In an increasingly digital world, it’s only natural that ecommerce is one of the fastest-growing industries. To keep up with that demand, companies need to improve their order processing workflow — the journey from when an order is placed to when it is shipped — to ensure customer satisfaction and, consequently, loyalty.

What Is Order Processing?

A critical element of order fulfillment, order processing is the workflow that ensures customer orders are properly prepared and delivered to the right place. Depending on the scale of a business’s operations, order processing can happen in a distribution center or warehouse where pickers, sorters and packers work in sync toward order fulfillment, or it can be done by a single person or small group.

What Is Order Processing Software?

While order processing can be conducted manually with pen and paper, as a company grows, so does its complexity and the viability of that method declines. That’s where order processing software showcases its value — it can minimize human error and ensure customer satisfaction, regardless of how large an operation is.

Order processing software stores and shares data on orders, checks stock availability and tracks order delivery, all of which can help ensure orders are filled accurately and on time. This is important because accuracy and reliability increase customer satisfaction, and customer satisfaction leads to more sales. An order management system (OMS) can be integrated with other software, like billing and accounting, to combine order processing and all related tasks in one centralized platform.

Key Takeaways

  • Order processing is a key component of order fulfillment, and efficient order processing workflows can help keep customers satisfied.
  • This workflow includes picking inventory, sorting items, packing orders and shipping them.
  • Order processing software can provide major benefits for a company, because it helps automate warehouse processes, improves accuracy and decreases the time it takes to fulfill orders.

Order Processing Explained

As the name implies, order processing is the process or workflow that happens after a customer places an order. This starts with confirming the products are in stock, then picking the items from inventory and sending them to a sorting area. Next, each individual order is compiled, carefully packed, labeled and shipped to the customer’s address, either directly (for businesses with smaller shipping volumes) or through order consolidation (for businesses with higher shipping volumes).

5 Steps in Order Processing Workflow

Order processing includes five main steps from order placement to delivery — and sometimes continues on if a customer starts a return process. But what is actually happening while an order is processing? Here’s a breakdown of the typical workflow:

1. Order placement: When the business receives a customer order, order details (including items, item quantities, shipping details and delivery addresses) are typically sent to an order management system. If the company has several fulfillment centers or warehouse locations, the OMS will automatically determine the appropriate warehouse location to ship from, based on the delivery address and item availability. This helps reduce transit times and delivery costs. In some instances, one order with multiple items may be fulfilled from several warehouse locations to ensure faster delivery. For example, if one fulfillment center does not stock a certain item or that item is out of stock, the customer may receive two shipments from two different locations so they do not have to wait for items to be re-stocked.

2. Picking inventory: The process of collecting a specified quantity of items from inventory to satisfy customer orders. Order picking must be a highly controlled process because it directly influences the productivity of the overall order processing workflow — the sooner orders are accurately picked, the sooner they can be packed and shipped. To efficiently pick orders, organizations generally employ different picking strategies, including but not limited to:

  • Piece picking, where each picker collects the necessary products for one order at a time.
  • Zone picking, where each picker is responsible for picking items within a zone of the warehouse. All items are collated in the end.
  • Batch picking, where order pickers collect products for several orders simultaneously, in batches.

Picking can be done manually by using picking slips and spreadsheets, or automatically using barcodes and scanners, or even picking robots or machines.

3. Sorting: This is when picked items are separated according to their destination. If zone or batch picking strategies are used, for instance, each item must be sorted into its respective order before it can be packed and shipped. Sorting is an essential step toward accuracy and customer satisfaction because it’s the perfect time for workers to ensure all ordered items are present and in good condition for shipping.

4. Packing: The process of protectively packing items into appropriate shipping boxes. The packing process also includes weighing the packages and labeling them with recipients’ addresses and any necessary delivery instructions. Whether items are packed in custom packaging or plain corrugated shipping boxes, it’s important to prioritize dimensions and weights that can be easily handled and are cost-effective.

5. Shipping: The process of transporting orders to their final destination. Orders can either be shipped directly to the customer, or they might first be consolidated with other orders going to nearby locations to cut costs and minimize the total number of shipments. If orders are consolidated, multiple orders are usually shipped with the same carrier and then forwarded to specific locales as necessary. When shipping, it’s important to use a reliable tracking system so you — and your customers — can monitor orders.

Once items are delivered, businesses often follow up with customers to ensure satisfaction or answer any questions regarding the product purchased. If the order processing steps are carried out effectively — meaning all items are delivered accurately, timely and safely — customers are more likely to be satisfied.

