An order management system (OMS) is a software application or platform that helps businesses manage and streamline their order fulfillment processes. It provides visibility and control over the entire order lifecycle, from order placement to delivery. It serves as a centralized hub that integrates within a company, such as e-Commerce platforms, inventory management systems, shipping carriers, and customer service. They are an integral part of the order management process flow.
Orders are the bloodline of any business. It is only natural, then, that efficient order management systems are imperative for all business settings. They play a vital role in orchestrating the entire order fulfillment process, ensuring smooth operations regardless of the sales channel – online or offline.
In this article, we will go through the functionalities of OMS, their benefits, and their types.
What Does an Order Management System Do?
Key functionalities and features of an order management system include:
- Order processing
- Inventory management
- Order tracking
- Integration with other systems
- Customer service
- Reporting and analytics
It allows the businesses to capture, process, and manage orders from multiple sales channels, such as online stores, marketplaces, and offline channels. It automates order entry, validation, and routing.
It provides real-time visibility into inventory levels across different warehouses, stores, or distribution centers. It helps prevent overselling, enables efficient stock allocation, and facilitates inventory replenishment.
Enables customers and businesses to track the status of orders throughout the fulfillment process. This includes monitoring shipment progress, generating tracking numbers, and sending notifications to customers.
Integration With Other Systems
An ideal OMS integrates with various systems, such as enterprise resource planning (ERP), customer relationship management (CRM), payment gateways, and shipping providers. This streamlines data flow, eliminates manual data entry, and ensures data consistency.
OMS often includes features to manage customer inquiries, returns, and exchanges. For instance, it provides customer service representatives with access to order details. This enables them to address customer inquiries effectively.
Reporting and Analytics
Modern OMS have provisions for generating reports and analytics to provide insights into aspects such as order metrics, inventory levels, and sales performance. This helps businesses make data-driven decisions and optimize their operations.
Why is OMS Important?
Proper order management involves a number of processes working in tandem. If an error occurs or if something is not documented correctly, it could lead to a failure in your order fulfillment – which further translates into poor customer satisfaction. In fact, an estimated 65% of customers don’t return after a negative experience with a business.
It is, therefore, essential that order management practices are fully optimized, which, in turn, makes an OMS necessary.
Risks of Not Having OMS in Place
Without a robust OMS system, order fulfillment would be disorderly. This holds particularly true for businesses handling growing sales volumes. Here’s how:
- Manual entry and validation of orders would be time-consuming, leading to delays and potential order inaccuracies.
- Without real-time visibility into stock levels, businesses may oversell products while being obscured about inventory. This leads to customer dissatisfaction and lost sales opportunities.
- Inventory replenishment would be challenging, as there would be no centralized system to track and manage inventory across multiple locations.
- The lack of an order management system hinders effective communication between departments, leading to delays in order status updates, customer inquiries, and coordination with shipping carriers.
Types of OMS
Depending on the classification criteria, there are several types of OMS. Let’s look at the prominent ones, in that regard. Note that many of these OMS overlap in some functionalities.
This type of OMS is installed and hosted locally on a company’s servers (hence, the name). It provides businesses complete control over the system but requires ongoing maintenance and IT resources to manage hardware, software updates, and security.
A cloud-based OMS is hosted and accessed over the internet, eliminating the need for businesses to maintain their own servers. It offers scalability, flexibility, and easy accessibility from anywhere. Cloud-based OMS providers handle system maintenance, backups, and security, reducing the burden on businesses. They are usually accessible via subscription. They’re also usually the go-to order management system for ecommerce.
Pricing of cloud-based OMSs depends on many factors, mainly:
- The size of your business and sales volume,
- The package level you choose (most OMS providers offer tiers such as basic, pro, enterprise, premium, gold, etc. Each tier comes with increasing benefits and is priced accordingly),
- Customized integrations,
- The kind of support your business requires.
An average basic plan starts at approximately $180 a month but, depending on the above factors, could go above $10,000 and more. In general, the more bespoke your requirements, the higher the price tag.
An integrated OMS is designed to seamlessly integrate with other business systems, such as enterprise resource planning (ERP), customer relationship management (CRM), and e-commerce platforms. It enables data synchronization, streamlines workflows, and provides a holistic view of order-related information across the organization. In fact, OSMs are also offered as a module of ERP systems.
