Have you ever sat in a bustling dining room and waited for your entrée while everyone else at the table was already enjoying theirs? If so, you unwittingly got a taste of the importance of proper order management.
The dynamics of eCommerce are vastly different from those of a restaurant, however the fundamental idea is the same - a customer places an order, and it gets processed, fulfilled, and delivered.
Sounds simple, right?
As any online retailer will undoubtedly attest, there is nothing simple about eCommerce order management. In the best of scenarios, it presents a myriad of challenges. If executed poorly, it can bring that merchant’s business to a standstill.
At SkuNexus, Order Management Software design is a core element of what we do. We help companies streamline operations, automate processes, and improve efficiency throughout their entire eCommerce backend. If you are part of a growing business that is facing challenges on any level in this area, you have come to the right place.
This is the first in a series of articles taking a deep dive into order management. As with any subject, a critical first step is developing an understanding of the basics. To that end, we will explain what order management is, discuss the role of order management systems in general terms, and touch on how they can greatly benefit your eCommerce business.
What Is Order Management?
Order management is the sum total of the processes, workflows, people, and ways that a merchant gets products to customers. If it sounds like a lot, that’s because it is.
Under the umbrella of order management stand inventory management, warehouse and fulfillment operations, shipping, and even returns. Because it comprises so many parts, opportunities for improving speed, accuracy, and efficiency exist throughout. Unfortunately, so too does the potential for human error.
When a shopper makes a purchase via a brand’s eCommerce platform, that order comes alive. If managed correctly, it will then pass unobstructed through many different stages before ending up on the customer’s doorstep. To begin, let’s take a look at those stages, aka the life cycle of an eCommerce sales order.
The Order Life Cycle
While every individual order is unique, the different phases of an order’s life cycle remain fairly constant. Each one may present multiple different choices to a merchant, but the phases themselves are standard.
Determining where an order should go for processing and sending it there is order routing in a nutshell. For early-stage eCommerce retailers, this can begin as a very easy decision. However, as a business grows, generally both its breadth of inventory and possible processing locations do, too. Accurate routing is crucial to placing the order on the right path from the start.
Order Fulfillment Processes
Once the order has been routed to the correct location, it needs to be picked, packed, and shipped. These three component processes form the basis of fulfillment.
- Picking involves locating & retrieving the proper quantities of each item to complete the order.
- Packing involves placing the item(s) and any necessary insulating materials/documents into the proper parcel.
- Shipping involves selecting a carrier, applying a shipping label, and transferring the parcel to that carrier for delivery to the customer.
The overwhelming majority of online shoppers do not consider what happens after they place an order. Where it was routed, picked, and packed is largely immaterial. They do care deeply about when it will be delivered, however. Customers expect to receive a notice/tracking number once the order has been shipped and be able to follow it all the way to their door.
Order tracking is necessary for the merchant, as well. Well-executed order management means knowing where the order is at any point in the cycle and seeing it through to delivery. Any issues that arise in shipping will ultimately need to be addressed by the online retailer.
Considering that roughly 15% of online purchases get returned, this order life cycle stage must be properly managed for the benefit of both parties. An easy returns process can help provide a positive customer experience, and merchants need well-designed systems in place to process returned items back into inventory as efficiently as possible.
What Is An Order Management System (OMS)?
In theory, an eCommerce OMS is whatever collection of methods a merchant employs to run and control order management. For a fresh startup, it may be entirely made up of manual processes. An order received on a website (or, say, via email) might be “routed” to the founder’s bedroom closet for picking, brought into the kitchen for packing, and driven to the post office for shipping. Inventory would probably then be adjusted in a spreadsheet, however using pen and paper is not out of the question. Tracking would involve going to USPS.com.
As inefficient as it may be, this is still an order management system, but it is not what we mean at SkuNexus when we talk about an OMS.
For our purposes, the OMS is a software platform that serves as the proverbial mothership of an eCommerce merchant’s backend operations. The scope of what a powerful OMS can do is immense, so for now, let’s look at general areas that it may command.
As an online retail business begins to grow, so do its sales channels. A website powered by eCommerce platforms like Shopify or BigCommerce is an excellent first step. However, brands with brick-and-mortar storefronts, social media pages, and/or presences in online marketplaces like Amazon or eBay, will have orders coming in from some or all of them. Simultaneously.
Attempting to manually route and fulfill orders arriving from disparate channels is extraordinarily difficult. When you factor in varied fulfillment options like BOPIS, 3PLs and dropshipping, it can be a recipe for disaster. By aggregating diverse order flow into a single portal, an OMS can provide structure and balance to a situation that is seemingly spinning out of control.
For any online retailer, the importance of clear insight into inventory - how much you have and where you have it - cannot be overstated. This information needs to be reflected and updated both internally, and across all sales channels, in real time.
Correct inventory management assures customers that what they’re looking for is in-stock. It informs a brand's decision-making for order routing, short-term replenishment of products, and forecasting for the long-term.
Going further, inventory accuracy means increased control. This yields easier cycle counts, streamlines accounting, and provides highly useful data for the entire company (sales, finance, supply chain, et al).
Optimized inventory management is no small task, however. For businesses with a broad selection of products spread across multiple locations, an astonishing amount of organization is required. An OMS can provide an abundance of tools to facilitate this organization in ways far beyond the capacity of manual order processing.
Warehouse, Fulfillment & Shipping Operations
It is during these operations that things get most hands-on, and an OMS can play a pivotal role in governing and automating the process. Tasks are directed, specific user roles are assigned, and workers receive only the information they need.
The results of this are profound. Pickers are informed exactly where their items are located and the best route to take to pick them. Packers know precisely what parcels and insulating materials to use. Shipping carrier/method decisions will be made, and shipping labels will be generated, automatically.
All of this is controlled by the OMS.
3PLs & Dropshippers
Many merchants use third-party logistics providers (3PLs) and dropshipping vendors for part, or all, of their fulfillment, and the need for seamless integration and open communication between all parties is crucial. Simply routing orders to third parties just scratches the surface of what an OMS can do.
From monitoring your inventory levels at multiple 3PL locations to scanning for needed items across a range of dropshippers, the OMS can take command of what is a frequent source of frustration for many merchants.
The Benefits of Superior Order Management
For any eCommerce business, improving the order management process will always have a significant positive impact. As we have tried to give general information in this introduction, here are some broad benefits to consider. We will get much more specific the deeper we go.
An order management system empowers merchants by giving them tight control over all aspects of the backend. The direction and accuracy provided through automation of formerly manual processes nearly eliminates fulfillment errors, optimizes inventory accounting, and greatly reduces waste in packing materials.
From the speed in order routing decision-making to the increased productivity seen in picking operations, an OMS increases efficiency in every element of an online retailer’s order processing and fulfillment. This translates to fostering greater output while lowering costs at the same time.
Expanding revenues without adding to spending is a supreme goal for any business and is achievable through optimized order management. The increases in accuracy, efficiency, and productivity can all lead to one thing - a company that is now growing at scale.
We hope this has given you a solid entry to the vast field of order management. We will continue this series in greater detail and follow it up with in-depth assessments of both inventory and warehouse management systems.
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To get a closer look at how SkuNexus can help your eCommerce business achieve its goals, please schedule a demo today.