5 steps in order processing workflow

Order Processing Factors

There is no “one-size-fits-all” approach to processing orders. Methods and priorities differ across businesses, distribution centers and carriers, and often depend on factors such as:

  • The nature of the products. Perishable items such as food or flowers, for example, generally need to be shipped in temperature and/or humidity-controlled environments to uphold quality, whereas clothing may not.
  • The number of items. Items ordered in bulk are packed and handled differently than small orders. Small orders might be sent directly to a customer’s address via the postal service, whereas bulk items might be freight shipped to a distribution center.
  • Shipping packaging. Not all items can be shipped in the same packages, and the size of packaging containers can affect how they’re handled. For example, a vinegar producer that carefully boxes bottles and gallon containers for retail must take a different packaging approach to commercial 55-gallon drums and 275-gallon totes, which must be packaged and palletized according to their larger sizes.
  • Productivity of workforce. Whether a workforce can keep up with order processing needs can be a key element in deciding whether to incorporate automation.
  • Seasonality. Busy shopping seasons (around the holidays, for example) can put stress on the entire order processing workflow. Workers have more orders to pick, sort, pack and ship, meaning the process often takes longer than usual and customers may receive orders later than they’re used to.

Types of Order Processing Systems

Order processing systems exist to help make order fulfillment more efficient and more accurate. To do so, they capture and store all order-related data — everything from available inventory to shipment tracking — in a central database. This makes it easy for relevant business departments to access real-time order information at any given moment. For example, the shipping department can use the system to determine which orders need to be shipped and where.

There are two main types of order processing systems: 

  • Traditional order processing systems rely on handwritten files and manual labor. From writing order slips to dropping off hand-packaged orders to the carrier company, all order processing is done by hand, usually by one person or a small team. This person or team is also responsible for tracking all order and inventory data, which can be a tall task in and of itself.
  • Modern order processing systems are technology-centric. All data, including inventory, customer profiles and tasks related to order processing, is fed into specialized software. This minimizes the possibility of human error while expanding a business’s capabilities and growth opportunities. For example, a North American retailer could seamlessly accept European orders online and coordinate shipping with a local fulfillment center.

Order System Advantages

Order processing systems can be a boon for businesses and enhance the customer experience. For example, order systems make it easier to keep track of orders in progress, from picking to shipping. This can help improve picking, sorting and packing accuracy. Order systems also make it easier to prevent lost or misplaced orders. In turn, this can provide a more reliable shopping experience for the customer, which can subsequently lead to recurring business and positive recommendations that help draw in new clients.

Order System Disadvantages

Though order systems are generally beneficial when implemented effectively, they’re not without some disadvantages. Highly technological or overly complex systems might require additional specialized personnel to ensure functionality, making implementation costly. On-premises order management software also brings significant upkeep costs that may include adding to your IT team. If an error does occur, it can be hard to track down given that order processing data is automatically captured by a software program, not manually entered by a warehouse worker who could retrace their steps.

10 Tips to Improve Order Processing

Although any company’s order processing procedures are unique to its business and customer needs, maximizing accuracy, cost efficiency and productivity remains a common goal for all businesses. Here are some tips to improve order processing and realize these goals:

1. Workflow efficiency: Businesses work better when all the moving parts are in sync. Make sure to continuously track workflows to determine where they can be refined. Wherever possible, simplify communication to speed up decision-making — without sacrificing accuracy.

2. Automation: Automation can save businesses time and money, make life easier for workers and benefit the customer experience. For example, automation can improve shipping functions, as well as other general order fulfillment processes.

  • Shipping: Automation can help to select the cheapest shipping option based on factors like available inventory, destination, package weight and size. Automated shipping systems can also automatically send customer notifications for tracking and order delivery confirmation.
  • Processes: Both picking inventory and sorting can become far easier and simpler with automated systems. What’s more, having an automated communication channel may drastically improve the way information passes through all the vital employees in the order processing workflow. For example, automation can help trigger task lists for pickers, sorters and packers. On a smaller scale, automated processes are not only less prone to mishaps, but they can also prevent employee burnout.

3. Demand forecasting: By analyzing customer profiles and past buying trends, it becomes possible to estimate future demand and more effectively plan, budget and set order processing goals. For example, demand forecasting can help a business determine when it needs to hire additional seasonal help.

4. Stock level accuracy: Maintaining well-organized and accurate inventory data can directly improve the efficiency of order processing and therefore ensure customers receive orders quickly and accurately. Outdated or manual processes can slow down operations. While it’s possible to implement and maintain a manual organization system that groups, labels and counts items by hand, automated inventory tracking systems can speed up the process while virtually eliminating room for error.

