Order Management System (OMS)

Order Management System (OMS): Definition, Process And Value

Capturing, tracking, and fulfilling orders across two or more sales channels is challenging for many businesses, especially high-growth retailers.

An order management system (OMS) will help your company’s sales process at every phase, from order creation through delivery and refunds.

This article covers everything you need to know about order management system definition, its benefits, and how to choose the right order management system for you.

Order management system
Order management system

What Is an Order Management System (OMS)?

Key Takeaways

  • Order management system meaning is a centralized platform that allows you to keep track of all orders, regardless of how they were received.
  • OMS features assist with sales channels and support, customer databases, and accounting integration, among other things.
  • There are several OMS options available to businesses such as manual order management, and standalone software.
  • Having the correct OMS in place has several advantages. They include more automation potential, fewer mistakes, and a better customer experience
  • It’s simple to pick the proper one for you if you know what you need from an OMS. Define your goals from the start. Then, during installation, cooperate closely with your chosen provider.

– See more: Order management system for eCommerce: Definition, Key Effect, Benefit
– See more: The Best Fulfillment Service in Vietnam
– See more: Best warehouse service in Viet Nam

What is an OMS?
What is an OMS?

Order Management Systems Explained

For merchants, receiving, monitoring, and fulfilling orders across two or more channels will be difficult to handle. Meanwhile, customers now demand more flexibility than in the past.

If you utilize multiple systems for each channel, handling these requests coming from various sources, such as a website, app, or in-store, may be a logistical nightmare.

An order management system OMS, on the other hand, can combine these channels and give a single site for all orders. Additionally, online-only shops can benefit from a system that streamlines the process from order receipt to inventory management and timely delivery.

Through enterprise resource planning (ERP) platforms, advanced OMS systems interface seamlessly with other parts of your organization, such as supply chain and customer relationship management (CRM).

These ERP technologies combine many modules from throughout your organization into one digital ecosystem, giving you a better understanding of everything from inventory levels to financial health and more.

Why Is an Order Management System Important?

By automating several steps that used to need manual intervention, the efficiency of your order management process will be improved.  An OMS can also boost the customer experience as well as cash flow and profitability by improving the company’s capacity to process orders efficiently and rapidly.

Furthermore, OMS has become increasingly vital since eCommerce continues to grow at a rapid pace. This is due to the flexibility in order, picking up, receiving, and returning things helps you satisfy customers’ expectations.

Additionally, a distributed order management system is supported by an OMS. You can y use OMS to fulfill an order that requires products to be shipped from several places, as well as handle returns through mail or in-store, all while keeping costs low. 

Another advantage of OMS is that it can scale as your business grows and develops extra sales channels.

What does an OMS do?

An OMS must perform specific functions regardless of the size or type of your company. The difficulty of doing so depends on your company and the level at which you work.

Here is what an OMS do you need to know:

1. Track All Orders

Order tracking and monitoring is probably the most basic feature of any OMS.

An OMS is mainly concerned with making life easy for both a brand and its customers to help you provide a more seamless customer experience, as well as inventory management, logistics, and other processes.

Once a company sells through many channels, the order management systems will become even more critical. Orders from your website, marketplaces, and other platforms will be tracked and recorded by OMS. In this way, centralizing and unifying sales can improve efficiency and production while also reducing mistakes.

If you have such a presence, an OMS will also record and process orders done over the phone or in-store. Therefore, all order information is available in one location. Your team can check order statuses, make necessary modifications, and communicate with customers.

Track-All-Orders
Track All Orders

2. Monitor & Manage Inventory

Many other aspects of your firm are affected by how orders are placed and handled. For example, any order that is placed and fulfilled has an influence on your inventory.

A variety of problems might develop if you don’t have an accurate inventory count:

  • Overselling is accepting orders for items for which you don’t have enough stock to fulfill. As a result, those orders are canceled, and buyers are disappointed.
  • Overstocking occurs when you think you are lacking a product and purchase too much replacement inventory. This implies you’re wasting important warehouse space and risk having dead merchandise on your hands
  • Inaccurate Forecasting: You don’t have accurate inventory statistics to estimate customer demand. As a result, you will most likely overlook a spike in demand for a certain product, then result in you running out of goods when you could have expected the surge in demand.

