Order Management and Order Processing: Why They’re So Important for Business
January 28, 2019
What do you want to learn?
Once a customer clicks the “Buy” button, their order’s journey begins.
New orders are placed on your ecommerce platform, then whoever is storing your inventory has to select, package, and ship the right products to the right place.
This might not seem too hard when you have a brand new business: A few orders come in each day and you can quickly (and cheaply) fulfill them yourself. No problem.
Potential obstacles can arise, however, as sales grow, channels multiply, products are added to your inventory, and your customer base expands.
What is order management?
Order management refers to the process of receiving, tracking, and fulfilling customer orders. The order management process begins when an order is placed, and ends when the customer receives their package.
When scaling your business, it’s important to automate and streamline this process — otherwise, you’ll eventually be overwhelmed by the sheer number of orders coming in.
What is an order management system?
An order management system gives you a one-stop shop to view and manage all customer orders in one place.
Some systems offer a two-way sync that makes sure order information is passed between your order management system and your ecommerce platform while providing you with visibility into the entire process. This can help automate the flow of sales order information to every piece of the retail supply chain.
That means you can track the entire journey of a customer order, from the “Buy” button to delivery — and even returns.
In short, an order management system organizes and automates everything that needs to happen to get customers what they ordered on time and in good condition.
What is order processing?
Order processing is the process or work flow from order placement to delivery. This is a key element of retail order fulfillment, where reliability and accuracy lead to customer satisfaction.
Steps in order processing include picking, sorting, tracking and shipping. Order processing can range from manual processes (hand written on an order log sheet) to highly technological and data-driven processes (through online orders and automated order processing software) depending on the operation.
Why your business needs accurate order management
Taking the time to implement order management processes and systems can seem like extra red tape when you’re bootstrapping business processes with a small team.
But as you grow your business, you may fall behind trying to fulfill every single order on your own. Here are just a few of the problems solved by accurate order management.
1. Keep from overstocking and under-stocking
A high inventory turnover ratio can be a good thing as long as you’re not over or under-stocking.
Overstock and you’re sinking cash you can’t afford on unused products collecting dust before they hopefully sell one day.
Under-stock and you risk making customers wait, splitting shipments, or losing easy sales entirely from customers who were ready to buy now but will probably end up giving that money to your competitor instead.
ShipBob’s order and inventory management software allows merchants to clearly see seasonal trends in inventory levels so that they know whether to prepare for a decline or an increase in sales.
Online apparel company FLEO Shorts, for instance, will send new inventory to ShipBob weekly:
“It’s really easy to create new SKUs and restock existing ones using ShipBob’s technology, which is especially important with high inventory turnover,” confirms co-founder Carl Protsch.
This helps ensure that businesses like FLEO don’t run out of products, keeping the business profitable and customers happy.
2. Fewer mistakes on fulfilling orders
It’s easy to avoid fulfillment mistakes when you’re only shipping a few orders a day.
You simply pick the right product, package it well, print the shipping label, and send it off..
Now imagine that your business takes off. Orders are coming in 24/7 from all over the world through multiple channels. Meanwhile, customers are bombarding you with messages inquiring about their order status, complaining about delivery times, and asking for refunds.
It’s only human to start making mistakes when you are dealing with this high volume of orders and level of complexity. Wrong products, wrong addresses, delayed shipments… these can damage the reputation of a growing ecommerce business.
That’s why it’s so important to have a streamlined order management system in place. More automation and synchronicity means less human error. Things may still go wrong once in awhile — oftentimes, that’s inevitable — but you’ll be able to scale your business without becoming overwhelmed.
3. Reliable information that helps you make data-driven decisions
It’s hard to make sense of data when it’s scattered across multiple platforms.
Order management systems allow you to see all sales order data in one place, making it easier to analyze the available information and make data-driven decisions.
For example, ShipBob’s order management system shows you how your customers’ orders are distributed geographically. You can use that information to split your inventory across the fulfillment centers closest to the majority of your customers. Storing your inventory closer to where your customers live is a great way to reduce shipping costs and increase delivery speed.
Order management systems also make it easier to identify real-time problems because you can see the whole process from a birds’ eye view instead of as separate fragments.
The ability to make data-driven decisions can save you money in the long run. When order volume is high, fixing even the smallest inefficiency can drive supply chain optimizations and have a significant impact on your bottom line.
