What is an order management system? The ultimate guide for choosing the best solution.

What is an order management system? The ultimate guide for choosing the best solution.

May 9, 2022

By: Sander Kah

9 min. reading time

Most e-commerce companies aren't deliberately careless about fulfilling orders. It's possible that none of them intentionally persuades customers to buy products, only to have their purchases delayed or mixed up. So why do some online retailers use inefficient systems to manage orders? While many e-commerce businesses are switching to order management systems, many have no idea what they're getting into or why they should.

If you're thinking about establishing an order management system, this article will provide you with all the information you need to make an informed decision. You need a way to organize and track orders, and a piece of software can help you do just that. But what precisely is an order management system?

What Is an Order Management System (OMS)?

What is an Order Management System?

An order management system is a platform that helps businesses keep track of orders from different sales channels in one dashboard. These sales channels include for example POS systems and marketplaces like Amazon and eBay. An OMS provides several solutions to business owners. First, it provides a centralized system for managing orders from multiple sales channels, including brick-and-mortar locations, websites, marketplaces, mobile apps, social media platforms, and in-store screens.

Secondly, an OMS assists companies in organizing and automating essential aspects of their purchasing/fulfillment processes for themselves and their customers across all sales channels. An OMS solution provides the features that help you manage tiny details in order fulfillment, whether optimizing shipping routes from the nearest and cost-effective location or prepping items for in-store pickup.

Thirdly, an OMS can help companies monitor inventory levels and track orders on delivery across all sales channels to avoid stockouts and backorders. Suppose a customer buys one of your products on Amazon or eBay; in that case, the system automatically updates all records on other channels and provides dashboards to help you keep track of the order status.

Finally, A robust OMS provides fulfillment reporting and analytics, allowing retailers and distributors to monitor key performance indicators (KPIs). For example, advanced OMS solutions allow you to track order fill time, fulfillment costs such as picking, packaging, and shipping, and even product defect and return rates. Monitoring these and other key performance indicators (KPIs) is the first step toward identifying inefficiencies and developing a plan to fix them.

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How does order management work?

How does an Order Management System work?

An order management system executes multiple business processes regularly. These processes can be grouped into three broad steps.

In the first step, the OMS provides visibility into inventory across stores, warehouses, logistics firms, and drop-ship locations. The record of the inventory is synced across all sales channels.

Next, when an order comes through any sales channel, the OMS captures the order details, optimizes the customer's preferred shipping option, and fulfills the order. The customization options are predefined to meet the customer's needs, and many of the workflows are automated so that the business owner can focus on more important matters.

Finally, a full-featured OMS facilitates payments and communicates data with financial systems after the order has been placed. If, after delivery, a customer wants to return an item, the OMS establishes rules for processing returns from all channels, completing exchange requests, crediting the customer account, and managing the dispositioning process.

These functionalities are part of any advanced headless commerces software that provides an API-first OMS which simplifies order capture and fulfillment for business owners and their customers. Using a headless system puts you above 42% of retailers who claim that their business OMS needs an upgrade.

Types of Order Management Systems

When it comes to order management systems, there are many options. From handwritten ledgers to computerized spreadsheets, everything in between has been tried and tested throughout the years. Today, order management systems have grown in complexity, effectiveness, and use, and they fall under two broad categories.

Enterprise Software:

Some OMS platforms are standalone modules that do not interact with other parts of a company. A standalone tool of this type provides all of the main features of order management. It enables businesses to centralize and track order data while making customer and transaction information readily available. Some of the better systems also include additional inventory and warehouse management functionalities.

The main drawback of standalone software is its lack of integration.

As previously stated, the ideal software should work in tandem with various other solutions. Aligning your order management with shipping, accounting, inventory demand forecasting, POS, and other tools can be difficult. As a result of a failure to communicate, data silos might form, and scaling issues can arise.

Cloud-based SaaS Model:

A SaaS order management software tailored to retail is a great option for brands serious about order management and other back-office operations. These systems provide all aspects of the order process that we discussed earlier. That includes both the e-commerce and fulfillment processes.

This OMS model allows for faster and easier deployment, "pay as you grow" alternatives for better scalability, and access through a browser or mobile app from anywhere there is an internet connection. Furthermore, an OMS solutions provider maintains and hosts the software, resulting in a better user experience and increased reliability.

The ideal SaaS OMS would have all the necessary features for processing orders from multiple channels, managing inventory, logistics, and supply chain, and providing analytics and inventory projections. This OMS can be integrated with CRM and accounting software to provide even more comprehensive data for a complete customer experience.

Why Online Sellers Need an OMS

There are many steps in the purchasing process of online retail businesses, from the point where an order is received to the point where the order reports are generated. Online retailers can increase efficiency by organizing these and other essential processes in one digital space with an OMS. In addition to increasing the bottom line, OMS software can improve the customer experience.