3. Facilitate Order Fulfillment

As of now, the OMS has kept track of the orders placed and the inventory you’ll need to fulfill them. 

Many logistical operations will be improved with the appropriate order management systems including directing orders to the correct warehouse, creating shipping labels automatically, and so on. Such improvements can have a significant impact on both warehouse management and overall productivity.

Businesses that 3PL suppliers will benefit from having the proper OMS in place. Order fulfillment is faster and more straightforward once your OMS is integrated with a 3PL system. When you consider the benefits provided to customers, that’s a win-win or a win-win-win.

4. Encompass Reverse Logistics

Returns are an unavoidable part of the eCommerce business. Roughly 30% of items ordered online are returned. Order management requires handling returned products and interacting with the consumers who sent them back.

Reverse logistics becomes a lot easier when you have the correct OMS. In this regard, you will be able to quickly create credit by cloning an original order. Refunds, replacements, and reorders will be easier to process as a result.

3 Main types of order management systems 

Different companies have various requirements for an OMS. However, the more extensive your firm becomes, the more you’ll require a more comprehensive OMS. The following are five of the most popular options to consider:

  • Manual order management
  • Using an e-commerce platform
  • Standalone order management software
  • Enterprise retail platform (ERP) software
  • A Digital Operations Platform for retail

1. Manual Order Management

Manually tracking and handling orders is not recommended for any but the smallest businesses. But you can keep track of all order data in a ledger or using spreadsheets. 

Manual order management is suitable for small firms
Manual order management is suitable for small firms

Typically, this will require creating a detailed spreadsheet in Excel or a similar tool. In this way, you’ll be able to keep all of your order information in one place and up to date.

Manual order management, on the other hand, is time-consuming. Just keeping a system up to date will take a large number of labor hours.  Furthermore, there is a substantial risk of human mistakes. If you enter an order improperly, problems can rapidly turn.

There are two main points in opposition to a manual system. 

The first is its difficulty to scale. Manual order management becomes more impossible as order quantities rise. It’s difficult to manually align all when you add more sales channels. You’ll need some technological assistance.

Secondly, a complex master spreadsheet is likewise difficult to use. It may be simple for its developer to make it up to date. However, if they quit the company, a new employee may find it difficult to keep up. That’s hardly a formula for productivity or efficiency.

2. Using an E-Commerce Platform

It’s obvious that everyone who sells online will surely need to use an eCommerce platform. This is the system that allows you to take orders from customers that come to your website. Smaller or newer companies often use their e-commerce platform to manage orders.

In certain cases, this can be effective because these platforms keep track of order details.  There’s usually a tool that allows you to follow order statuses and even adjust stock. However, relying only on an eCommerce platform is only a viable solution if the following conditions are met:

  • Your website is where all of your orders are placed. There aren’t any available through third-party channels
  • Your website and office are also connected to your warehouse, allowing you to keep track of inventory and fulfillment
  • The eCommerce platform is fully accessible to your customer care team.
  • You don’t have any big plans for expansion
  • Simple order fulfillment processes are all that is needed.

When it comes to ordering management, relying on your e-commerce platform is less practical if:

  • You have many sales channels
  • Your logistics are more complex. For example, y If you have many warehouses or use dropshipping on occasion
  • You want to grow your business without sacrificing the client experience.

3. Standalone Order Management Software

Many businesses choose standalone order management software if they need a more effective OMS. This software is integrated into the company’s retail technology stack and works in tandem with other solutions. This includes their e-commerce platform, accounting systems, and other systems.

A standalone software covers all of the basic features of order management. allowing businesses to consolidate and track order data, as well as access information about customers and transactions. Some better options also have additional features such as Inventory and warehouse management.

However, one minus point of standalone software is its lack of integration. In reality, the software must function associated with a wide variety of different solutions. 

Aligning your order management with shipping, accounting, inventory demand forecasting, POS, and other systems can be difficult. Miscommunication, data silos, scalability challenges, and other undesirable outcomes are possible outcomes.

Benefits of an Effective OMS (Order Management System)

Let’s look at the benefits of utilizing an OMS for your order fulfillment process!

Improve order accuracy

Order fulfillment without an OMS is risky.  Manually processing orders with spreadsheets exposes you to human mistakes. A human mistake from manual process management is the main cause of inventory and fulfillment challenges for many businesses.

