A successful ecommerce business has a lot to do: research the market, source products, list onto marketplaces and so on – all before getting a single customer order.
When the orders do start coming in, you get the satisfying buzz of making a sale and all that effort finally seems worthwhile. You just have to send the orders out the door. Should be simple, right? Print off the details, pick the items, pack the boxes, add packing slips, stick on shipping labels, arrange for a pick-up (or drop them off)… and now it doesn’t seem so simple after all.
Many sellers quickly go from waiting for their next sale with a feeling of excitement, to waiting with a feeling of fear. Will they have enough stock? Will they apply the right labels to the right boxes? Will they even be able to ship on time?
So that’s the bad news: shipping is a messy, complex, demanding process. It can be a huge challenge, and has been the downfall of many sellers. The good news? It’s a challenge that businesses have faced before, and there are plenty of solutions out there for making it easier, faster, cheaper and more accurate.
Shipping is often the first area where sellers start the feel the strain. That’s typically in one of two areas:
- The logistical complexity of getting the right order to the right customer at the right time; or
- Carriers charging you more and more for shipping, while customers expect to pay less and less.
Instead of a multichannel management tool (or alongside it), a robust shipping system can be one of the central pieces of technology in an ecommerce business.
What was the FIRST service I ever remember dishing out money for when I was getting started? An order management solution.
If you think about it, most ecommerce businesses spend more time fulfilling orders than in any other area. If you can decrease that time spent and systematize that one area alone, your productivity scales massively.
John Lawson, Author, Speaker, Educator, Founder of The Ecommerce Group
So, what is an order management system (or OMS)?
Well, the core function of an OMS is to manage the processing of sales orders efficiently. To do that, at their simplest, these systems need to:
- Hold inventory data (or work closely with a system that does) so they can update the quantity remaining when each order is received.
- Download order data from each sales channel you use, such as marketplaces and ecommerce platforms. This can be done directly, or via an integration with a multichannel system.
- Manage the process of fulfilling orders, by providing warehouse workers with data on orders that need to be shipped (paper print-outs or mobile apps are typically used for this). Some OMS’s may also connect with a separate warehouse management system (or WMS, see below).
- Generate shipping documentation such as invoices, packing slips, customs documentation for international orders, and shipping labels. Again, an OMS may connect to another system to generate shipping labels and associated documents.
Order management systems can also include features for purchasing, drop shipping, accounting and more.
All those variations and integrations can make OMS’s a little difficult to pin down! But generally speaking, a business looking for an OMS should aim at the outset to find a single system that has all the features they need. If they have existing systems that they are happy with, there could be difficult decisions about whether to look for a system that integrates with them, or consolidate on a single system.
It’s a worthwhile goal to have “one system to rule them all”, but in reality most businesses find they need to bolt-on at least one or two additional tools to get all the functionality they need. So don’t get completely hung up on finding an all-in-one system, as it could mean dismissing a different solution that is more powerful and/or cost effective – albeit with a little additional complexity.
Even smaller merchants with 50-100 orders a day can benefit from a basic order management system (OMS). An OMS/ERP system should be your central location for your inventory database, order data, purchasing and much more. Your OMS should also provide a streamlined interface to pack and ship your orders and manage drop shipping.
When shopping for your first OMS solution, make a list of key features you want in a matrix. Then use the matrix to track which features each OMS has, as you meet with each company. You’ll end up adding more features as you interview more companies, which is great. Be aware, none of the current OMS solutions probably have 100% of the features you want, so start with what you need and work up from there.
Travis Romine, Ecommerce Growth Consultant, Sharp Commerce
Browse the directory for Order Management tools, including reviews, news, related discussions, compatibility information and pricing.
At first glance, shipping tools can look similar to OMS’s, and it’s true that some shipping tools, such as ShipStation, have marketplace integrations and inventory management features that bring them close to OMS territory.
