An order management system (OMS) supports all the stages in your company’s sales process — from order creation through delivery and even returns.
OMS platforms provide a single, centralized system for managing orders from multiple sales channels, include brick-and-mortar locations, websites, call centers, mobile orders, kiosks and more. It simplifies the buying process for customers, and makes it easier to manage orders, inventory, fulfillment and returns for businesses.
What Is an Order Management System (OMS)?
An OMS helps you organize and automate key parts of the purchasing/fulfillment processes for you and the customer. After an order is placed and a delivery method is selected, an automated process is triggered for fulfillment. Whether it’s shipping from the nearest and/or most cost-effective location, or preparing the item for in-store pickup, OMS platforms help fulfill orders quickly. It also helps you monitor inventory levels to avoid stockouts and backorders and even manage other steps in the customer lifecycle, such as returns. It enables your employees and customers to view and track each order from start to finish, and it helps you analyze the overall efficiency of the process.
The most powerful OMS platforms can deliver fulfillment reporting and insights so retailers and distributors can track key performance indicators (KPIs). For example, with advanced OMS platforms, you can track order fill time, costs related to fulfillment like picking, packing and shipping and even product defect and return rates. Monitoring these and other KPIs is the first step to identifying inefficiencies and developing a plan to address them.
Video: What Is Order Management?
- Online order management systems are centralized platforms to oversee all orders, regardless of the channel in which they were received.
- While specifics may vary, OMS functionalities help with sales channels and support, customer database and accounting integration.
- OMS tools are frequently used by retailers and distributors that receive orders from more than one channel (e.g., website and brick-and-mortar store), but even online-only retailers can benefit by managing all sales processes from a single sign-on. Additionally, they can more easily accept orders from various online channels, including through an app, their website, social media, etc.
Order Management Systems Explained
Receiving, tracking and fulfilling orders across two or more channels can be challenging for retailers. And customers expect more flexibility than ever. Some may want to pick up in-store, and others might prefer the order shipped. Managing these requests coming from different sources — such as website, app or in-store — can be a logistical headache if you use different systems for each channel. Instead, an order management system can aggregate those channels and provide a single portal for all orders. Additionally, online only retailers can take advantage of a system that helps manage the process from receiving an order through inventory monitoring and efficient delivery.
Advanced OMS systems integrate seamlessly with other areas of your business, such as supply chain and customer relationship management (CRM) through enterprise resource planning (ERP) platforms. These ERP tools bring different modules from around your company into one digital ecosystem and give you greater insight into everything from inventory levels to financial health and more.
Why Is an Order Management System Important?
An OMS can increase the efficiency of your order management process, automating many steps that previously required manual involvement. Because that improves the company’s ability to process orders efficiently and quickly, an OMS may increase customer satisfaction and enhance your cash flow and profitability.
As ecommerce continues to grow at an impressive rate, OMS becomes increasingly important, for two primary reasons. First, it helps you meet customers’ expectations to have flexibility in ordering, picking up, receiving and returning products.
Second, an OMS supports distributed order management. For example, with OMS, you can fulfill an order that involves shipping items from multiple locations, process returns through the mail or in-store, and do so as cost effectively as possible. Another benefit of OMS is it can grow as your company increases sales volume and adds new sales channels.
How Does an Order Management System (OMS) Work?
An OMS begins by providing visibility into available-to-promise (ATP) inventory at your own warehouses and stores and from third-party suppliers like 3PL (third-party logistics) firms and drop-ship locations. This helps with inventory planning.
Next, the OMS provides fulfillment via robust order capture, validation and release; pick, pack and ship functionality including drop-shipping; shipment confirmations and customer communication.
After the order, a full-featured OMS enables easy payments and shares that data with financial systems. Should the customer wish to return an item, the OMS sets rules for processing returns from all channels, fulfilling exchange requests, crediting the customer account and managing the dispositioning process.
Types of Order Management Systems
Historically, companies have managed orders in a variety of ways. From keeping ledgers with a notebook and pen to a spreadsheet stored on a single computer. But order management systems have become much more complex, efficient and useful.
Individual and enterprise systems
Companies can buy OMS software as individual modules that don’t integrate with other areas of your business. But the more robust platforms can integrate your OMS with other software modules so all your data lives in one digital location. This way, your OMS data is integrated with your customer relationship management, supply chain, finance and other business software. This not only allows for greater automation features, but it also helps you generate more robust reporting and show how various aspects of your order management affect the bottom line.
