What is Order Management Systems (OMS)?
Before discussing what Order Management Systems (OMS) are, let’s first understand them. OMS is software businesses use to handle and keep track of their sales orders and inventories. Manhattan Associates, Sterling Commerce (now part of IBM), Fluent Commerce, Kibo Commerce, and SAP are some leading providers in the OMS market.
As time has passed, many different order management systems have been created to meet the specific needs of various businesses and industries. According to a study by Grand View Research, the global OMS market size was valued at $1.34 billion in 2020 and is expected to grow at a CAGR of 8.9% from 2021 to 2028.
Key Concepts and Components
Order Processing: OMS automates the order processing workflow, reducing manual errors and ensuring efficient order fulfillment.
Inventory Management: OMS keeps track of inventory levels, helping businesses optimize stock levels, reduce carrying costs, and prevent stockouts.
CRM Integration: Integrating OMS with CRM systems provides a holistic view of customer data, enabling personalized order handling and improved customer service.
Supply Chain Integration: OMS coordinates with suppliers and partners to streamline procurement, production, and shipping processes.
Reporting and Analytics: OMS generates reports and provides analytics on order trends, customer behavior, and inventory turnover.
A survey conducted by Software Advice found that 47% of respondents use OMS software to manage inventory, 29% use it for order tracking, and 16% for customer data management.
Benefits of Order Management System (OMS)
An Order Management System (OMS) is like your superhero buddy when it comes to handling orders and making everything smooth and efficient. It’s a software that helps businesses with order products from scratch to end, making sure everything’s in check and customers are happy.
Enhanced Efficiency: OMS takes care of all the order processing stuff, reducing errors and speeding things up. So, you get orders done quicker and with fewer headaches. OMS can reduce order processing time by up to 30%, according to an Aberdeen Group study.
Centralized Order Processing: OMS provides a centralized system to keep everything in one place. It’s like a command center for order, no matter where they come from. So, you can see all the orders, inventory and customer details under one spot. According to a study by McKinsey & Company in 2023, businesses that implement a centralized order processing system through an OMS experience an average of 25% reduction in order processing time.
Inventory Management: OMS keeps tabs on your stock in real-time, so you won’t run out of products or end up with too much. That means less waste and more money in your pocket. A study by McKinsey & Company in 2023 found that businesses that effectively implement inventory management through an integrated OMS experience an average of 15% reduction in excess inventory levels.
Order Tracking and Visibility: Customers appreciate transparency regarding their order status. OMS lets them see what’s happening with their orders, tracking their packages in real-time. 55% of organizations report that real-time visibility into order status and inventory levels is critical for business operations (Aberdeen Group).
Integration with Sales Channel: OMS is like a smooth operator, it can integrate with all your sales channels. Whether it’s your online store, a marketplace or a physical shop, it talks to them all. You don’t need to worry about double work or errors in data – it’s all synched up! According to a survey by Forrester Consulting in 2023, businesses that integrated their Order Management Systems with multiple sales channels experienced a 28% increase in order accuracy and a 32% reduction in order processing time.
Optimized Order Fulfillment: OMS is all about efficiency, right? It knows which fulfillment center or warehouse is the best fit for each order based on inventory availability, shopping costs and customer location. So, it sends the order where they can be shipped out faster with less bucks. A study by Forrester Consulting in 2023 found that businesses that integrated their Order Management Systems (OMS) with optimized order fulfillment solutions reported a 25% reduction in order processing time and a 20% increase in on-time order deliveries.
Better Customer Service: An excellent OMS brings better customer service by letting customer reps access real-time order and inventory data, giving accurate info to customers for improved satisfaction. 89% of consumers have stopped doing business with a company after experiencing poor customer service, emphasizing the importance of timely and accurate order management (RightNow Customer Experience Impact Report).
Order Customization and Personalization: OMS supports order customization, allowing tailored products and services based on customer’s preferences and purchase history. A survey by Accenture in 2023 revealed that 74% of consumers are more likely to make a purchase from a company that offers personalized experiences, such as customized product recommendations and tailored promotions.