At closer inspection, however, they tend to be quite different beasts. An OMS is a central system with comprehensive functionality (and/or external integrations) to act as a central hub within the business. Shipping tools are generally “point solutions” that:
- Are closely integrated with multiple shipping carriers
- Can automatically compare shipping services
- Print shipping labels in bulk, quickly and accurately
Automatic “rate shopping” is particularly important, to find the best combination of speed, price and other factors like tracking and confirmation of delivery, without painstaking and error-prone manual work.
Online sellers often use a shipping tool alongside a multichannel management or order management system, either to:
- Bolt-on shipping features to systems that don’t handle shipping at all.
- Enhance the shipping functionality of their main system with more advanced features.
- Provide access to parcel carriers that their main system does not support.
Note that in the US, there are only a few companies allowed to print shipping labels for USPS. Since 1999, Pitney Bowes, Endicia and Stamps.com have been the only companies able to offer online USPS postage printing. Other systems with USPS support actually require a separate subscription to one of those three services, although that is often included for free.
The picture has just started to change, however, with shipping tool Shippo developing their own direct integration using the new USPS ePostage program. Perhaps others will be able to follow suit.
Browse the directory for Shipping Tools, including reviews, news, related discussions, compatibility information and pricing.
While OMS’s and shipping tools provide technology solutions to the challenge of order management, fulfillment outsourcing services sidestep the problem completely.
Sellers who outsource their fulfillment use an external company to:
- Receive and process inbound shipments of stock from their suppliers.
- Store products in their warehouse.
- Receive order data automatically from sales channels or management systems.
- Pick, pack and ship orders.
There is a lot to be said for offloading all the logistical demands of running your own fulfillment operation. A good fulfillment company (or 3PL) will take it all off your hands, and be able to process orders more quickly and accurately than you could in-house.
They will, of course, have their own overheads and profit margin, so the per-order cost will usually be higher than when processing orders yourself. However, the price of using a 3PL can compare favorably when all your indirect costs, such as staffing, rent and management overhead, are taken into account.
Using a 3PL has helped me grow Crucial Vacuum in many ways. We lowered our return rates, saved time, and saved money as my business grew. We were able to reduce long-term expenses like benefits, insurance, warehouse maintenance, and transportation. I got access to better shipping rates through my 3PL since they are able to aggregate by volume, and they have warehouses in strategic locations all over America to lower shipping time.
However, as with all things, there are some disadvantages; you become dependent on your 3PL, you don’t have hands-on access to your inventory, and the initial costs can be quite pricey.
Chad Rubin, CEO, Skubana, Managing Director, Crucial Vacuum.com
Read more about 3PLs and other fulfillment strategies in our guide to ecommerce fulfillment.
Browse the directory for Fulfillment Outsourcing services, including reviews, news, related discussions, compatibility information and pricing.
Shipping consolidators provide an innovative service that can provide significant cost savings, particularly for businesses with a high volume of international shipments.
Companies that provide these services are used just like “ordinary” parcel carriers from the outside, but once your packages go into their system, they operate quite differently. Instead of treating each parcel as an independent shipment, consolidators pre-sort packages from many different businesses and transport them in bulk to the local delivery offices.
Then the parcels are transferred to the national postal service (e.g. USPS in the USA or Royal Mail in the UK) for onward delivery. That way, the more expensive long-distance shipping cost is shared between many parcels, and cheap local delivery rates apply for the “last-mile” to the customer.
When you ship, your choices are as varied as your products. Most shippers stick with the big four or a local carrier. Savvy shippers will find mail consolidators – and major cost savings. Mail consolidators combine the services of FedEx and the USPS, for example, which could save you up to 50%. Basically, FedEx picks up the package and drops it off at the destination’s local Post Office, who in turn delivers it. International consolidators offer an easy way into international shipping – they pick up the package, ship it overseas, and let a local carrier deliver. Efficiency at its finest.