Unlike traditional order management systems, where processing many orders results in a high error margin, OMS software uses task automation and warehouse and inventory data centralization to remove errors and prevent data loss.

Another vital reason online sellers need an OMS is that selling on several platforms can make inventory tracking challenging, especially if the systems don't sync in real-time (or at all). When an order is handled through an order management system, inventory is automatically updated, making the software excellent for multichannel businesses.

How to choose an OMS

Choosing an OMS for your company is not a decision to be made lightly. The right one can save time, decrease expenses, and provide better experiences to your customers—experiences that will entice them to return regularly.

There are many factors to consider in making that decision, both in terms of possible software integrations and workflows that you can automate on the system.

Here are three critical factors to consider when choosing an OMS:

1. Technology Stack

Order Management Technology

A critical factor to consider when choosing an OMS is the technology stack used in developing the Platform. The tech stack provides a clue into how fast and flexible the Platform is and what you can expect in terms of performance. The best OMS types are built with the API-first headless architecture, which ensures that the images and pages of the system are well optimized.

Every retail brand is unique and requires a technology stack designed to fit. With a headless commerce system, every brand has the chance to customize its user experience and deliver what customers want more quickly and improve conversion. You may not be able to see how a headless OMS can help your bottom line until you schedule a demo.

2. Integrations

Order Management Integrations

Before deciding on a system, consider how it will work with other programs you already use. The data from your OMS software should seamlessly integrate with your accounting and CRM to generate a comprehensive perspective of your business.

Also, ensure that your OMS is multichannel; integrations for Sales channels, marketing tools, and other components should all be part of this system. This factor is especially critical for retail brands with many sales channels. The best OMS for your brand doesn't necessitate a complete overhaul of your current system; it should be able to incorporate any software you need without putting your business at risk.

3. Business Analytics and Reporting

Order Management Reporting

Having a robust reporting feature on your OMS can help you in many ways:

  1. Customer data will provide insight into your target persons during marketing activities.
  2. Accurate sales numbers will help you optimize inventory management.
  3. On the other hand, profit and loss reports will allow you to dig deeper into your entire financial health.

Examine the analytics and reporting functionalities of an OMS before making that final decision. Here are some questions to ask the OMS reps to ensure that you're making a good decision.

  • Is it possible to track product and channel performance over time with this Platform?
  • Can you see detailed customer demographic reports?
  • Can you track your sales in other ways to better understand my company's performance?
  • Can you have a real-time view of your financial metrics?
  • Can you make inventory forecasts using the data available on the OMS?

Order management software is helpful for more than just keeping track of your current position. it should be able to assist you in analyzing larger patterns and trends and keeping track of current orders across all channels. To observe this reporting in action, schedule a demo.

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

Benefits of an Order Management System

A company's decision to implement an OMS usually results in a review of its supply chain to identify problems and opportunities for improvement. Faster fulfillment times, for example, have resulted solely from this kind of analysis. Additional OMS benefits include reducing labor costs, optimizing fulfillment across all channels, and enhancing sales and profitability.

Now that you know the work of an OMS, the different types of OMS, and how to choose one, here are some benefits of implementing an OMS:

###. Reduced data entry error.

With an OMS, the potential for processing error is nearly completely removed. This error-free system is achievable because the same data is utilized in all sections of the sales and fulfillment process; it is possible to limit data entry, which reduces the risk of data input errors.

Order tracking visibility.

With an OMS, everyone in your company that has backend access can track the status of orders, which enhances customer service. You'll need this access to deliver excellent customer service to your consumers at every stage of the purchasing process. Customers can also use OMS to check on the status of their orders.

Smart inventory management.

Improved sales visibility allows you to optimize inventory levels to match customer demand while eliminating overstock. A centralized view prevents you from missing a sale due to inventories spread across multiple locations. With inventory adequately managed, you can increase profitability while improving customer experience and inspiring loyalty.

Analytics and reporting

OMS analytics dashboard provides metrics that will empower you to make data-driven decisions. There is no need to make random guesses about what needs to be worked on when you have a tool that provides complete visibility into the correlation of your sales patterns, KPIs, projections, and inventory levels.

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To scale your online retail business, you need to take orders from multiple channels. Whether your customer finds your product on Amazon, Facebook, or your online store, they should have an outstanding experience, not minding where they placed the order. If you want to achieve this, your inventory and fulfillment operations must be efficient and accurate.

OMS software is a critical tool for managing inventories, accepting orders from various channels, fulfilling orders, and processing refunds.

The Platform is most useful when other critical systems like ERP, CRM, and accounting are integrated. Schedule a demo if you want to see how an OMS works with all these systems.

In today's digital world, customers can approach retailers in various ways and make purchases via websites, apps, marketplaces, and more. Order Management systems are a single point of entry for all sales, orders, inventory, and fulfillment, independent of how the order is received or how the product is delivered, instead of having separate programs for each way of ordering.

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