Despite all technological development that supports all areas of the business world, the competitive, rapidly changing, and huge market makes modern order management processes a complex task. To better understand order management systems, business owners must know the primary purposes and objectives of these strategic approaches. Thus, this article will provide insights into the OMS without further ado.
Forrester statistics forecast the global spending on OMS software to reach $1.9 billion by 2026. This is a considerable increase compared to the $1.0 billion registered in 2021. Such significant market growth is driven by the expansion of e-commerce worldwide and the need for order management to align with modern customer expectations.
Companies use an order management system (OMS) to support this complicated business process. It aims to automate order management processes by covering different elements relating to customer orders. Order management is an integral part of any eCommerce business as it includes all order-related activities, such as order taking, order processing, and order fulfillment.
It can enable visibility for employees and customers to view and track each order from placement until completion. It also supports analyzing the overall efficiency and effectiveness of the process.
Essential functions of an OMS
There are particular functions that an order management system must carry out regardless of the size or nature of the company. Of course, the complexity of its tasks depends on the business. That is why some companies would require a more comprehensive system for successful operations. But now, let’s discuss the must-have features of an OMS.
The most fundamental function of any order management system is to track and monitor customer orders. Once your eCommerce passes the entry stage and enlarges its sizes, it would be impossible even for highly professional staff to handle orders without a proper order management system. That is why businesses integrating an OMS into their order fulfillment strategy become more efficient and effective, making their customers’ lives easier.
The right system tracks every customer order and simplifies managing them. Moreover, it makes inventory management, logistics, and other processes much smoother and more automated from the business’ perspective. As for customers, the OMS improves their buying experience making it more seamless.
Of course, the system is much more essential for the companies that sell through different channels. In fact, multichannel eCommerce sales are among the most beneficial strategies. According to Statista, multichannel online retailers managed to generate over $350 billion in 2020. That figure is expected to reach $575 billion by 2023.
While tracking and managing orders from various channels are challenging, the order management system must have a centralized order repository. This implies that the system must be able to receive orders from all channels and return order statuses to every respective channel.
The next significant order management system function is order processing. As part of order management, order processing implies a set of activities that need to be completed to turn a customer order into a sales order. In other words, order processing is a series of actions necessary to prepare, package and ship products to customers.
The essential order processing activities include:
- Receiving an order: When a customer order is received, the order management system must register it and assign order numbers. In the case of online stores, the order is received when a customer hits the “submit order” button.
- Checking order and customer data: An order management system in eCommerce must ensure that order and customer data are valid. The validation process might include order entry, item creation, payment, shipping, cancellation, returns processing, etc.
- Packing the items: After order and customer data are checked, the OMS assigns order lines to items. That’s when order pickers would be able to see what items they need to pick and pack for a certain order.
Shipping the order: The final stage of order fulfillment is shipping the order to the customer. The order management system must provide pickers and shippers with all the necessary information, such as the tracking number, customer’s shipping address, etc.
Inventory Management and Monitoring
Inventory is one of retail and wholesale companies’ critical and most significant assets that require careful and accurate monitoring and control. So, properly managing inventory is essential for an eCommerce business to avoid the following issues:
- Overselling or understocking: This issue refers to the acceptance of sales for out-of-stock items. Because you will not be able to fulfill these orders on time, it will lead to order cancellations, dissatisfied customers, and a ruined reputation.
- Overstocking: When you have no clear image of your inventory volumes, you might end up over-ordering stock. Unnecessarily high stock levels create expenses, increase handling costs, waste warehouse space, and increase the risk of obsolescence.
- Imprecise forecasting: Without precise inventory figures, it would be very challenging to assess customer demands accurately. Accurate inventory forecasting is one of the critical factors for a business’ success.
With a proper OMS, eCommerce retailers can record, track and control orders in one synchronized platform. A centralized sales system makes the whole process much more efficient and effective with reduced time and error. This feature is offered by an inventory management software system, eSwap. Managing all orders from a single platform makes the processes much more organized and saves time for businesses and customers.
A professional order management system will strongly support your inventory monitoring processes. The proper software system will timely update inventory volumes. So, with every new order placement, the system will change the inventory balance accordingly.
Benefits of an OMS
Now let’s discuss the significant benefits that an effective OMS provides to your business.
