What is Order Management?
Order management is basically a way of keeping things organized when running a business or dealing with sales. It’s like an orchestra conductor, ensuring all the instruments play harmoniously.
Formally speaking, order management refers to the process of handling customer orders from start to finish. It involves everything from receiving the order, processing it, and then delivering the goods or services to the customer. This whole shebang ensures that the customer gets what they want when they want it and that the business runs smoothly like a well-oiled machine.
Steps of Order Management Process
Order Placement: This is the initial step when customers place their orders using different channels such as websites, apps, calls, social media, or even in person.
Order Processing: Once orders are placed, it needs to be processed. That means verifying the order details, ensuring the item’s availability, and checking the customer’s info.
Inventory Management: At this stage, it involves monitoring and managing the inventory levels of products to ensure sufficient quantities are available to fulfill customer orders. This may include updating stock levels in real-time and automating reordering processes.
Order Fulfillment: After processing orders, it needs to be fulfilled, which includes picking the items from the inventory, packing them nicely, and preparing them for shipment.
Shipping and Delivery: The order goes to the shipping carriers or partners, who get it to the customer. This includes sending tracking information to customers to keep track of their orders.
Order Tracking and Customer Support: Order status updates are communicated to the customer throughout the process. If customers have any questions or problems, there are support systems to help.
Returns and Exchanges: If customers aren’t happy or satisfied with their purchases, they can claim a refund or go for exchanges or returns.
What is Order Management?
Order management is super beneficial for all kinds of businesses; it helps keep things running smoothly and efficiently.
Key reasons why it is such a big deal
Happy Customers: When an order is efficiently managed, customers get their products on time with just the right amount. This leads to happier customers with increased loyalty and higher satisfaction, ultimately resulting in repeat business and positive mouth-of-word referrals.
Inventory Control: Order management helps keep inventory in check. Businesses know what’s coming in and going out, so they don’t end up with too many or too few products, saving money in the long run.
Super Streamlined: With an efficient order management system, businesses can make the whole order process a piece of cake, from taking the order to delivering it. No more mistakes, delays, or mix-ups means your work becomes smarter and faster.
Saving Money: When businesses order efficiently, they can cut down on costs. Automating things means less manual work and fewer errors. Plus, it helps in both optimizing the supply chain and cost.
Data-Driven Insights: Order management systems generate valuable data on order patterns, customer behavior, and what they’re digging into. That helps businesses to make better choices, spot trends, and stay ahead of the game.
Keeping Customers in the Loop: Customers appreciate being able to track their orders in real-time. That builds trust and keeps them happy.
Playing by the Rules: Different industries have different regulations and compliance requirements for order processing, shipping, and tracking. Effective order management keeps businesses in line with those rules and out of trouble.
Smooth Integration and Scalability: Order management systems can link with other business systems like inventory and customer management. It’s like having a superhero team that works together and makes things run even smoother as your business grows.
Easy Returns and Exchanges: Handling returns and exchanges efficiently makes your customers feel like they can trust you. That leads to happy campers and better overall experiences.
Competitive Advantage: In today’s cutthroat market, giving top-notch service sets businesses apart from the crowd. Efficient order management is a secret weapon that gives you a leg up and makes you a big player.
Key Features of Effective Order Management
Order Tracking: The ability to track orders in real-time, from the moment they are placed to their delivery, allows businesses and customers to know the status and location of each order.
Sorting Out Inventory: Comprehensive inventory tracking helps businesses maintain accurate stock levels, avoid stockouts or overstocking, and ensure smooth order fulfillment.
Automated Processing: Automating order processing tasks reduces manual errors, speeds up order fulfillment, and improves overall efficiency.
Integration Capabilities: Seamless integration with other business systems, such as CRM, ERP, and accounting, streamlines operations and ensures data consistency.
Multi-Channel Order Management: Through this system, businesses can handle orders from different channels, such as online stores, physical locations, and phone orders. It provides a unified view of all orders.
Order Prioritization: Businesses prioritizing orders based on criteria like customer type, shipping method, or urgency helps meet deadlines and fulfill necessary orders first.
Customization and Personalization: Businesses often offer their customers customized options and personalized experiences. This enhances customer satisfaction and loyalty.
Order Editing and Modifications: Businesses should have systems that allow easy order editing or modifications before fulfillment to accommodate customer changes.
Analytics and Reporting: Comprehensive reporting and analytics provide valuable insights into order trends, customer behavior, and overall performance, aiding decision-making and business growth.
Order Approval and Workflow: For some businesses, having an approval workflow for certain orders ensures that appropriate checks and balances are in place before processing.
Shipping and Logistics Integration: Integration with shipping carriers and logistics services simplifies shipping and provides real-time tracking information.