5. Warehouse management: A warehouse management system (WMS) can play a critical role in increasing productivity and decreasing costs. For example, a WMS can manage all warehouse-related tasks, including order fulfillment and shipment, in one centralized location. A WMS is typically used alongside specific inventory and other supply chain software, further streamlining the order fulfillment process to increase the level of service while reducing costs.

6. Partial order processing: Sometimes it might not be possible to fulfill an entire customer order in one shipment. For example, a pencil manufacturer low on stock may be able to send only half of an order for 1,000 pencils to an office supply store. The manufacturer can process a partial order now so the office supply store can have items to sell, and will send the other half when it’s available. Partial order processing can also be used to improve shipping efficiency. Sometimes it may be faster to split an order into several shipments if part of the order is coming from your warehouse and the other part from a nearby fulfillment center, for example. Having the flexibility to partially ship orders can improve customer satisfaction.

7. Customer communication: Communicating and assessing customer satisfaction is vital throughout the entire order processing workflow. Letting your customers know their orders are underway can give them a sense of control and make them feel more involved in the process.

8. Inventory control: Along with demand forecasting, inventory control helps prevent instances of having too much — or too little — stock available. Proper inventory management controls can save money by ensuring the company purchase only the volume and selection of products it can sell. Efficient inventory control incorporates data from recent purchases, reorder rates, customer satisfaction and turnover, for instance.

9. ERP integration: An enterprise resource planning (ERP) system helps automate business processes by using a central database that collects key business information from all departments, from warehousing and shipping to accounting and human resources. Integrating order management modules with the broader ERP system can help monitor and prioritize customer orders as they come in, then track their progress. This can help improve order processing speed and thereby improve customer experience.

10. Mobile picking and barcode scanning: Pickers can use mobile devices to scan barcodes on items each time they’re picked for an order. These scanners can notify teams whenever an incorrect item barcode is scanned, which can decrease picking errors.

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Optimize Order Processing With NetSuite

Earning loyal customers no longer relies solely on having a great product. That helps, of course, but in today’s fast-paced commerce environment, order processing workflows can make or break a company because they have a major impact on the customer experience. An order management solution such as NetSuite Order Management can optimize order processing and better manage inventory throughout the order life cycle by coordinating and organizing all of the moving parts of order fulfillment, including the entire order processing workflow. This type of software also provides insightful analytics, such as KPIs and other metrics, that tell you what you’re doing well and where there’s room for improvement. Your OMS should also be integrated with inventory management software to ensure you have the necessary items in stock and that order volume is in sync with the inventory purchased.

Additionally, NetSuite WMS automates processes and coordinates a warehouse’s many moving parts, including order processing. WMS helps warehouse managers identify which orders to release based on criteria including priority customers, expected ship date and ship method; devise strategies for determining the proper bin location based on such concepts as first-expired-first-out (FEFO); and recognize clustering opportunities for multi-order picking.

Order processing is a critical element of order fulfillment. It refers to the workflow that occurs in a warehouse to ensure customer orders are properly prepared and delivered to the right place. While it’s possible to improve order processing on manual systems, the technology available today makes this process much easier and more affordable so it’s available to companies of all sizes. Accuracy and reliability are other key benefits because they boost customer satisfaction, and customer satisfaction leads to more sales.     

Order Processing FAQs

How do you improve order processing?

You can improve order processing by implementing systems, manual or automated, that help ensure accuracy, timeliness and smooth customer relations. Technology-centric systems can virtually eliminate human error while simplifying processes. This can help customers receive accurate orders quicker, thereby improving customer satisfaction.

What does it mean when the order is processing?

After an order is placed, it will appear as “processing.” This means the order is in the process of being picked, packed and prepared for shipment. Some order processing systems will notify customers during each step of the process, from order placement to delivery.

What are the six steps in the order fulfillment process?

The order fulfillment process involves these six key steps:

  1. Receiving: Accepting incoming inventory from a manufacturer or supplier.
  2. Inventory storage: Storing and organizing stock, usually in a way that aims to facilitate the picking process and keep the warehouse organized.
  3. Picking: Finding and collecting ordered items to prepare them for shipping.
  4. Packing: Putting orders in packaging with sufficient protection, either in custom-branded or standard shipping boxes.
  5. Shipping: Sending the finished packages either directly to customers or to third-party carriers for delivery.
  6. Customer support: Ensuring that the customer is satisfied and, if not, processing returns and/or refunds as necessary.

How do you effectively manage order processing?

Order processing begins by first picking the correct inventory from a warehouse after the order is placed. Items are then sorted and compiled with their respective orders. Next, orders are packaged and shipped to the customer.