4. Less wasted time
If you run an ecommerce business, chances are that you’re a creator, entrepreneur, or visionary. Sometimes all three.
But you know what probably doesn’t appear on that list? Ecommerce fulfillment expert— and rightfully so. Every hour spent troubleshooting fulfillment issues is an hour that could be spent on growing your business through more strategic activities like product development or building your brand.
Think about it: Is managing inventory, packaging products, shipping orders, and handling refunds really the best use of your time? It’s okay to do everything yourself when you’re just starting out, but there comes a point when it simply doesn’t make sense anymore.
Noel Churchill, the owner and CEO of RainbowOPTX, found himself spending all of his time fulfilling orders:
“It felt like all I did in the busy season was eat, sleep, and pack orders. It was my entire life. I even had 2 other people helping, each working 8 hours a day, 5-6 days a week. I had reached my limit. I had to make a transition in order to scale.”
Noel Churchill, Owner and CEO, RainbowOPTX
He knew something had to change.
Outsourcing fulfillment to a third-party logistics (3PL) provider like ShipBob allowed Noel’s team to save 120 hours each week. Rainbow OPTX has grown by 115% and increased their order volume 2.5x since partnering with ShipBob.
The order management cycle
The order management cycle is an end-to-end process that begins when a customer purchases a product and continues through delivery and sometimes returns.
The process requires several moving parts, often controlled by separate entities, to come together to provide a cohesive customer experience.
Here’s a quick look at each stage of the order management cycle.
1. Order placed
Orders are placed by customers from different places, at different times, across every available channel.
To streamline this process on the backend, you need a multichannel order management or omnichannel fulfillment tool that can automatically push the relevant information (order details, shipping details, delivery address, etc.) from your ecommerce store to your order management system.
2. Order received
Once the order is placed, the information is passed to the fulfillment center where the processing of the order begins.
ShipBob has fulfillment centers in Chicago, Los Angeles, Dallas, and Pennsylvania, allowing merchants to split inventory across the country. When a new order is placed, ShipBob’s order management software determines where to send it based on factors like available inventory, customer delivery address, etc. This helps keep transit times and delivery costs low.
3. Order is picked
Picking generally refers to following a picking list by retrieving product(s) from the available inventory and delivering it to a packing station.
3PLs often have warehouse picking teams, or pickers, dedicated to this task.
This is where warehouse management plays an important role: The way inventory is arranged impacts the time it takes to fulfill each order.
4. Order is packaged
Once the order is delivered to the packaging area, it’s packaged in a way that minimizes the dimensional weight while still providing sufficient protection.
Some 3PLs allow clients to provide their own custom packaging to provide customers with a unique unboxing experience.
5. Order ships
Once the item is packaged, it’s shipped to the customer. Some 3PLs partner with specific preferred carriers, while others rate shop to ensure that their customers receive the best shipping prices. Carriers usually pick the orders up straight from the 3PL’s warehouse.
Each order is assigned a tracking number which is then shared (either manually or automatically, depending on the software) with the customer, allowing them to see the status of their order every step of the way.
6. Item delivered
Finally, items are delivered to the end customer. But were they the right items? And were they delivered on time?
If order management has been on point this entire time, your odds are significantly higher.
7. How’d we do?
Following up with customers post-delivery isn’t just for lip service.
Staying in constant contact with loyal customers can help you figure out why people keep coming back to your online store and how you can increase the lifetime value of each customer.
Meanwhile, spotting recurring problems can create a feedback loop that helps your business improve.
8. Measure what could have been improved
Should you always accept returns and provide refunds?
On the one hand, returns are an inevitable part of ecommerce, and it’s important to handle them well: Customers who are unhappy with the return process are 3x more likely to never buy from that store ever again.
But on the other, understanding the root issue of customer dissatisfaction and addressing it can help you prevent future returns and reduce logistics costs.
Order management should offer a holistic way of analyzing the entire ecommerce logistics process. By tracking strategic KPIs like lead times or return rates along with qualitative feedback, you can improve the process to increase customer satisfaction and cut costs at the same time.
Order management software
Order management software isn’t a one-size-fits-all product. Each solution has its own advantages and disadvantages. The best fit for your business will depend on your specific needs and goals.
Here’s how some of the most popular solutions on the market stack up.