These work independently and do not require integration with other systems. It is typically suitable for smaller businesses with simpler order management needs or for those who prefer a standalone solution rather than integrating multiple systems.
This type of OMS is specifically designed to manage orders across multiple sales channels, including online stores, physical retail outlets, marketplaces, and more. It ensures consistent order processing, inventory management, and customer experience across different channels.
Enterprise-level OMS caters to larger organizations with complex order management requirements. It offers advanced features such as multi-location inventory management, order routing optimization, advanced analytics, and configurable workflows to handle high order volumes and intricate supply chains.
Retail OMS (supply chain OMS)
Retail OMS focuses on the unique needs of the retail industry, including features like point-of-sale (POS) integration, store inventory management, click-and-collect order processing, and in-store fulfillment capabilities. The same relates to ecommerce order management system offerings.
Pros and Cons of OMS
While we have already explored the pros of OMSs by delving into their features and benefits, let’s take a comprehensive view that encompasses both the advantages and disadvantages it offers.
Pros of OMS
- Automates order processing, reducing manual effort and increasing operational efficiency.
- Real-time visibility of inventory levels helps optimize stock allocation, prevent overselling, and avoid stockouts.
- Facilitates smooth coordination between departments, ensuring accurate and timely order fulfillment.
- Integrates with other systems, enabling seamless data flow and eliminating manual data entry.
- Generates insightful reports and analytics, allowing businesses to make data-driven decisions and optimize operations.
Cons of OMS
- Implementing an OMS can be time-consuming and expensive, including initial setup costs and potential integration challenges.
- Training employees to effectively use and navigate OMS may require time and effort.
- Technical issues, system downtime, or connectivity problems can temporarily disrupt the order management process.
- Adapting the OMS to specific business needs may require customization, which can be complex and time-intensive.
- Some OMS may be unable to keep up with rapid business growth or handling high order volumes and could require upgrades or migrations to more robust systems.
- Cloud-based OMS may have inherent security risks and may be targeted by bad actors to extract sensitive customer information.
It’s important to note that these cons may not apply to all OMS types and can vary based on the specific type of OMS chosen. This brings us to the relevance of selecting the right OMS.
How to Choose an OMS
Choosing the right OMS is the key that unlocks the door to streamlined operations, efficient order processing, optimized inventory management, and enhanced customer satisfaction. The order fulfillment process might be difficult without the proper OMS.
At the end of the day, having the right OMS depends very much on the type of business. That said, here are some OMS essentials that can benefit any business. These are what you ideally tick off while looking for an OMS.
- Inventory visibility,
- Accepting backorders and preorders,
- Order tracking and management,
- Refunds and returns,
- Multi-channel fulfillment,
- Integration with internal systems,
- Automation capabilities.
Choosing an OMS: Best Practices
- Assess your specific business needs and objectives. Identify the key features and functionalities you require.
- Consider your business’s growth potential. Ensure that the OMS can handle increasing order volumes, support multiple sales channels, and accommodate future expansions or changes in operations.
- Consider the total cost of ownership, including upfront costs, licensing fees, ongoing maintenance, and potential customization expenses.
- Consider the ease of onboarding and training your team on using the system efficiently.
- Determine if the OMS can be customized to fit your unique business requirements. Look for flexibility in configuring workflows, order routing rules, and report generation.
- Research the reputation and track record of the OMS provider. Evaluate the vendor’s support options, including availability, responsiveness, and ongoing technical assistance.
- Ensure that the OMS prioritizes data security and compliance with industry regulations, especially when handling customer and order-related information.
- Request a demo or trial period to explore the OMS firsthand. This allows you to assess its usability, functionality, and suitability for your business before committing to a purchase.
Efficient order fulfillment is key in today’s competitive business environment. By leveraging the capabilities an order management system offers, your business can experience heightened efficiency in order delivery, product tracking and customer satisfaction. There are hundreds of options out there, which is why Webretailer does the hard work for you by providing detailed reviews, feature lists and all other essential information needed to make the correct choice. Find the right order management system for your business with Webretailer today.