How does order management work?

The way order management works often depends on the size of your business. Order management can be relatively simple for smaller companies and may be managed manually. However, as order volume increases, your customer base grows, and you expand your product list, an order management system (OMS) ensures you can fulfil customer orders accurately and efficiently.  

This guide covers the order management cycle, the benefits and challenges, and why utilising an OMS is beneficial. 

What is order management?

Order management encompasses all the people, processes, systems, and data needed to receive, track, and fulfil orders. It starts when customers order and ends when they receive their items. 

Check out MYOB CRM, a sales and operating system to manage customers, stock, orders and fulfilment.

Why is order management important?

Order management is important because it enables organisations to streamline order fulfilment tasks, overall creating a better customer experience. These benefits directly impact productivity and profitability as well as customer satisfaction, loyalty and repeat purchasing. 

Reduce costs by automating manual processes

By automating manual processes, an OMS can help reduce the costs associated with your supply chain. For many businesses, supply chains go beyond the four walls of their warehouses and usually involve external suppliers, manufacturers, distributors or fulfilment centres.

This complexity can make tracking inventory and orders more challenging, especially when using manual processes. An OMS can help you control costs and reduce order errors using automated workflows. 

Increase revenue by improving inventory accuracy

Improving inventory accuracy with an OMS helps increase revenue. An OMS incorporates your inventory management processes to provide real-time visibility of stock levels – even across multiple locations – which helps you accurately calculate inventory turnover, and fulfil orders effectively. Businesses that do this well not only avoid overstocking but also see an increase in sales revenue.  

Better order fulfilment and accuracy

Better order fulfilment and accuracy result from good order management practices. They can help you avoid sending out incorrect products or delayed shipments, both of which can harm customer relations.

Order management cycle

The order management cycle has four stages: 

Order placed by customer

Customers who place an order have purchased and paid for items through your website, app, marketplace or retail store. This can happen without an employee checking inventory and accepting payment manually. 

Order received by vendor

The vendor then receives the order. If you have multiple fulfilment centres, your OMS should automatically send the order for processing to the correct location based on order details and the customer's location.

Fulfilment of order 

Fulfilment is the next step. For smaller businesses, you may pick, pack and ship the order from your warehouse. Fulfilment in a larger organisation will likely involve multiple people, suppliers and processes across different locations. 

Management of inventory and post sales

Management of inventory and post sales refers to the processes that happen after an order is shipped. This might involve following up with the customer for feedback or a product review, managing returns, exchanges or refunds, and analysing data for inventory forecasting and demand planning purposes. 

Benefits of order management

The benefits of order management come from improving the efficiency and accuracy of sales order fulfilment. As your business grows, your order management systems and processes can scale to handle increased order volumes. 

Here are some more benefits:

Improved inventory tracking and visibility 

Improved inventory tracking and visibility means you can see what's in stock where, and what's in demand. With a real-time view of your order management processes, you can identify and resolve bottlenecks so orders get processed faster. With accurate inventory data, you can avoid stock-outs and excess safety stock, reduce carrying costs, and improve stock replenishment.

Reduced costs with automated processes

Automated processes help reduce costs and increase operational efficiency, significantly improving your bottom line. When teams spend less time on administrative tasks, they can process orders more efficiently and prevent fulfilment errors that can lead to lost revenue. An OMS can also help reduce shipping costs by ensuring fulfilment from the nearest warehouse or distribution centre to the customer. 

Increased customer satisfaction

Increased customer satisfaction is the most significant benefit of streamlined order management. While factors like product quality and customer support also influence this, when a customer receives the correct items quickly, their customer satisfaction increases – and they're much more likely to purchase from you again.

Challenges of order management

Order management challenges can occur as your business grows and you gain more customers, inventory and warehouses. Additional complexity can slow down order processing times and cause errors if order processes are manual and mismanaged. 

Inventory tracking issues 

Inventory tracking issues stop you from seeing where an order is during the order management process. Without this visibility, you can't give customers real-time updates on orders or proactively fix roadblocks that might hamper workflows. This becomes even more complex if you work with third-party fulfilment providers or dropshipping companies that use different systems from your own. 

Increased costs 

Increased costs stem from poor inventory management and incorrect shipments. The longer you hold on to stock, the higher your carrying costs, and ordering too much of a product will exacerbate those expenses over time as you pay for extra warehouse and storage space. Shipping the wrong products or not selecting the most cost-effective shipping methods incur excess costs too. 

Lack of inventory visibility 

A lack of inventory visibility is one of the most common reasons for delayed or incorrect order shipments. Being able to locate the correct stock is critical not only for warehouse efficiency but also for customer satisfaction. An OMS gives you real-time inventory visibility for fast, accurate order fulfilment, including location and stock availability. 

Inaccurate order fulfilment and unhappy customers

Inaccurate order fulfilment can lead to unhappy customers. Sending someone the wrong product or failing to ship an order quickly is a surefire way to lose money and customer trust. An OMS helps minimise the risk of these things by eliminating manual data entry of order information like SKU numbers and quantities. 

Utilise an order management system

Utilising an order management system provides you with a digital way to track and manage the lifecycle of an order. It consolidates product information and inventory availability and automates order processing tasks so teams can fulfil orders quickly and accurately. 

As your business grows, an OMS facilitates that process at scale, helping you maximise profitability and keep customers satisfied. When you integrate an OMS with other systems like an ERP, CRM and inventory management software, there are even more opportunities to streamline order management processes. 

Order management FAQs

What is distributed order management? 

Distributed order management (DOM) refers to functionality within order management software. It uses logic-based rules to prioritise orders and route them to the distribution or fulfilment centres closest to the customers. This helps businesses minimise fulfilment lead times and keep shipping costs as low as possible. A DOM system also makes managing back orders and pre-orders for new product launches easier.

Is supply chain management and order management the same? 

Order management is a crucial aspect of supply chain management. Supply chain management refers to the entire production of goods and services, from raw materials to delivery. Order management starts when items or services are ordered. 

Speedy and accurate order management 

Order management is about ensuring that customers get the right products quickly. That's because satisfied customers are more likely to make repeat purchases, generating more revenue. Order management software and automation will cut costs, increase order accuracy, and streamline operations – all things that positively affect your bottom line. 

With MYOB CRM, you can quickly track, process, and fulfil customers' orders, manage inventory, and access real-time visibility of your finances. With in-built inventory management capabilities and seamless integrations, it provides a start-to-finish solution for better order management – even at scale. 

See what MYOB CRM can do for you — view a customisable demo. You can also start a 14-day free trial. 

Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.