Skubana is a commerce platform that specializes in helping complex companies who fulfill orders from multiple warehouse locations and channels.
Skubana brings everything you sell into one single place. Their product also offers in-depth analytics and tools to automate almost everything, even purchase orders. Contrary to other solutions like BrightPearl, onboarding and implementation with Skubana only takes a few weeks.
NetSuite’s SuiteCommmerce product offers a variety of features, including an order management system that can handle orders from channels as diverse as a brick-and-mortar store, online store, or even a kiosk.
SuiteCommerce aims to be a complete commerce platform that eliminates the need for integration with other platforms.
It’s ambitious and powerful, but it might be a bit much for a small ecommerce business, and the learning curve is steep.
ShipStation is a shipping software meant specifically for online sellers.
It integrates with most marketplaces, shopping carts, and carriers, making it your go-to for DIY fulfillment for small ecommerce businesses.
However, once DIY fulfillment becomes unsustainable, merchants need to upgrade to a more scalable solution, such as outsourcing order management and fulfillment to a 3PL.
TradeGecko is an order and inventory management tool for businesses that use multiple sales channels and fulfillment providers.
TradeGecko’s software combines sales channels, locations, and currencies to streamline order management from a single dashboard. This is especially useful for ecommerce businesses that sell both direct-to-consumer and wholesale, as well as those who need to connect inventory data from several different international warehousing locations.
Though TradeGecko is not a fulfillment provider, their software can be used in conjunction with fulfillment technology to ensure streamlined order management and fulfillment.
Brightpearl is a retail management system that is meant for merchants doing over $1 million in annual revenue.
They bring everything from inventory and order management to shipping, a POS solution, and even a CRM under one roof.
It’s powerful but complex. Smaller and more agile businesses would probably be better served by a simpler, more affordable solution.
Unlike the solutions above, ShipBob offers a complete order fulfillment solution.
ShipBob provides ecommerce merchants with software that allows them to track inventory, manage orders, and access valuable data and insights through one system.
“I love that you can view orders based on when they are processing, completed, on hold, and in other stages. It is super helpful for us to have that and track the order every step of the way.”
Ines Guien, Head of Logistics at Dossier
Moreover, once the order is placed, ShipBob handles everything from picking to packing to shipping and returns. This allows ecommerce merchants to scale more quickly and affordably by focusing on more strategic business activities such as product development and brand growth.
How to streamline order management with ShipBob
Ecommerce merchants who want to reduce the time spent on managing orders should consider outsourcing order fulfillment to ShipBob. ShipBob offers the intuitive software, fulfillment infrastructure, and expertise needed to scale an ecommerce business and meet customer expectations around shipping. This gives you the time and resources back to focus on growing your business.
Here’s how order management through ShipBob works.
Step 1: Connect your store
First, connect your store and import your product information to ShipBob’s dashboard.
ShipBob’s order fulfillment software integrates with every major ecommerce solution, including Shopify, BigCommerce, WooCommerce, Magento, and Squarespace, so it takes just a few minutes to sync your store and import products and SKUs to the ShipBob dashboard.
Step 2: Send us your products
Once you connect your store to ShipBob, you need to send inventory to the fulfillment centers you would like to ship from. Once ShipBob receives your inventory, it is processed and stored in designated locations in bins, on shelves, or on pallets.
Step 3: Receive an order
When you connect your ecommerce store to ShipBob, every order a customer places will be automatically forwarded to ShipBob’s order management system, which will, in turn, assign it to the most strategic fulfillment center based on inventory levels and the customer’s location.
Step 4: Let ShipBob do the rest
ShipBob will pick, pack, and ship the order, as well as provide you and your customer with an order tracking number so that they can check the order status themselves. Throughout this process, you can keep track of the progress of every order through the ShipBob dashboard.
Having the right order management strategy and system in place can help prevent backordered items and angry customers.
Order management software streamlines the order fulfillment process by centralizing all of your critical data and helping you to make better business decisions and increase order accuracy while keeping costs down.
There are many order management systems on the market, and the right one for your business will depend on your size, needs, and goals. ShipBob empowers merchants of all sizes to not only manage orders but outsource the complete order fulfillment process, allowing you to focus on growing your business.
To learn more about ShipBob’s order management system and fulfillment services, click the button below. Check out the dashboard, tell us more about your ecommerce store, and see how a partnership with ShipBob can help you grow your business.