This not only affects consumer experiences, especially if the wrong item is delivered to the wrong customer, but it also causes logistical difficulties. The number of returns you’ll have to handle skyrockets, as does the amount of money you’ll have to spend rectifying orders that are wrong.

A similar concept applies to cross-platform manual data entry. 

Some eCommerce businesses nevertheless spend time manually creating and issuing purchase orders. Using an OMS to streamline their production will eliminate the need for back-and-forth communication between your brand and a vendor if a manually made purchase order is erroneous.

Pick, pack, and ship faster

OMS boosts the delivery faster
OMS boosts the delivery faster

While shipping costs are still important to modern customers, the time it takes for a product to move from purchase to delivery is crucial. When shopping online, around 43% of customers expect next-day delivery, which brands must achieve in order to secure the possibility for repeat business.

Indeed, once fulfilling orders is mentioned, time is of the essence. The time it takes to process orders and allocate them to a facility determines how long it takes for them to arrive.

That’s why an OMS works more effectively in this case. By checking inventory across different warehouses, an OMS simplifies the picking and packaging process. 

It locates the closest fulfillment facility with available inventory to the customer. It transmits order information to that location immediately so that the goods may be chosen, packaged, and dispatched as quickly as possible.

Meet customer expectations

Shipping is obviously a touchy matter for today’s customers. Customers value more than simply the timing of your purchase fulfillment process. Customers demand to know the status of their purchase, including its current location and expected delivery date, in 97% of all cases.

Retailers can use an OMS to assist them to satisfy such expectations. When customers seek an update on their order or return, most platforms offer built-in tracking sites. This type of transparency keeps customers from posting bad reviews all over the website.

Prevent stockouts and forecast stock

54% of shops do not have access to forecasting tools. Another 18% have an excessive amount of money in inventories. Lack of visibility into inventory levels frequently leads to two major issues, which can cost companies up to 12% of annual sales:

  • Over-stocking: Large amounts of unsold stock imply you’re strapped for cash, both in terms of the goods and the storage expenses you’re paying to keep it safe.
  • Stockouts: Each year, businesses lose $1 trillion due to a lack of inventory to meet demand. As a result, businesses have to turn customers away and persuade them to come back when the supply is refilled.

Retailers may tackle these issues by using an OMS with inventory control. Retailers will have access to comprehensive data on peak and low-selling seasons, popular items, and consumer behaviors.

This dataset may be used to determine how much stock certain warehouses will require, ensuring that they are not overstocked.

Sell internationally

The worldwide eCommerce market is expected to be valued at $4.5 trillion. Customers from all around the world can shop at eCommerce stores. Their only limit prior to an OMS was the processes required to accept and fulfill overseas orders.

Order management software supports eCommerce companies in expanding their global reach. Retailers may do the following with one:

  • Accept payment in a variety of currencies for overseas orders
  • Send order data to 3PL partners in each country automatically
  • Orders should be routed to the warehouse that is closest to the end customer.

How to Choose the Right OMS

From the moment a customer puts an order until delivery and even after-sales care, the OMS system will assist you in managing the order lifecycle. Choosing the ideal OMS for your company, on the other hand, might be a difficult task. There is no such thing as a one-size-fits-all answer. Because every business is different, it will require a somewhat different from an OMS.

However, there are certain basic criteria to examine for all e-commerce businesses.

Vital Considerations

When evaluating OMS options, whether your company is big or little, there are a few things to keep in mind. Before deciding on a system to manage your company’s orders, keep the following six aspects in consideration:

1. Integrations

You’ll need your OMS to integrate with other elements of your organization, regardless of whatever model you choose. 

Accounting and inventory management technologies must be used in connection with standalone OMS software. Even the most comprehensive digital operations platform must integrate to some extent, for example, your website and third-party sales or marketing platforms. 

One factor to evaluate is whether the integration was developed directly or indirectly and if it was constructed and managed in-house or outsourced. This has a significant impact on the integration’s dependability and efficiency.

Consider different apps and services with which it must integrate before deciding on the best solution for you. Separate sales channels, marketing tools, and other items may be included. The best OMS for your brand is one that doesn’t need you to overhaul your whole structure in order to use it.

