What Is Order Management System?

By Erhan Musaoglu logiwa-blog-author | Tags: Inventory Management Warehouse Management eCommerce

In today's business world, making sales through the internet is far more complicated than ever before. Both retailers and wholesalers should think about the sales channels, competing prices, shipping options, logistics, and fulfillment challenges thoroughly. Luckily order management systemis what you need when you're stuck in your sales operations.

 

An OMS is a tool that helps you centralize your order processing through sales channels and fulfillment methods. By doing so, an OMS also automates your workflow and supports you on your customer experience journey. In short, your OMS controls sales, inventory, and fulfillment processes altogether, and that's why it's vital for you and your business. It is no surprise that there are thousands of companies that spend millions of dollars on the order management system all over the world. That is clearly because they've experienced late shipment crises for selling wares when not in stock or they've had to hire extra staff to check picking just to avoid faulty deliveries. For these very reasons, understanding the OMS meaning and utilizing its features will be helpful to your holistic sales operations today and in the future.

Key Takeaways of Order Management System and How to Calculate Its Return

 

You've opened your online store and started your first sales operations. As your sales figures increase and your workload intensifies, you have difficulty doing all the sales and order processing manually. Data entrance will take too long and it'll be really compulsive to track your customers' orders. Right at this point, you understand that you need a tool to help you with this complicated and time-consuming process. However, before you start to look for an Order Fulfillment Software, you must be sure about the size of your need. For example, if you are dealing with 3 to 4 orders a day, it is a sign that you can do it all by yourself. On the other hand, if this number goes up to 10 or more orders daily, you should have a better way to process the orders. Besides, taking orders from different types of channels also exhausts you and is difficult to deal with manually. For instance, lets say 4 packs of socks are sold from your web store, 2 baby sweatshirts from brick-and-mortar, and 5 baby hats from the marketplace you are integrated with. When these numbers increase in time, you'll see the importance of an OMS for your business clearly. Making critical errors in shipping processes also affects your operations and even costs you both financial and emotional damage. This extended period of time spent on multiple processing periods will most probably cause slower delivery times and you'll end up with unhappy customers and order cancellations at the end of the day. The other subject that makes you think you need an OMS is fulfilling the order with many suppliers or 3PL Warehouse Management Software 3PL companies. When it comes to calculating its ROI (Return On Investment), a few subjects should be considered in detail. The first one is the time saved with this new system. For example, think that you have an employee to process orders manually. In the new world where you put the order management system in place, will it be useful to cut the time this employee spends time in half? The formula for this calculation is multiplying the time saved by the hourly wage of the employee. In this way, you will clearly see if your savings are more than your investment and decide accordingly. The other subject to consider when calculating the ROI of your OMS is to examine the number of processing errors and the other tasks you can do instead of order processing.

The Fundamentals of Order Management System

 

From the time you utilize an order management system for your business, you start to breathe a sigh of relief as you autopilot your sales, warehouse, order, and inventory processes. Starting to explain the fundamentals of order management processes, the first element will be tracking. Tracking and monitoring orders is the crucial aspect of an e-commerce order management system As your business starts to grow bigger and bigger in time, you have to have a tool to deal with the increasing number of orders. At this point, an ideal OMS is the support you need for your excess workload. Especially if you sell via many channels, an OMS becomes more vital for you. Tracking and registering orders through your online store, marketplace, and other platforms will be completed by this system and you will be doing some other tasks simultaneously. A smart order management strategy makes a big difference to the company's efficiency as well as helping get rid of errors. Besides, the order management system you use deals not only with your online orders but also with in-store processes. That means, if you have a brick-and-mortar presence along with online stores, all the orders will be handled in one spot letting you and your staff work with ease. Other than tracking, managing inventory will be an important subject for you in your sales journey. As you place and fulfill every order, you need to rearrange your inventory checklist. If you cannot track your stock list properly, be aware of some problems in advance. For example, let's say that you've sold a product for which you do not have adequate stock. In this case, you need to cancel the order and most probably upset your customer. This is called overselling. This problem occurs when you cannot trace your stock or do not have a right inventory management software integration. Vice versa, if you do not have any orders for your inventory, that means you waste your warehouse space and end up with dead stock. False forecasting also happens when you cannot measure your inventory accurately. If you do not have correct inventory figures, you have the probability to miss the increases in product demands. All these calculations can easily be fulfilled by an order management system.

Why You Need an Order Management System for Your Business

 

Up to now we have explained the definition and the key principles of OMS and how to calculate its return in a nutshell. It is time to point out the benefits of order management system. The first advantage will be the automation for sure. As all the commercial companies have one main target that is profit, working hard and correctly is the only path leading to this goal. When you have the right OMS, all the back-office processes will be automated. In this way, your staff might be deployed for different types of tasks. The second benefit of having an OMS is the elimination of human error. Errors made by company staff, even if it's seemingly small in the beginning, may cause significant problems later on. Consider that you have sold 6 books from your online store. Your related staff member does something wrong and sends the order to the warehouse as 60 items sold. This mistype error makes a quite big difference when it comes to the logistics process. For this scenario, if you use an order management system, all the processes will be done automatically by the software and you wouldn't have to worry about it. Real-time reporting is another advantage of having an OMS in hand as updating systems takes time. Especially if your business uses multi-pieces-software, the data processes will be handled more slowly. However, an efficient OMS gives you real-time data about your customers, stock, orders, and more. With this information, you are one step further than your competitors as you have the chance to see product performance, customer behavior, and sectoral trends. Besides, when you use the right OMS, your customer service staff could deal with the questions regarding order status as all the details will be on one screen. This is also valid for the queries about shipping and delivery subjects. In short, even if you sell wares through your web store or marketplaces such as Shopify, Walmart or Amazon order management system helps you get all the necessary information you need across your sales processes.

Tips on Choosing the Right Order Management System

 

No matter if your business is a small or big one, there are some important areas to think about before having the right order management system. For instance, in any OMS, you will have to integrate with some aspects of your business. However, the correct OMS for your company does not want you to change all your setup to use it. Besides, when choosing the right online order software you need to consider the supply chain impact. If you'd have difficulty dealing with the orders from some suppliers while adopting a certain solution, it means that you are in the wrong place. Similarly, if you're prevented from using your favorite third-party logistics company when you choose one particular OMS option, you need to look for another alternative to work best for your brand. Another thing to consider is customer satisfaction while choosing to integrate with an OMS. For example, if you are an omnichannel seller and make sales with more than one currency, you must have that sort of cloud-based order management system. Otherwise, you'd hurt your business losing your customers from your left-aside sales channels.

Briefly, an order management system will boost your company's performance in many aspects from inventory tracking and order management to shipping and fulfillment processes. You have the options to choose among manual order management, standalone software, or more complicated platforms to fit best for your company. Doing so benefits your brand to decrease human errors, automate processes, and better customer experience. Get together with your staff, define your objectives and start to implement the right order management system for your business.

Logiwa has built a fully integrated WMS and cloud order fulfillment software solution for B2C and DTC businesses

 

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Erhan Musaoglu

Written by Erhan Musaoglu

Erhan Musaoglu is the CEO and Co-Founder of Logiwa.