Cloud-based options and on-premises
OMS systems may also be onsite software or delivered in SaaS/cloud model. SaaS has faster and easier deployment, “pay as you grow,” options for better scalability and access from anywhere there’s an internet connection with a browser or mobile app. Plus, the vendor maintains and hosts the application, which means a superior UX and better reliability.
Order Management Process
What is order management process? It includes all the activities involved in taking, processing or receiving and fulfilling a customer order received via any sales channel. The process starts with creating new orders and establishing or updating customer accounts. Later steps include inventory-related activities such as checking and maintaining availability, picking, packing and shipping — and if you’re dealing with POS (point of sale systems), the process also extends to receiving payment. You may also hear the term “order to cash” used to refer to an extended view of the order management process that includes managing customer payments, returns and refunds.
Benefits of an Order Management System
The decision to implement an OMS often leads companies to examine their supply chains for bottlenecks and areas that can be improved. Sometimes, this analysis alone leads to improvements, such as faster fulfillment times. Other benefits of OMS include optimizing fulfillment across all channels, decreasing labor costs and improving sales and margins. Here are other boons that can come from OMS platforms.
Tighter inventory management
Better visibility into sales helps you optimize inventory levels so that you meet customer demand while minimizing excess stock. A consolidated view keeps you from missing a sale because inventory is in multiple locations. All of this can increase cash flow as well as improve customer loyalty and satisfaction.
Reduced data entry
Because the same information is used across all areas of the sales and fulfillment process, less data entry is required, and that means less potential for errors.
Everyone in your organization can access and track order status which enhances customer service. Customers can use OMS to track order status, too.
OMS dashboards can inform decision-making by highlighting sales patterns, tracking KPIs and forecasting sales and inventory levels.
Challenges of an Order Management System
Not all OMS software is created equal. And even with the most advanced software there can still be challenges to overcome. Here are some common hurdles and advice on how to address them.
OMS platforms are at their best when they’re connected to other areas of your business. If your order management doesn’t connect with your CRM, finance management, supply chain and other software modules, you’ll miss out on valuable efficiency and customer service opportunities.
The user interface should be clear and concise, offering up users the information they need to perform their work duties, such as monitor inventory levels, process returns and more.
Another important feature is the ability to generate reports in simple-to-understand dashboards so you can see KPIs at a glance. You should also be able to dive deeper into individual customer information to see things like order history.
Other features to keep an eye out for include POS integration, a robust customer support team, and the ability to triage orders for shipping and in-store pickup.
Lack of configuration
It’s likely you’ll want to open access to your OMS to various employees who are involved at different stages of the customer lifecycle. Selecting a platform where you can customize data access, reports and other information can help you keep data secure while still providing all the tools your workers need to do their jobs well.
Why Do Online Sellers Need an OMS?
Even companies with a single channel can benefit from the structure provided with an OMS. Organizing the entire purchase experience can dramatically boost success. Consider the following steps all managed with an OMS:
- Receive orders
- Process payments
- Manage inventory
- Ship/track orders
- Oversee returns
- Generate sales reports
- AI-powered predictions
By moving all these and other important processes into one digital space with an OMS, online retailers can boost efficiency. In addition to improving your bottom line, OMS software can provide a better experience for customers.
OMS platforms can also help open online sales doors that might have been previously closed to ecommerce companies. Rather than only receiving orders through your website, you can open purchases to third-party retailers like Amazon and eBay, as well as other outlets like social media. And all those orders, inventory and fulfillment processes can be managed from a single sign-on.
How to Choose the Right OMS
Selecting the best OMS for your business can be a daunting task. This system will help you manage the order lifecycle, from the moment a customer places an order to delivery and even post-sales service.
Here are a few steps to follow to make sure your OMS meets your company’s needs.
- Assess your current business needs
Think carefully about your company’s future requirements and consider expectations of business growth, global expansion, increasing order volumes and expanding sales channels.
- Consider functionality
There are some features that your OMS system should cover, including the following:
- Receive orders from any channel
- Accept and process payment
- Send orders to appropriate warehouses/locations based on proximity to customer
- Allow for in-store pick up
- Monitor inventory levels
- Order tracking for customers
- Predict inventory levels to help maintain appropriate stock
- Integrate with accounts receivable to create invoices and receipts
- Plan how to integrate your systems and data
It’s also important to consider connectivity to other systems, including your company’s ecommerce website and ERP system. By integrating business software into a single ERP platform, you can lower manual input and reduce errors. Taking a broader look at your company's approach to business software and how the OMS will help save hassle and time down the road.
