the significant risk of errors.
Increasing Visibility
It is possible to track the status of all orders, which enhances customer service for your business. Customers can also use the OMS to track their orders' status.
Insights
Managers can identify sales patterns, track key performance indicators (KPIs), and forecast sales and inventory through OMS dashboards.
Challenges of an Order Management System
Let's look at the important challenges of an order management system in depth:
Inconsistencies and Gaps in Data
Today businesses often operate on multiple channels and marketplaces, which causes data gaps to occur. This may lead to human errors and inconsistencies. Customers can experience diminished customer service due to data gaps, deficient order fulfillment, and cancellations of orders.
An Inefficient Syncing Process
Users who access the order management system from multiple locations might experience communication gaps due to inadequate multi-directional syncing. Several data points, such as product inventory, pricing, and discounting, may need to be more accurate. Operational costs can also be negatively affected by incorrect shipping and order processing.
Redundant or Insufficient Features
An order management system can generate and fulfill orders. Often, the required features are not available in one platform; therefore, external tools must be integrated with it. Duplicate features, however, can complicate the order management process and add to its cost.
Multi-Package and Bulk Order Issues
Bulk orders and multi-package orders are vital to the success of any business model, whether it is B2B or B2C. However, the fulfillment of bulk or multi-package orders is often complex and requires special care. An order management system that needs to take this into account forces a company to shift from traditional mechanisms.
Constraints on Customizability
Most order management solutions are designed for standardization, consistency, and efficiency. That makes it possible to offer quality service on a scalable basis. However, certain segments of customers may expect customized features that place limitations on an OMS.
Why Do You Need an Order Management System?
Modern e-commerce and consumer expectations have led to increased volumes, and faster speeds of the product lifecycle. Thanks to the widespread use of digital and electronic commerce, consumers expect to be able to order anything they want, whenever they want, and from any platform they like.
An order management system helps business owners with this emerging trend. It provides a centralized location for managing orders from different channels (e.g., online store, physical store, marketplaces), enabling businesses to streamline their order processing functions and avoid errors.
How to Choose the Right Order Management System?
If you are searching for an order management system (OMS) for your business, here are a few factors to take into account when making your selection:
- Ease of Use: Can your staff quickly learn and utilize the OMS? Is the interface user-friendly?
- Functionality: Does the OMS offer all features and functions required? Can it be customized to meet specific requirements?
- Scalability: As your business expands, can the OMS scale along with it?
- Integration: Does the OMS integrate seamlessly with your existing systems (e.g., accounting, CRM, warehouse)?
- Support: Does the vendor offer exceptional customer support? Are there online resources (e.g., FAQs and user manuals) available for users to reference?
By taking time to consider these aspects carefully, you can ensure you select the ideal order management system for your business.
Adopt an Automated Order Management Solution
Inventory and order management can be challenging functions for businesses. As they face many data points, scaling their current systems with business growth becomes challenging.
TranZact provides businesses with a centralized dashboard to view all their current and upcoming orders and integrates with inventory functions to align resources for the fulfillment of orders. It also enables customers and internal stakeholders to get full visibility of their orders in real time.
FAQs on Order Management System
1. What does an order management system do?
An order management system automates the entire process of managing orders by helping you to oversee inventory, sales, and customer information online from anywhere at any time.
2. Is the order management system an ERP?
An order management system is specifically designed to streamline order recording, fulfillment, order reports, and routing. This is different from an ERP that handles end-to-end enterprise functions across the supply chain, including production, inventory, and more.
3. What is the difference between OMS and ERP?
Manufacturing, inventory, accounting, human resources, and supply chain management are all possible uses for ERP systems. While ERPs can handle some OMS functions, including storing, reporting, and routing orders, OMSs are primarily designed to manage orders.
