Order management process | Tips to know
24 Jul 2021
From the point of your order placement to your final reception, there is a huge background process going on. That process is order management. It refers to controlling and tracking customers’ orders and taking all the steps until the business correctly fulfills them. The process includes order acceptance, picking, packaging, shipping, tracking, and finally, receiving feedback or return.
The importance of order management accuracy
Order management processes are connected to every functional area and process of the supply chain. It touches inventory management processes, shipping, and transportation, customer care, etc. Considering that order management has one of the central roles in the supply chain, its accuracy is critical.
Following are some of the top reasons which make order management accuracy of high importance.
Avoid understocking and overstocking
When you track and manage your orders accurately and adequately, you can precisely know your inventory levels. It will support you to manage your inventory ordering and handling processes better to avoid over and understocking.
Why is it important? The straight answer would be to avoid extra costs and expenses. Overstocking increases warehousing costs, maintenance costs and increases the risk of ending up with obsolete inventory. On the other hand, when you do not have enough stock to meet your customer needs, you simply lose the chance to generate more sales and even lose those customers to your competitors. So, that is the price of understocking.
Decrease order fulfillment mistakes
If not appropriately managed, order fulfillment can be full of error solving which will be highly complicated, resource-intensive, or even impossible. Despite all the financial damages that those errors can cause, they also negatively impact the brand’s image and reputation.
Order fulfillment mistakes can include packing wrong quantities or items, shipment delays caused by poor management, etc.
To avoid such mistakes, businesses should consider investing in an order management system to keep the processes organized and easily manageable.
Ensure data reliability
Reliable data is an essential requirement for informed decision-making. Inventory and order data is the essence of businesses operating in retail and wholesale industries. Data accuracy can be achieved by system optimization with inventory and order management software. Those systems support you with ongoing order data and provide data reports regarding orders, sales, shipments, stock on hand, etc.
All those analytics and reporting features are available on eSwap software.
Online order management cycle step-by-step
Generally, there are 5 main steps in an online order management cycle.
Order reception and payment generation
The first step starts with a customer placing an order and making an online payment. This step also includes acceptance of an order by the business. So, when the order is successfully received, the purchase details are sent to the warehouse so that the logistics staff can get the products ready and continue processing them to the next step.
Picking is the step when the logistics staff works on order selection from the warehouse facility.
Although it seems like an easy task, in reality, it requires high responsibility and attentiveness. In the cases of large warehouses picking goods can also be time-consuming. Just imagine a warehouse of a retail business that sells a variety of fast-moving consumer goods. Take, for example, cosmetics. Those goods have different options which are very similar to each other. So, carefulness when picking ordered goods is a must to keep your customers satisfied.
After picking products, logistics staff also does the packing into boxes or mailers. Depending on the products, appropriate packing can be an extremely challenging task. However, ensuring that the products are safe during the shipment processes is essential for customers to receive orders in expected conditions.
For example, fragile goods, despite all decorative packaging, must also be covered with bubble wrap to avoid damages during transportation.
After getting successfully packed, ordered goods should be shipped to the customer’s location. Before getting the order shipped, employees should attach the customer’s address and sales invoice.
After the in-house delivery or the third-party shipment service takes the order, you shoul update the order status and tracking number in the system. Automated processes will send a shipment confirmation to the customers.
When the order is successfully delivered to the customer, the customer care team should complete the concluding step regarding that order. The last step is reaching out to customers to get feedback on a product and the whole purchasing experience. Receiving feedback is very important to understand customer satisfaction and make improvements if necessary.
Sometimes it is possible to have one more step in the order management process. That refers to returns. Unfortunately, it’s impossible to entirely avoid returns. So, businesses should also ensure the easy and flexible return and refund practices within their policies.
Order management KPIs
Businesses should perform several measures to analyze the effectiveness of order management systems.
Rate of Return
The rate of return measures the level of returns. The lower is it, the better. The ratio is the following:
Rate of Return = Number of Units Returned / Number of Units Sold
Sending wrong products to customers can cause dissatisfaction and extra costs related to returns. The following ratio is for measuring the picking accuracy:
Picking Accuracy = ( ( Total Number of Orders – Incorrect Item Returns ) / Total Number of Orders ) x 100%
Order lead time
Order lead time refers to the period between the customer’s placement of the order and its delivery. Shorter lead times make customers more satisfied. However, it is essential to ensure that it is not happening at the price of sacrificing order quality.
Order Lead Time = Lead Time for Each Order / Total Orders Fulfilled
To sum up
Order management is a fundamental part of the supply chain. With the business expansion and increasing order volumes, order management can become overwhelming. That is why businesses should consider switching from manual processing to using automated software solutions, such as eSwap software, to ensure effective practices and customer satisfaction.