Returns Management: Returns can be bummer, but OMS has your back. It simplifies the process by providing standardized workflows and automated return processing. Happy customers, happy business! According to a study by the National Retail Federation (NRF) in 2023, businesses that have implemented an OMS with integrated returns management experience, on average, a 35% reduction in return processing time.
Data Insights and Reporting: OMS collects and analyzes data from various order-related processes, providing invaluable insights into sales trends, customer behavior and operational performance. This data is used to make well-informed business decisions and optimize strategies for enhanced performance.
Features and Functionalities
Order Entry: OMS enables efficient order capture with data validation, reducing order entry errors by up to 60% (Aberdeen Group).
Order Routing: Intelligent routing improves order accuracy and reduces fulfillment time by directing orders to the nearest or most suitable location.
Inventory Management: Implementing proper inventory management with an OMS can lead to a 20% reduction in excess stock (Aberdeen Group).
Order Tracking and Status Updates: Offering order tracking and proactive status updates can lead to a 30% reduction in customer inquiries (Aberdeen Group).
Returns and Exchanges: Companies with automated return processes experience 52% fewer customer complaints (Gartner).
Use Cases
Retail: OMS helps retailers manage online and in-store orders seamlessly. 51% of retailers plan to invest in OMS to support their omnichannel strategies (NRF).
E-commerce: 45% of online retailers identified integrating their OMS with e-commerce platforms as a top priority (Retail TouchPoints).
Wholesale/Distribution: Distributors using OMS solutions achieve an average of 90% order accuracy (Inbound Logistics).
Multiple Types of OMS
Retail OMS: This kind of OMS is designed for retailers with physical stores or online shops. With a retail OMS, businesses can view real-time updates on their inventory data across different sales channels. They can also identify which products sell the most using Stock Keeping Units (SKUs) and know when to restock. Additionally, they can track their sales performance and get valuable insights into their products.
Some popular players in the retail OMS software segment include Magestore, Shopify Plus, Brightpearl, Veeqo, and Skubana.
E-commerce OMS: This type of OMS is specifically developed for e-commerce businesses and online retailers. It’s called e-commerce order management and handles the behind-the-scenes tasks of managing and fulfilling online orders. This process involves various tasks such as order routing, printing shipping labels, handling returns, and managing subscriptions.
Integrated OMS: An integrated OMS brings everything together in one place, enabling businesses to synchronize customer data from all their sales channels and compare it in real-time. This OMS also allows you to connect with other businesses using systems like Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), and other inventory management systems. By integrating these different systems, businesses can streamline their operations, have better visibility into their processes, and improve overall efficiency.
Multichannel OMS: With a multichannel OMS, retailers can centralize all their order and inventory information from various sales channels in one place. This system streamlines various processes such as ordering, fulfillment, shipping, pricing, and warehouse management across different selling channels, whether online or offline.
For instance, if you have a physical clothing store and sell through online platforms like Shopify, Bigcommerce, or marketplaces like Amazon, Etsy, and eBay, managing orders and inventory separately for each channel can be challenging and time-consuming. Multichannel OMS simplifies this by gathering all the data from these channels and presenting it on a single platform. This way, retailers can easily track and manage their operations across all sales channels without dealing with multiple systems.
Dropshipping OMS: Dropshipping is a business model where products are shipped directly from suppliers to customers, eliminating businesses to hold inventory. This approach reduces the challenges businesses often encounter, as it connects all order sources to relevant operational technologies on the backend, such as Warehouse Management Systems (WMS) and Enterprise Resource Planning (ERP) systems. It allows fulfillment to happen regardless of the sales channels being used.
By adopting dropshipping, businesses can spend less time manually handling the often tedious requirements of managing inventory and shipping. Instead, they can focus more on expanding their market presence. This model streamlines operations and provides more flexibility, making it an attractive option for many modern businesses.
