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What is Order Management – A deep dive into the subject

You might have heard about order management system e-commerce. There are many components involved in order management or OM. Information technology, marketing, and logistics are involved in order management and it is all about the proper management of the supply chain. Essentially, order management is a business process that is at the core of a business’s success. It enables old customers to remain satisfied while meeting the demands of new customers. Now more than ever it has become extremely vital to ensure marketing tactics, supply chain, and customer satisfaction is on the same level as digitization is becoming a widespread reality.  

The supply chain process that is involved in order management might sound like a simple process but it is a complicated procedure that not many fully understand. A business must continually meet the expectations of its customers while ensuring the entire process takes place smoothly. The logistics are the one area that can become extremely complex and this is where the order management system comes into play. Constantly understanding the ways to efficiently meet customer demand and give priority to customer satisfaction is key. However, all this requires an in-depth understanding of some key concepts.

This guide will enable you to understand what is order management, its examples, the difference and similarities when compared to inventory management, and an introduction to the order management system.

If you think about it, your conventional and manual order management process steps could be costing you repeat sales. Whether it’s a payment error, a missed order, or some kind of delivery issue, any inconvenience will lead to bitter customer experiences and they will not want to do business with you anymore. According to market reports, it’s said that almost 60 percent of consumers have cut ties with brands because of one negative encounter.

You can avoid any negative customer interactions by having a solid e-commerce order management process. For this, you need to seek the help of affordable yet powerful online accounting software in India, which will ensure repeat business. With the rise of cloud computing, accounting software has also undergone a massive digital transformation.

What is order management?

How does one define order management? It is a process that involves receiving an order, tracking the order, and fulfilling that order. The next step in the order management process is shipping the order to whoever placed that order; customer or business entity or others. In order for this process to go smoothly, there are many factors involved. Time and resources are involved. Some of the examples of resources are software and systems. It is important to work towards optimal and efficient order management processes to ensure that the customer and business are able to achieve the level of satisfaction they seek.

Order management can be defined as tracking orders and being able to fulfill the order by managing everyone involved in the process. These include partnerships and people. One of the important components of the order management process is managing the customer’s data. This involves information about the customer’s past buying habits, whether they made payments on time, and their other buying habits of value such as whether they buy a few products or in bulk. The order management process involves inventory tracking to ensure you have enough inventory to fulfill orders and you are able to manage vendor data as well.The steps involved in order management might sound like they are not much but the entire process is a complicated process. Let us say that when the order was being processed, something suddenly goes wrong. The customer will need to know about what went wrong during the order processing. Moreover, they expect you to define the problem in detail along with a solution so that the problem can be solved. For example, if during the order processing a product on sale became out of stock because another customer ordered before them, then the customer will require you to provide information about when the product will be back in stock. All of these problems can be solved with Giddh’s cloud computing accounting software. Giddh helps you ensure that you have a well organised and planned process in place to manage your business’ cash flow and inventory.

Examples of order management

The process of customer order management has a lot of steps involved. Here are the common steps and examples.

Step 1: Entry

The first step of the order management process is order entry which also involves the validation process where what the customer has selected is validated.

Step 2: Processing

This order processing step is about data integration whereby the data is sent to the appropriate platform.

Step 3: Verification

Before the placement of an order, the customer needs to be qualified.

Step 4: Billing and invoicing

This step involves generating an invoice before which the order and customers are set up for billing.

Step 5: Payment

This is when the payment is processed after the customer makes the payment.

Step 6: Inventory

If sufficient stock is available then there is no need to order more but if not then more stock needs to be ordered.

Step 7: Manufacturing

When there is a custom order then it will require this step whereby the custom-order details are shared with the manufacturer.

Step 8: Customer Service

This step is an important one as it involves letting the customer know about what is taking place the whole time.

Step 9: Returns/Refunds

This process can be a part of the previous step whereby information about returns, refunds, and cancellations are provided.

Step 10: Service Provisioning

This step takes place if the order is for a service. It involves setting up the service.

Step 11: Preparation

In this step, the order is prepared as it is picked up from inventory and packed.

Step 12: Shipping

This is when the order is sent to the customer and tracking details are provided to the customer.

Order management vs. inventory management software

Many people often confuse inventory and order management software. Order management software is used for the entire process of managing an order. That is, from the order entry step to tracking delivery, the software helps do it all. Today, order management software tools are able to process multi-channel orders from e-commerce. Inventory management software, on the other hand, is focused on inventory. That is procurement tracking, sales order fulfillment management, and future purchase planning are all parts that are taken care of with the help of the software. Proper inventory management software can help businesses sell more.

Inventory management and order management overlap when it comes to products and here is how. Businesses need to know about their inventory levels and where they have this inventory. This will enable businesses to be able to manage all their orders properly. When businesses have accurate data about sales then they can manage inventory better than if they don’t. This is why these two processes go hand-in-hand. You will notice that solutions for order management will have ways to track inventory and the same applies when it comes to inventory management solutions. That is, these will give you features that enable you to manage orders.

What is an order management system?

Order management system or OMS refers to software applications that work together with bigger systems such as ERP and CRM by being integrated into them. An OMS enables processes such as customer communication and order fulfillment among others. The OMS tools enable processes such as tracking operations related to warehouse, order entry, business intelligence, and accounting to take place smoothly while ensuring correct integration is in place. Oftentimes, people refer to the order management system as order management system software too.

