You can think of your ecommerce order management system as the heart of your business. Order management is central to your operations and the source of healthy inventory flows and successful fulfillment.
An effective order management system automates critical tasks while freeing you to focus on other areas of your business. When you’re looking to scale your business across new channels and higher volume, you must have accurate and up-to-date inventory data that doesn’t need manual upkeep.
With the right order management processes, you’ll always have the right products at the right place at the right time. By contrast, issues in order management can lead to missed revenue and unhappy customers. Those shoppers might even turn to your competitors for what they need.
Discover how businesses use order management systems to support growth, why they are superior to enterprise resource planning (ERP) systems and how to choose the right system for your business.
What is an order management system?
Order management is the process of tracking incoming orders and managing their fulfillment, including returns and exchanges. Businesses with smaller revenue or inventory, or those selling on only one sales channel, might manage orders through an ecommerce platform, such as Shopify, or by manually updating spreadsheets.
However, most customers shop from various channels, including your website, marketplaces and apps (not to mention physical stores). Scaling your online presence requires a multichannel approach. A dedicated order management system helps businesses multiple sales channels and coordinate the entire fulfillment process — from picking and packing to delivery visibility and post-sale service.
An ecommerce order management system brings many everyday tasks together, including tracking stock levels across multiple warehouse or storage facilities and analyzing cloud-based order and inventory data across sales channels. These systems also collaborate with third-party logistics providers (3PLs) to print, pack, process and ship orders to the end customer.
In short, they streamline the fulfillment process, serving your customers quickly without sacrificing customer service.
Why is a good order management system important?
Implementing an ecommerce order management system enables you to easily manage growing order volumes across all your sales channels from a single location. This approach saves time and money through increased efficiency and fewer errors.
Here are a few examples of how an order management system can support your business as it grows.
Streamlined sales support
Managing inventory across multiple channels is one of the most significant challenges for supply chain executives. Across marketplaces, social media platforms, brand websites and other channels, customers have more purchasing options than ever. Yet nearly 30% of companies lack inventory visibility across stores, warehouses and vendors.
Order management systems help you manage inventory and fulfillment processes across each sales channel while providing data and insights that inform other processes, such as what channels to prioritize for inventory restocking.
Automated and accelerated order fulfillment
Today’s ecommerce customers expect you to route orders quickly, often within 24 hours. A good order management process can accept customer payment, automatically feed the order information to 3PLs for fulfillment and print shipping labels for businesses fulfilling orders in-house. These automated tasks help companies to complete the processing, picking, and shipping phase quickly, saving time and helping meet consumer demand for ultrafast shipping.
Every seller wants customers to be delighted with each order, but returns are inevitable. Your order management system should enable you to address returns and refunds quickly while minimizing the impact on customers or your supply chain. Over 70% of consumers are influenced by returns policies, and they might even abandon their purchase if they don’t like the terms.
Order management systems can automatically print return labels for customers who need to send items back. These systems can quickly determine the return address for a nearby warehouse or facility, which helps you quickly process physical returns (or return pickup) and any applicable refunds. Make sure customers can track returns in real time just as they do with their order status.
What’s the difference between order management systems and ERP?
Growing businesses often search for efficiencies by leveraging concurrent systems to ease the fulfillment process. ERP software is a typical example of a system that’s stretched to meet the needs of ecommerce businesses. While ERPs are often considered all-in-one solutions, they lack the crucial features and capabilities of a dedicated order management system.
The initial need for ERP software was to aid in the manufacturing stage of the supply chain, and they are the preferred choice for resource planning. However, ERPs aren’t usually optimized for order management, as they lack the detailed functionality and settings necessary to support sales efforts and facilitate returns.
ERP systems can be a helpful management tool during the presale stage of your sales cycle. Still, they offer limited, if any, benefits for order management and the post-purchase experience. This is especially true when dealing with omnichannel inventory, as teams are forced to juggle between ERPs and spreadsheets, creating more opportunities for errors.
Using an order and inventory management system like Linnworks, in conjunction with an ERP, gives your business more control over order fulfillment and customer experience throughout the customer journey. This combination enables your business to apply granular insight across all sales channels and expedite essential processes like shipping and forecasting. These systems can also integrate with other back-end functions, such as sales and finance, to coordinate inventory and sales data.
What are the benefits of an order management system?
Managing orders effectively helps you consistently provide a positive customer experience. Order management systems can also influence revenue growth and save time and money by creating efficiencies. Here are some common benefits.
Reduce human error
Fulfillment processes that rely on manual inventory and order management processes are more prone to human-induced errors. These mistakes hurt customer satisfaction and your bottom line. They’re avoidable by using an order management system that automates many of these processes and encourages data-based decisions instead of instinct.
An order management system also prevents the need for back-and-forth communication with vendors over incorrect purchase orders and reduces the risk of incorrect inventory purchases.
Improve inventory control
Stockouts and overstocked inventory are major concerns for businesses, especially for the 54% of retailers that still calculate demand by hand. Not only are those manual processes more time-consuming, but they also increase the likelihood of error.
Overstocking products can lead to you paying storage fees that add complexity and reduce margin. Understocking, meanwhile, can create missed sales opportunities and drive customers to another seller that has what they want.
An ecommerce order management system can help you forecast how much stock to order based on data showing your most popular products, consumer trends, seasonal spikes and location. This data can also show you how much stock to order for specific warehouses, as certain locations might require different inventory levels based on seasonality or near-term demand.
Enhance the customer experience
Each point in the order and warehouse management process is an opportunity to improve the customer experience — or prevent a bad experience — which can increase retention and revenue over time. Sellers that effectively manage customer orders create a seamless fulfillment process while providing customers with shipping updates and simplified after-sales services.
Make the most of your time
An automated order management system helps you save time and be more efficient and productive. For example, automated purchase-order processes can simplify inventory replenishment and eliminate manual intervention. When order data gets automatically routed to warehouses or 3PLs, orders can quickly be assigned to the most appropriate fulfillment center. Automation can also enable batching of orders to save time and expedite fulfillment.
Access real-time business insights
Real-time visibility means you can quickly measure performance, plan confidently and optimize your business. Customized dashboards with filters give you a broad view of operations while zooming in on the details of orders, inventory tracking and other crucial information. With a system like Linnworks, you can easily navigate your orders by assigning them to tags or groups.
What to look for in an order management system
Choosing the right order management system is one of the most important decisions ecommerce businesses can make. Start your purchasing process by understanding your business’s needs across its sales channels and 3PLs.
Look for order management software that offers real-time inventory and customer engagement technologies, like personalization, to tighten your fulfillment cycle. The solution you pick should automate workflows and provide robust data capabilities, among other features.
These systems should also cover the later stages of the order process, including delivery and service schedule management. Linnworks provides all of these features, along with connecting orders with 3PLs and warehouses and providing powerful business intelligence.
Look at where your business is today and what it needs to scale effectively across channels. When you know your business’s needs, you can select the ecommerce order management system that will streamline your fulfillment from start to finish.