Key takeaways:
- An order management system (OMS) tracks and streamlines order processing in online stores.
- It usually includes order placement, processing, fulfillment, shipping, and post-sale services.
- Key features consist of tools for order analytics, centralized processing, inventory management, and post-sale handling.
- It’s a good idea to start with a lightweight solution that will kick-start your operations.
One of the first challenges all e-commerce businesses face is managing orders. In between purchase and delivery lie many order fulfillment processes, any of which can cause issues without a well-integrated order management system(OMS).
Everything from order entry, processing, inventory level checks, delivery coordination, and accounting is part of the order management system. As supply chains grow more complex and fast delivery expectations, a functioning order management system is essential for a good customer experience.
How an OMS Works
An order management system is a digital tool that tracks and streamlines the entire order lifecycle. Different systems vary in order processing steps, but the basic structure of an order management system remains largely the same.
Order placement. One or multiple sales channels are tracked to get product information, quantities, prices, payment confirmation, shipping details, and other order data. The same order management system is also used to show current inventory levels.
- Order processing. Inventory availability is checked to confirm or deny the order. Additional inventory management processes take place, such as informing employees or suppliers of inventory levels.
- Routing and fulfillment. The order details are sent to an appropriate location, usually a store or a warehouse, based on predefined order management rules. The goods are then packed and prepared for shipment by staff.
- Shipping. The order is then handed off to carriers, and the tracking number is entered into the order management system. Shipping confirmation is sent to the customer, and the order is tracked until delivery.
- Post-sale services. Most order management systems still track orders to adjust inventory levels and prepare for post-purchase services, such as returns or refunds. At this point, the order management system might be integrated with an accounting or other business systems.
An efficient order management system will help track orders in real-time so that there are no overselling or mismatches between orders and deliveries. If you’re running an e-commerce store, for example, each new order will automatically adjust the inventory levels on your website.
If multiple sales channels are used, the order management system might require special integrations. Human input is needed in other steps as well, so many businesses need a convenient way to manage orders manually.
Order review, packing, and shipping, as well as post-purchase services, often require manual input. While the order management process can be highly automated, it comes with associated risks and costs. Order processing feature implementation should reflect your business processes and size.
Key Features of Order Management Systems
- Order analytics and reporting – get comprehensive reports on sales performance, fulfillment-return rates, supply chain, and related data. A good order management system will allow you to notice trends quickly.
- Centralized order processing – view the entire supply chain in one dashboard to solve problems and coordinate future actions quickly.
- Inventory management – monitor inventory levels in real-time, with different statuses such as in stock, reserved, in transit, and others, to prevent overselling and demand forecasting.
- Fulfillment optimization – use data to find the best order processing options, such as selecting the nearest warehouse, deciding shipping carriers, splitting shipments, and others.
- Post-sale handling – improve customer experience with tools that handle reverse logistics of post-sale processes, such as returns, refunds, and exchanges.
The list isn’t exhaustive as crucial features might vary depending on your business processes, model, and niche. Some businesses might find features like third-party logistics integration or fraud prevention as necessary.
However, most small-to medium-sized businesses can reap the main benefits of an order management system from a simpler setup. In many cases, it makes sense to start simple and then adjust the features with business growth.
Benefits of an OMS
By implementing at least some level of automation and centralized order management, even small businesses can expect positive results. Most of them are related to improved customer experience and business processes.
- Faster order fulfillment cycle. A quality order management system improves the time it takes to complete an order.
- Lower operational costs. If correctly implemented, an automated order fulfillment process can reduce costs.
- Better customer satisfaction. Accurate and timely data about orders helps communicate with customers better and provides post-sale services.
- Increased scalability and control. When you can track orders in one dashboard, you can handle larger volumes and react to problems faster.
- Enhanced decision-making. Analytics that order management systems can provide are invaluable for inventory planning and other business decisions.
How to Choose the Right OMS
The process of choosing an order management system begins with identifying the immediate pain points in your customer lifecycle. If you don’t yet have an online store or an effective way to track and manage orders, it’s almost impossible to achieve.
With Jimdo, small-to-medium e-commerce businesses can start with a straightforward and affordable order management solution. You can start solving immediate order management issues without any complicated setups. Real-time inventory visibility, automatic stock updates, customer notifications, and overall order processing optimization are all within reach.
Depending on your product type and industry, you may eventually require advanced features, such as compliance tools or payment solutions. The need for them is best determined when you have the basics of your order fulfillment processes already mapped out.
Subscription prices, staff training, and increased store complexity can put a strain on your business processes. Starting with a fast and lightweight platform allows you to test your order management process with reasonable costs of ownership.
It’s important to include all the necessary stakeholders when choosing an order management system. To actually increase customer satisfaction, the system must be convenient for everyone in the order processing chain.
Different business models might require focusing on different parts of fulfillment, but such preferences might change with business growth. Starting lean will help you minimize upfront costs and be in a stronger position to invest in advanced capabilities later.
The Future of OMS
The rapid technological innovations we have seen so far can give us some reasonable guesses on what to expect from order management systems in the future. Advances in artificial intelligence (AI) and machine learning (ML) capabilities are likely to be integrated more.
Basic website building and order management are already a thing with tools like Jimdo Dolphin. We can expect these tools to provide even more features and a better customer experience for users of all skill levels. It’s likely that AI tools will not only help to optimize inventory management but also predict demand.
At this time, innovations in warehouse operations, robotics, Internet of Things (IoT), and other areas must advance further to enable these innovations. Small companies should be aware of such possibilities, but if you’re just starting, it’s better to cover the basics of order management first.
Frequently Asked Questions
What is the best order management system?
Which order management system is best for you depends on your business processes, size, industry, and specific needs. Most small to medium e-commerce shops in popular niches can make do with standard inventory management and ordering processing solutions integrated into their website platforms, such as Jimdo, Shopify, Salesforce, and others.
What is the difference between OMS and WMS?
Warehouse management systems (WMS) and Order Management Systems (OMS) differ in their scope. WMS focuses on warehouse operations specifically, aiming to make them more efficient. Order management systems encompass the whole customer lifecycle from order to delivery and sometimes even repairs, returns, or other after-sales services.
What is the difference between OMS and CRM?
Customer Relationship Management (CRM) systems are created to manage and nurture customer relationships. They store customer data, such as contact information and interactions, with the aim of improving engagement. While some functions might overlap, Order Management Systems (OMS) take care of more practical steps on how orders are processed.
What is the difference between OMS and ERP?
An Enterprise Resource Planning (ERP) system is a more comprehensive business management software than just the order management process. It’s commonly used by large corporations when integrating and streamlining core functions – finance, human resources, manufacturing, supply chain, sales, and others. An ERP system is likely to encompass an order management system as well.