Inventory OMS: Big businesses with lots of different operations use inventory OMS. The inventory OMS works together with all your systems, like accounting, marketing, supply chain, sales, and customer service. When everything is integrated, it’s a great choice if you want to automate as much as you can. It can handle many orders, work with many systems at once, and give you advanced analytics and reports.
Cloud-Based OMS: A cloud-based OMS runs on a remote server, which you can use online. It helps businesses make their order management work more smoothly and automatically. It also connects with other systems, which means the business doesn’t need to spend as much on its own computer systems. Cloud-based OMS solutions are expected to grow at a CAGR of 13.3% from 2021 to 2028 due to their scalability and cost-effectiveness (Grand View Research).
Important Components of OMS
Customer Relationship Management (CRM): CRM is a combination of technology and strategy used to handle interactions with current and potential customers. In an order management system, CRM plays a significant role by gathering and arranging customer information like contact details, purchase history, preferences, and communication choices.
By incorporating CRM, the OMS can give a complete picture of each customer, helping businesses understand their customers’ true desires. This valuable information allows businesses to personalize marketing, create targeted campaigns, and offer better customer support, which results in improved customer satisfaction and loyalty.
Some popular names in this field include Kapture, Salesforce, Netsuite, Microsoft Dynamics, etc.
Customer Data Platform (CDP): A Customer Data Platform (CDP) is a special system that combines customer information from different sources and channels into one complete customer profile. Unlike CRM, which mainly deals with managing customer interactions, a CDP’s main purpose is to collect, clean, and organize customer data from various touchpoints, such as websites, mobile apps, email campaigns, social media, and more.
In the context of OMS, a CDP is a centralized place where all customer data is stored and can be accessed by various departments in a company, including sales, marketing, and customer service. This helps businesses keep accurate and consistent customer information across all their systems and channels.
Some well-known players in the CDP market include Klaviyo, Bloomreach Engagement, Segment, SAP, and ActionIQ.
Master Data management (MDM): MDM stands for Master Data Management, a way or technology used to create and handle a single, reliable, and complete version of important data, like customer details, employee information, products, suppliers, and more. MDM ensures that data across various systems and databases, such as CRM, CDP, and ERP, stays in sync and updated, reducing data duplication and errors.
Master data is a mixture of legacy data and manually entered and maintained new data. It is the backbone of business processes and includes important information about users, customers, regions, products, and organizational elements. Master data encompasses the essential rules and functions that govern these aspects within a business.
MDM is beneficial for businesses because it helps them understand their customers better. It creates a well-organized record for each customer and ensures no duplicate entries, providing a clear and accurate picture of each customer.
MDM can improve customer experiences for retailers, especially when dealing with suppliers from different places. It helps solve data issues, manage inconsistencies, and introduce new products faster.
In the context of an order management system, MDM ensures that customer data, product information, and other important details remain accurate and consistent throughout the entire order process. This is particularly crucial for larger organizations that store data in multiple databases and systems.
Reltio, IBM, Informatica, Riversand, SAP, etc. are prominent players in the MDM market.
Challenges with Order Management System (OMS)
Order management system plays an important role in order handling and keeping customers happy. But like any system, it has its own set of challenges to deal with. Below are the common challenges faced with order management system:
Integration Complexity: One of the big challenges is getting the order management system to integrate with other software like ERP, CRM, and inventory management. It can be a bit of a headache to ensure all the data flows smoothly between them. 35% of organizations consider system integration challenges a top concern in adopting OMS (Aberdeen Group).
Data Accuracy and Duplication: Keeping the data accurate and up-to-date is a big deal. If things get messed up with duplicate data or wrong info, it can lead to major order mess-ups and unhappy customers. 61% of consumers are concerned about the security of their personal data during online transactions (Baymard Institute).
Inventory management: Figuring out how much product you have and where it’s located can be a real puzzle. Running out of stock or having too much can be a headache if the order management system doesn’t monitor it. According to a Statista survey in 2023, 62% of businesses that adopted an Order Management System reported that managing inventory effectively was one of the top challenges they faced during implementation.