We all will indeed agree with the phrase saying that “time is money.” And considering the rapidly changing modern markets and trends, this statement has never been more accurate. And since we agreed that time is a critical intangible asset, businesses should direct their efforts to optimize business processes. If not performed effectively, order management processes can be highly time-consuming.
The best way to do that is through automation of business operations. So, by integrating an effective OMS, the software will effectively handle the data entry and other manual tasks, giving your employees more time to deal with complex tasks.
Reduction of Human Error
No matter how professional and attentive your staff is, it is almost impossible to achieve errorless completion of tasks when a human being performs them. Mistypings and forgetting are two of the most widespread human errors in business.
Integrating the suitable OMS and automation of business processes will solve most of these potential human errors. So, as a result, there will be less opportunity for mistakes to create significant problems. A decrease in human error will save the business time, money, reputation, and other crucial resources and assets.
Even with absolute accuracy, getting on-time updates on order processes, inventory levels, and other important figures and statistics is sometimes impossible. That is even more complicated when businesses use multiple software or tools instead of a unified platform.
By leveraging a proper OMS, you will quickly access real-time centralized data on inventory, orders, and sales figures. The system will also easily prepare important analytical reports that you can use for smarter decision-making.
Pleasant Customer Experience
The suitable OMS can improve the customer experience in many ways, including:
- Up-to-date information on order statuses will allow customer support representatives to answer their questions adequately.
- Customers can access their shipping and delivery information directly, including online tracking and shipment status updates.
- The eCommerce, which connects to your inventory database, will inform customers about stockout items online. And they can even subscribe to receive an email or notification when the item gets back in stock.
Main Drawback of an OMS
Everything in this life comes with advantages and disadvantages. The order management system is not an exception. Let’s quickly go through the main order management system limitations.
High Initial Costs
The most significant order management system disadvantage is the high initial cost of implementing and maintaining the system. System integration can be challenging and costly, especially for businesses with complex order fulfillment processes.
However, the system would eventually pay for itself by automating and optimizing the workflow.
Complicated System Management
Another no less significant OMS disadvantage is that finding a balance between the system’s functionality and simplicity might be challenging. OMS often has a number of features that make it complicated for beginners.
At the same time, complexity denotes the flexibility to meet the specific needs of a business.
Distributed Order Management Systems (DOM) Explained
Now that we know what order management systems are, it is high time to learn about the DOM.
A distributed order management system (DOM) is a software solution designed to streamline order fulfillment in businesses with multiple locations, such as warehouses, stores, drop-shipping locations, etc.
The main DOM goal is to ensure that the customers can order a product from any location and receive it from the most convenient location. To do so, businesses need real-time order visibility across all locations.
The most significant DOM advantages include:
- Flexibility: DOM provides businesses with the flexibility required to manage inventory and order fulfillment from multiple locations.
- Efficiency: Such systems ensure that businesses can efficiently manage all orders, no matter how complex they are.
- Improved customer experience: DOM systems make it possible for businesses to provide their customers with a better shopping experience by offering them more convenient order fulfillment options.
However, the main DOM disadvantage is that it is a pretty complicated and expensive system to implement and maintain. Order management systems are essential for businesses that want to streamline and optimize their order fulfillment processes. DOM systems are especially beneficial for companies with multiple warehouses. While such systems require precise warehouse management strategies, there are platforms like eSwap that can efficiently manage every workflow from a single user-friendly platform.
Summing up, we would like to emphasize the key points from the article once again.
- An order management system is a software solution for order fulfillment in businesses. Its main goals are order accuracy, processing speed, and efficient customer service.
- There are three main types of OMS system functions: order-taking systems, order processing systems, and order management and monitoring systems.
- The most significant order management system advantage is its ability to optimize the order fulfillment process.
- The main disadvantages of such systems are high initial costs and system complexity.
- A distributed OMS is a software solution that can streamline order fulfillment in businesses with multiple locations. The main goal is to ensure that the customers can order a product from any location and receive it from the most convenient places.
- When investing in an order management system, ensure it easily integrates into your business processes, is user-friendly, and offers a free trial period. eSwap order management system meets all these requirements and provides businesses with a convenient way to manage orders and inventory from a single platform.