Robert Gilbreath, VP of Marketing, ShipStation.com
Browse the directory for Shipping Consolidators, including reviews, news, related discussions, compatibility information and pricing.
Drop shipping is a service provided by some suppliers (wholesalers and manufacturers) where they will ship their products directly to the buyer after a sale is made. They do not require payment until the product is sold, so unlike most retail there is positive cash-flow – you pay the supplier after the buyer pays you.
Marketplaces and ecommerce platforms, such as Amazon, eBay and Shopify, have no built-in connection to drop ship suppliers, so the whole process has to be managed separately. There are a number of things that need handling:
- Monitoring each supplier’s inventory levels and keeping listings in sync.
- Placing orders with suppliers once you receive an order from your customer.
- Updating shipment tracking information on the sales channel once the supplier ships the order.
Sellers who drop ship large volumes can soon be overwhelmed by all those manual order management processes.
If you’re practicing a drop ship business model, keeping your order fulfillment organized and automated is one of the most important aspects of communicating with your supplier network. If you have ten suppliers whose products you are listing, you need a piece of software that links your products to the correct supplier, and sends them an automated order email or request so they can ship it to your customer as quickly as possible. If your communication with your suppliers isn’t stellar, your customer experience will suffer putting you in a bad position as an online seller.
Connor Gillivan, Chief Marketing Officer, FreeeUp.com and author of ConnorGillivan.com.
Some order management and multichannel management systems include drop shipping features, but there is a different class of solutions that specialize in this business model.
Note that “true” drop shipping involves buying from wholesale sources such as manufacturers and distributors. Tools for buying from retail sources are covered under online arbitrage.
Browse the directory for Dropship Automation tools, including reviews, news, related discussions, compatibility information and pricing.
Order management systems handle all the processes involved in fulfilling customer orders, so where do warehouse management systems (WMS’s) fit in? What else could be involved that hasn’t already been covered? Here are some typical features of a WMS:
- Handling the process of receiving new inventory, and directing where it should be stored within the warehouse.
- Managing different types of warehouse locations such as shelving, totes and hanging space.
- Tracking product batch numbers, expiration dates and specific storage or handling requirements.
- Advanced order-picking methodologies such as wave picking and multi-zone picking.
Warehouse management systems can also include integrations with suppliers to handle reordering, and with carriers to handle shipping, so can be quite similar to OMS’s. However, the core features are more advanced handling of inventory as physical items – recording, tracking, planning and directing all movements of stock within the warehouse.
Using a more sophisticated warehousing and dispatch system can massively improve efficiency and cut down errors. Our WMS allows us to know exactly where everything is, perform accurate stock checks, and massively improve the efficiency of pick and dispatch. Previously we used paper pick-lists and small picking carts. Now we use handhelds to scan items as we pick, so we know immediately that we have the right items. When we pack items we now scan each item into the box, which all but eliminates sending out the wrong items.
Trevor Ginn, Managing Director, Hello Baby
Warehouse management is a real discipline – practically a science of its own. To get some more insight into what’s involved see Best Practices for Running an Ecommerce Fulfillment Warehouse.
Browse the directory for Warehouse Management tools, including reviews, news, related discussions, compatibility information and pricing.
More than anything else in ecommerce, shipping is all about logistics, operations and performance. There’s little room for imagination or creativity – it’s just a job that needs to be done as quickly, accurately and cheaply as possible.
Software automation, and third-party service providers, are a big part of that. The right software tools, used properly, are central to efficient and accurate shipping. Alternatively, you can outsource your entire fulfillment operation to a third-party logistics company who already have all the right software and processes in place.
Then shipping consolidators, and shipping tools that automatically “rate shop” to find you the best carrier and service for any given order, can help you make substantial savings on your shipping costs.
Given the attention that it deserves, the mundane business of shipping orders can add a few extra percent to your profit margins, while helping maintain the high performance metrics that the marketplaces now demand.