Order Tracking and Visibility: Customers nowadays want to know where their orders are at all times. Keeping them in the loop with the correct info is tough, especially if many suppliers or third-party shippers are involved. A Deloitte survey in 2023 found that 47% of businesses said inadequate order tracking and visibility as a significant challenge when implementing an Order Management System.
Order Complexity and Customization: Some businesses deal with orders like a puzzle with a million pieces. Managing complex orders with customizations and different prices can be a real head-scratcher for order management systems. A Deloitte survey in 2023 cited 48% of businesses that have implemented an Order Management System dealing with order complexity and customization as one of the top challenges they faced.
Order Routing and Fulfillment Optimization: Getting orders to customers the fastest and cheapest way possible can be a real challenge. It’s like trying to find the best route on a road trip but for packages. A 2023 industry report by Supply Chain Insights found that 48% of businesses implementing or using an Order Management System reported challenges related to optimizing order routing and fulfillment processes.
Handling Returns and Exchanges: Dealing with returns and exchanges can be a real rollercoaster ride. The order management system needs to handle all that back-and-forth while keeping track of inventory changes. A Deloitte survey in 2023 among supply chain and operations executives found that 48% of respondents identified order routing and fulfillment optimization as a significant challenge when implementing or upgrading their Order Management Systems.
Scalability: As businesses get bigger and more popular, they get more orders to deal with. The order management system needs to be ready to handle the extra work without crashing. Scalability is a key concern for 34% of businesses when selecting an OMS (Aberdeen Group).
Security and Compliance: Since the system deals with sensitive stuff like customer data and payments, security and following the rules are super important. Ensuring data security and compliance with regulations like GDPR or PCI-DSS is a constant challenge. A Cybersecurity Insiders survey in 2023 found that 78% of organizations expressed concerns about data security and compliance when implementing an Order Management System.
User Adoption and Training: When a new order management system comes in, everyone needs to learn how to use it properly. If people resist change or don’t get enough training, it can be a real challenge to make it work.
Costs and ROI: Setting up and running an order management system costs money. So, it’s essential to determine if it’s worth the investment and bringing good things to the business.
Glossary
The glossary section will provide definitions and explanations for technical terms and concepts used throughout the page.
Order Processing: The series of steps involved in receiving, validating, and fulfilling customer orders. This includes order entry, inventory allocation, packing, and shipping.
Inventory Management: The practice of overseeing and controlling a business’s stock of products to ensure optimal levels, avoid overstocking or stockouts, and minimize carrying costs.
Customer Relationship Management (CRM): A strategy and technology for managing interactions and relationships with customers. In the context of OMS, CRM integration enables better understanding and servicing of customer needs.
Supply Chain Integration: The process of aligning and coordinating various components of the supply chain, including suppliers, manufacturers, distributors, and retailers, to optimize the flow of goods and services.
Fulfillment: The process of assembling, packaging, and shipping products to customers after an order is placed.
Order Routing: The automated or manual process of directing orders to the appropriate fulfillment center, warehouse, or distribution point based on factors like location and inventory levels.
E-commerce Platform: A digital platform that allows businesses to sell products and services online. Integration with OMS ensures seamless order processing and fulfillment.
Return Management: The handling of returned products by customers, including processes for authorizing returns, processing refunds or exchanges, and restocking returned items.
Cloud-based OMS: An OMS that is hosted on remote servers and accessed through the internet, offering scalability, accessibility, and reduced infrastructure costs.
Artificial Intelligence (AI): The simulation of human intelligence processes by machines, including tasks such as data analysis, decision-making, and problem-solving.
Mobile Integration: The incorporation of mobile devices, such as smartphones and tablets, into the OMS ecosystem for order management, tracking, and communication.
Scalability: The ability of an OMS to handle increasing order volumes and transaction loads without significant performance degradation.
Data Security: The measures and protocols in place to protect sensitive customer and business data from unauthorized access, breaches, or cyberattacks.
Change Management: The strategies and processes used to prepare and support individuals and teams when undergoing organizational changes, such as implementing a new OMS.