2. Impact on Supply Chain

Retailers, both online and off, are a part of larger supply chains. You’ll purchase stock or raw materials from different vendors. Then, you can transmit parts or all of it to distributors or third-party logistics providers who are in charge of delivering to customers.

In selecting an OMS, keep in mind how the system will affect your supply chain. 

Does implementing a certain solution make it more difficult to handle orders from some suppliers? Using one OMS alternative prevents you from using a preferred 3PL provider? If the answers to these questions are yes, you’d better consider switching to another system.

3. Reporting & Analytics

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OMS provides you with various data

OMS also helps you analyze wider patterns and trends as well as keep track of current orders. The ability to accurately foresee and plan for the future is facilitated by this understanding.

Examine the reporting capabilities of an OMS before making a decision with the following information to consider

  • Track product and channel performance over time using OMS
  • Generate and see customer demographic reports
  • Track your sales in any other way to gain a thorough view of your company’s performance
  • Have a real-time overview of your revenue
  • Forecast demand using data.

Accurate and detailed data from your OMS will benefit you in a variety of ways. 

  • Customer data will aid in the targeting of marketing campaigns
  • With accurate sales numbers, you can optimize inventory management
  • Profit and loss reports allow you to dig deeper into your entire financial health.

You’re missing out if your system doesn’t allow for this level of reporting.

4. Customer Experience

An OMS can have an influence on customer experience even if it is not supposed to be consumer-facing. We’ve already explored how the correct system may ensure that the impact is beneficial. Meanwhile, an ineffective system may have undesirable consequences.

Consider an OMS that is only built to handle one sales channel or currency. Adopting the solution would harm your business if you sell across many platforms or have clients from other countries. Make sure that whatever OMS you select covers all of the basics for your company.

5. Scalability

No business wants to remain stagnant; they all want to grow and expand, and many of them have big goals for the future. When selecting an OMS or any other technology, one of the most important factors to evaluate is whether it can scale with the company.

Take a look at where you want your company to be in 5 to 10 years. Will you be selling on a variety of different platforms? Will your order volume increase? Then consider if this OMS is capable of handling such changes to your operation. If you answered yes, you’ve hit pay dirt.

6. Service

While selecting a solution, you must also consider the service provided, of course when you choose an OMS

  • How much support a vendor provides with implementation. 
  • Are they going to be there to help you define the scope of the process and manage the transition? 
  • Do they additionally provide training for all members of your team who will be required to master the new system?

If you answered no to either question, you might want to consider another alternative.

You should also consider how much help a vendor will provide in the long run. It’s important to have 24/7 support if something goes wrong with your OMS to assist streamline processes and teach best practices for your system.

Tips to choose the OMS

After you’ve considered everything above, you’re willing to find an OMS. Here are some tips for you to choose the OMS.

Tips to choose the OMS
Tips to choose the OMS

Define Goals & Objectives

Discuss the implementation of a new OMS with all partners. This will include the following:

  • Team members
  • Suppliers
  • Distributors
  • Customers

Find out what your objective is for upgrading your system from them. This will assist you in identifying which functions are required to achieve your objectives and which you can do without.

Create a Proposal

To write a complete proposal, apply everything you learned in step one. It must specify exactly what you want from a new OMS. 

Consider factors like order numbers, sales channels, and future goals by making such a document to organize your plan and also.  show suppliers what you want them to do.

Research & Reach Out to Vendors

Take a look at the current market for OMS. What vendors are available who might be able to help you? Make a shortlist, and then contact the best ones. Send them your proposal and invite them to discuss it.

Evaluate & Compare Your Options

After you’ve received responses from several suppliers, you may compare their services. Consider your company’s requirements and the functions you determined to be necessary. Keeping that in mind should assist you in selecting the finest OMS solution.

Work With the Vendor to Implement

Any reputable OMS provider will want your installation to be a success. They will frequently offer advice and support during the process. After all, it’s in their best interests for you to get the most out of their program. The more closely you collaborate with a provider from the beginning, the more likely this is.

Final Thoughts

You must accept orders from multiple sources to stay competitive and develop your business. That’s why you need an OMS.

An order management system is a critical tool for managing inventories, accepting orders from multiple channels, fulfilling orders, and processing refunds.

The full detail about OMS including definition, process, and the way to choose the right OMS for you will surely come in handy for your business.

 

Ngoc Lee

Writing is an art that speaks from my heart!

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