Customer Communication: Automated order status updates and communication keep customers informed and reduce the need for manual follow-ups.
Fraud Detection and Prevention: Advanced security features and detection mechanisms help prevent fraudulent transactions and protect customers and the business.
Scalability and Flexibility: An effective order management system should handle increasing order volumes and adapt to changing business needs.
Mobile Accessibility: Mobile-friendly interfaces or dedicated mobile apps allow businesses to manage orders on the go, providing greater flexibility to handle urgent situations.
Softwares that is Used for Order Management
When it comes to order management, businesses use quite a few software options. These tools help them track their orders and ensure everything runs smoothly. Let’s break it down into the following points:
ERP Systems: These are all-in-one solutions that handle everything from creating orders to invoicing them. Big names like SAP, Oracle ERP, Microsoft Dynamics, and NetSuite fall into this category.
CRM Systems: These systems focus on managing customer relationships, but some also include order management features for sales orders and keeping track of customer interactions. Salesforce and Zoho CRM are examples of such platforms.
Inventory Management Software: These tools work closely with order management systems to monitor inventory levels, avoid stockouts, and ensure orders get fulfilled on time. You might have heard of TradeGecko, Fishbowl Inventory, and Cin7.
Order Management Systems (OMS): OMS software is specifically designed to handle order-related processes. They often integrate with other systems like ERP, CRM, and inventory management tools. Orderhive, Orderbot, and Ordoro are some famous names in this category.
E-commerce Platforms: These platforms have built-in order management features to handle orders in online stores. Shopify, WooCommerce (a plugin for WordPress), and BigCommerce are among the popular ones.
Supply Chain Management (SCM) Software: SCM solutions with order management features optimize the whole supply chain process, from sourcing raw materials to delivering the final product to customers. JDA Software and Blue Yonder (formerly JDA Software) are known players here.
Point of Sale (POS) Systems: Physical stores use POS systems to process sales and manage inventory, often including order management functionality. Square POS, Lightspeed, and Vend are some well-known POS options.
Third-Party Fulfillment Software: When companies outsource order fulfillment to third-party logistics providers, they use specialized software to integrate with their systems. ShipStation and ShipBob are examples of this kind of software.
Challenges with Order Management
Effective order management is important for customer satisfaction and business success, there are several challenges organizations face:
Complexity and Orders: As businesses expand and offer more product variations, bundles and customization options, order complexity increases. Companies managing diverse product offerings and configurations often lead to errors in order processing and fulfillment.
Order Accuracy: Manual data entry or system errors can lead to incorrect shipments, wrong quantities, or shipments to the wrong address, resulting in dissatisfied customers and potential financial losses. According to a study by Voxware, order accuracy rates in distribution centers ranged from 97% to 99.9%.
Inventory Management: Over-selling or under-stocking products can lead to delays, backorders and customer dissatisfaction. Integrating order and inventory systems is essential to maintain accurate stock levels. The National Retail Foundation reports that the US retailers lose nearly $50 billion annually due to out-of-stock items.
Demand Forecasting: Predicting demand accurately is sometimes challenging, which leads to overstocking or stockouts. Inaccurate forecasting can result in excess inventory costs or missed sales opportunities. The Institute of Business Forecasting & Planning states that demand forecasting accuracy is around 60-70% for many companies.
Order Processing Delays: Manual or inefficient order processing workflows lead to delays in fulfilling orders. Slow processing times can frustrate customers and impact their perception of your brand. According to a survey by Temando, 50% of customers abandoned an online purchase due to unsatisfactory delivery options.
Integration of systems: Organizations often use multiple software systems for different aspects of order management, such as order entry, inventory management and shipping. Integrating these systems to ensure smooth data flow can be complex and require ongoing maintenance. A survey by Statista found that 31% of businesses reported poor integration of order management systems.
Returns and Exchanges: Processing returns, exchanges, and refunds can be time-consuming and complex. Establishing clear return policies and efficient processes is important to maintain customer satisfaction. A report by Invesp states that 30% of all products ordered online are returned, compared to 8.89% in brick-and-mortar (offline) stores.
Technology and Scalability: Outdated or inadequate technology can hinder order management as the business grows. Scalability challenges may arise if systems cannot handle a high volume of orders efficiently. A survey by Orderbot found that 38% of respondents identified outdated technology as a major obstacle to order management efficiency.
Consumer Expectations: With the rise of e-commerce giants, customer expectations for fast, accurate, and flexible order fulfillment have increased. Meeting these expectations can be challenging for smaller businesses. According to a study by Salesforce, 80% of consumers consider the experience a company provides to be as important as its products and services.