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Order management system: What is it and how do you choose one?

Written by:

Jessica Malnik

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Order Management

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Linnworks order management system.

In between capturing and fulfilling orders, businesses must monitor stock levels across sales channels, coordinate with third-party logistics (3PLs) providers, and maintain a seamless customer experience from the time a customer places an order to post-purchase interactions. 

When you are just starting out, you can likely get by with more manual processes via your ecommerce platform and maybe a spreadsheet or two. However, as you scale to multiple sales channels, these manual processes start to break down. 

Wouldn’t it be simpler to consolidate these processes into one, straightforward system? Enter order management software designed to coordinate and automate the fulfillment process for ecommerce businesses. 

In this guide, we'll share what an order management system is, the benefits of if, as well as how to choose the right one to streamline the order process for customers.  

What is an order management system?

Order management encompasses everything from the minute a customer places an order to shipping and logistics as well as refund / return management. 

When your business is only doing a handful or fewer orders per day on one channel, it is easy enough to manage through your ecommerce platform, like Shopify. Or, you can even manage this via spreadsheets. 

However, as your business expands and you start selling on multiple channels, you are going to need a dedicated order management system (OMS) to coordinate the entire fulfillment process, from picking/packing the order to delivery visibility and after-sales service. 

An OMS can track stock levels across multiple warehouse or storage facilities, analyze order data across multiple sales channels, and collaborate with multiple 3PLs to print, pack, process, and ship orders to the end customer. It enables the processes necessary for businesses to get their products to the end consumer as fast as possible while also ensuring the best customer experience possible.

What does a good order management system do?

Modern ecommerce businesses require an order management system that will include every facet of the ecommerce lifecycle, from real-time insight into inventory to shipping schedules that can be shared with the end customer. However, a good order management system won’t just include these touchpoints, it will dramatically improve the processes involved each step of the way. 

Support multichannel and omnichannel sales efforts

Aside from delivery costs, managing inventory across multiple channels is the second-most specified challenge for supply chain executives. That statistic is not surprising when you consider that today’s consumers are able to place an order directly through a brand’s ecommerce store, through a marketplace, or through social media platforms at any time. 

A good order management system helps businesses manage inventory across the multiple channels they’re selling through, as well as keep tabs on the fulfillment of multichannel orders. Likewise, an efficient system will allow business owners to view best-selling products by channel, so ecommerce businesses can restock inventory accordingly. 

Automate and accelerate the order fulfillment process

Today’s ecommerce customers expect their orders to ship fast — as in the next day fast. A good order management system can accept customer payment, automatically feed the order information to 3PLs for fulfillment and even autonomously print shipping labels for businesses fulfilling orders in-house to accelerate the fulfillment process. The automation abilities of a good OMS help businesses complete the processing, picking, and shipping process as quickly as possible. 

Streamline returns process

While today’s customers want their order fast, they also want to be able to return it fast and with ease. Linnworks research on the effortless economy shows that 89% of customers want returns to not involve a customer service representative. In addition, 72% of shoppers are influenced by an ecommerce business' return policy. A good order management system helps facilitate a fuss-free returns experience for both the business and the buyer. 

An OMS can automatically print return labels for customers who need to send items back, selecting a return address for the warehouse or facility closest to the customer so refunds can be processed as quickly as possible. A good OMS can even provide online tracking information, so customers can monitor the status of their return or refund in real-time. 

Order management system vs ERP

With ecommerce businesses juggling a number of order management processes from the moment a customer confirms a purchase, many brands have attempted to leverage functionality from concurrent systems to ease the fulfillment process. One such system that’s been stretched to meet fulfillment needs is enterprise resource planning software (a.k.a  ERPs). 

An ERP system can coordinate sales and finance, along with planning and purchasing inventory and even human resources. In other words, ERPs are known as all-in-one solutions that can offer ecommerce brands a full tech stack and the ability to integrate multiple processes with one software. However, software that does everything doesn’t exactly specialize in one thing.

ERPs were primarily designed for the manufacturing stage of the supply chain, which means they create gaps in the order fulfillment process. While the preferred choice for resource planning, ERPs lack the detailed settings necessary to support omnichannel sale efforts or facilitate a simple returns process. Though ERPs excel in the pre-sale stage, they offer slim to nothing for order management and post-customer experience.

This is particularly true when you are selling on multiple channels. Your team winds up having to use both ERPs and spreadsheets to keep up with everything, and that’s where inventory inaccuracies and overselling happen. 

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How Linnworks connects with ERP

In comparison, using order and inventory management software, like Linnworks, in conjunction with an ERP gives ecommerce businesses more control over order fulfillment and customer relations from start to finish. They allow granular insight at the channel level and help streamline shipping. OMS platforms also integrate with other backend functions, particularly sales and finance, to coordinate inventory and sales data.

What are the benefits of an order management system?

From manufacturers and suppliers to packaging and distribution services, the multiple partners and processes involved in ecommerce fulfillment make it easy to lose visibility or control over order management. An order management system can limit the costs involved with order fulfillment and help generate revenue for an ecommerce brand — here’s how. 

Reduce human error 

Human error is bound to occur when the order fulfillment process is completed manually. At a time when 28% of ecommerce brands still “spend a lot of time” building and issuing purchase orders, order management systems automate the process to eliminate the risk of human error. An OMS also prevents the need for back-and-forth communication with vendors when purchase orders are incorrect and reduces the risk of over-or under-purchasing inventory due to a clerical error. 

Improve inventory control 

Speaking of over-or under-purchasing inventory, did you know that 54% of retailers still calculate demand by hand? Aside from being majorly time-consuming, this process is also ripe with human error. If an ecommerce brand overstocks, it means they pay extra storage fees and continue to lose cash until the inventory is sold. If a brand understocks, they risk needing to turn a customer away.

An order management system can help forecast how much stock an ecommerce brand should order based on popular products, consumer buying trends, low- or high-selling seasons, and location. This data can even be used to determine how much inventory to order for particular warehouses, as certain locations may require higher stocks than others due to seasonality or current demand.

Enhance the customer experience 

Each point in the order management process presents an opportunity to provide a positive customer experience, which can ultimately boost customer retention and overall revenue. An order management system creates a seamless fulfillment process, regardless of the sales channel, to help businesses pack and ship faster, provide shipping updates, and simplify after-sales services to keep customers up-to-date with everything from order rerouting to order refunds.  

How to choose the right order management for your business.

The right order management for your business will rely on several factors, including which sales channels you use and the type of third-party logistics providers you work with. As a general rule of thumb, be sure to look for an order management software that offers real-time inventory and customer engagement technologies, like personalization, to tighten your fulfillment cycle. 

For instance, Linnworks integrates with more than 70 marketplaces and sales channels from Shopify and BigCommerce to Amazon, Walmart, and eBay

Optimization is the name of the game with order management, so look for a solution that offers automated workflows as well as one that can analyze bulk data and replenish inventory to optimal levels by automating the PO process.

For instance, some of the automated order management features in Linnworks includes but are not limited to: 

  • Set up workflows for order processing 
  • Connect orders automagically with 3PLs and warehouse locations 
  • Automate the purchase order process
  • Connect with any of Linnworks shipping integrations 
  • Get access to powerful business intelligence reports in minutes

Likewise, ensure that whichever system you choose offers delivery and service scheduling, so you can ship packages faster and stay on top of customer returns. Regardless of provider, an OMS should streamline fulfillment from start to finish.

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