Today, the way in which the order management system works has changed due to new dynamics. This is because economies all over the globe are moving towards e-commerce and an increasing number of customers are placing orders with the help of their mobile phones. This has brought a change in the functions of the order management system. Advanced technology is being used as a result of the new demand such as automated order processing in an online order management system. This has made it easier to solve problems faced by customers without complications and it has expedited the problem resolution too compared to before.

Tips that help with order management efficiency:

When taking up cloud accounting software, you will want to consider the tips listed below. They will help improve the efficiency of your overall process:

Use a system that has all-in-one features:

One of the biggest obstacles that order management faces is speed and accuracy when logging into various systems; like e-commerce platforms, shipping carriers, the marketplace, and return systems, and so on. Therefore, you need to identify an accounting software online that will have an all-in-one approach and ties in multichannel orders, along with inventory, returns, and shipping. Having all these features on one platform can increase efficiency and take your business to the next level.

Print your shipping labels in bulk:

When you print labels, individually, it can take up major portions of your time and effort. This is even more tedious if you’re dealing with a high volume of orders that come in from multiple channels.

So, make use of order management process steps that will allow you to print labels in bulk, with just a few clicks. This will save you so much time and increase your team’s productivity as well.

Automate your order management process steps:

If you think about it, the less labor-intensive work your team does in a day, the better they can focus on growth strategies and customer engagement, especially, if the tasks are repetitive and menial. Once an automated online accounting software automates the basic tasks, it will free up so much time for you and your time to spend towards growing the business. For instance, you can opt for a cloud accounting software that creates automated order rules. This will help you put any repetitive tasks on autopilot, like:

Adding tags to orders that have high value, this way you can pay special attention to them

Routing orders from specific countries to the appropriate warehouses

Choosing the best shipping service

Important order management process metrics:

Keeping an eye on the order management process will allow you to see parts that are weak and need attention. Some of the key metrics include:

  • Rate of return
  • Accuracy in selection
  • Order lead time
  • Purchase frequency

Advantages of an order management system

There are numerous advantages of order management systems. Here are some of the top reasons.

  • Order management system helps increase customer satisfaction. For example, when the customer is ordering information, they need to do it once. They see everything happening in front of their eyes and they receive an order confirmation immediately.
  • Customers know what is taking place at all points of order management. This makes it simple for them to know what is happening and if anything needs to be changed then it can be done quickly. This enables customers to feel like they are in charge.
  • Order management software has an automation component that saves time and minimizes errors. This is because the steps required in creating an order until delivery are reduced. Data security is enhanced as a result of this and easy changes can be made when required.
  • The ability to order from anywhere is excellent as it helps increase customer satisfaction levels. An OMS enables customers to order from anywhere they wish and this convenience helps customers buy more. This is beneficial for the business as well.
  • OMS makes it easy to analyze data that is stored. For example, an OMS can help you learn how you can improve and in which areas. An order management system can essentially be used to improve customer loyalty which will benefit your business in many ways.
  • OMS helps anyone to easily get access to the information they need. For example, sales reps can get the information they require without wasting time and energy. Customers can easily find up-to-date and accurate information about a particular product in real-time.
  • Ordering mistakes can prove to be costly for your business. The order management system allows you to avoid mistakes since everything is done in a system and the use of paperwork is not required anymore. Moreover, OMS helps to simplify things and to streamline the entire process.

Key order management process metrics

KPIs are an essential aspect of any part of a business including your ecommerce order management process as well. Having clear understanding and focus on the process metrics will enable you to find out which part of your business is weak and needs attention. Below mentioned are some of the key order management process metrics which you need to keep track of.

Rate of return

The rate of return metric gives you an estimate of how often your customers are returning the items. For maximum benefit, you need to segment the results according to their reason for return. As a result, you will have the exact reason behind the poor results, and then you can devise a strategy to resolve the problem. The rate of return can be calculated by the following formula.

ROR = (Number of units returned / Number of units sold) X 100

Picking accuracy

Lacking in picking accuracy will lead to unsatisfied customers and negative reviews from them for which you need to compensate to fix the errors. Hence, it is an important metric to track. To calculate the accuracy of your picking process, you can utilise the data from segmenting the ROR metric. Picking accuracy can be calculated as – Picking accuracy = (Difference between total number orders and incorrect item returns / Total number of orders) X 100

Order lead time

Order lead time is the amount of time used between receiving an order request from the customer to actually getting it delivered to them. The lesser the lead time, the more impact you can create on your customers’ satisfaction levels. However, it is important not to compromise on the accuracy and quality of order processing and delivery in reducing the lead time. To calculate the order lead time, find out the average time of all fulfilled orders. Order lead time = Lead time for every order fulfilled / Total number of orders

Purchase frequency

The purchase frequency metric indicates the frequency of orders made per customer generally calculated over a year or a definite period. Keeping track of this metric allows you to gain insights about how your follow up and nurture campaigns are performing and the entire customer experience. Purchase frequency = Total number of orders / Number of unique customers

Conclusion

Now you know what is order management and how the process works step-by-step. Having a defined order management system in place will improve your customer satisfaction levels so that your customers keep coming back to you. Needless to say, it is a crucial aspect of your warehouse processes and forms the essence of how your customers place the order and receive them.

As your business grows and starts handling more and more customer orders, following manual order management process steps can become challenging. Opting for Giddh’s online accounting software and order management system can ease the process for you. Giddh offers the best online accounting software in India that can help you streamline all your fulfilment processes as well as manage the growing customer orders efficiently.

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