- Select on-premises or cloud-based
Cloud/SaaS OMS solutions don’t require that you maintain hardware or install software. On-premises OMS applications are available for companies that prefer to host and manage their own systems.
What are the features of order management system? An OMS typically supports four main areas within the order management process.
The OMS receives and consolidates information from all points of sale, including online, in-store and call center. Some products also support orders from different global regions and multiple currencies.
Product information and availability are updated in real time for both your customers and your employees, including the customer service team. The OMS also supports omnichannel customer returns and exchanges.
This includes customer contact information and activity, including previous orders. Customer service reps can provide more tailored service, identify opportunities for upsells and recognize highly profitable and frequent customers.
In addition to providing a consolidated view of inventory, which aids in managing and tracking stock levels, the OMS includes inventory management algorithms that route orders to the appropriate warehouses and identify the best shipping options. An OMS provides data that is used throughout the inventory management and fulfillment stages, including picking, packing, shipping and tracking.
Data from the OMS should flow into your accounting system’s general ledger and subsidiary journals, such as accounts receivable and accounts payable, eliminating the need to reenter information or transfer it in a separate process.
5 Ways to Reduce the Cost of Returns
Recovering as much income as possible on returned merchandise is critical. Here are a few tips to help.
- Retrain the sales team and partners
If an item is returned more often than expected, look at how the sales team is selling it and how marketing positions it. Often, nothing is wrong with the item itself — it’s just being sold to the wrong customers or for the wrong uses.
- Standardize returns processing
Returns must be handled immediately and efficiently to recover as much value as possible. Include return labels in shipments so your team can track packages, plan for their arrivals and inspect them quickly. All returns should be scanned or entered into your inventory/order management system upon arrival. From there, have documented processes for inspecting and restocking to minimize both shrinkage and the cost of reverse logistics — moving products back to the merchant from the consumer.
- Don’t make immediate payment
Companies are often too quick to give clients full refunds before checking for damage, missing parts or anything else that could impact its resale value. All returns should go through a thorough inspection.
- Augment online product content
The problem of returns starts at the checkout, especially with online purchases, where the buyer cannot touch the product. Mitigate this by offering more content: Multiple images, videos, detailed product descriptions and a Q&A section all contribute to lower return rates.
- Consider outsourcing returns
Handing off returns to a third party could reduce costs. A 3PL (third-party logistics) firm brings to bear expertise and economies of scale, including better rates with carriers and more efficient processes tuned to the unique demands of the reverse supply chain.
To stay competitive and grow your business, you need to accept orders from various channels. Regardless of where or how the order is placed, customers should have the same excellent experience, and your inventory and fulfillment processes has to be efficient and accurate. OMS software is an important tool to help you monitor inventory, accept orders from different channels, fulfill orders and process returns. The platforms are especially powerful when incorporated as part of overall ERP software so your order management information is integrated with CRM, supply chain, accounting and more.
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What does an order management system do?
An order management system helps you track orders, sales, inventory and fulfillment. It’s especially common for companies that receive orders from more than one outlet. For example, if your company has a brick-and-mortar outlet, as well as online sales, managing all purchases through one portal can be more efficient and help you better monitor inventory levels. However, even online-only retailers can benefit from an integrated system that helps them keep an eye on sales, inventory, fulfillment and more all from a single sign-on.
What is order management system in retail?
Customers can access retailers in more ways than ever, and purchases are made from websites, apps, call centers, text messages, chat bots, social media sites and more. Rather than have an individual program for each method of ordering, OMS systems are a single portal to track all sales, orders, inventory and fulfillment, regardless of how the order is received or the delivery method of the product.
How does an OMS work?
An OMS consolidates all your company sales into one digital space. So, whether you receive an order from Amazon, eBay, your own website, a physical store or anywhere else, you can access and fulfill all sales from a single login. They typically focus on orders, inventory, fulfillment and returns.
What does OMS mean in retail?
Order management systems are common tools for retailers who receive orders in at least two different channels. For example, if your customers can purchase a product online and pick it up in store or have it shipped directly to them, a single OMS system can help you manage your orders more efficiently.
What is online order management system?
If your OMS system is cloud-based, you can access it from anywhere with an internet connection. You’ll be able to monitor inventory levels, view customer orders, sales history and more from a single sign-on.