What is an Order Management System?
Answering common questions about Order Management
Software and Systems
A Guide to Order Management Software
- What is an Order Management System (OMS)?
- What Is an Order Tracking System?
- Why Are Order Management Systems Important?
- How Does an Order Management System Work?
- Why Do Online Sellers Need an OMS?
- What is the Difference Between Distributed OMS and OMS?
- What Are the Benefits of an Order Management System?
- What Features to Look for in OMS?
What is an Order Management System (OMS)?
An order management system (OMS) is a comprehensive software platform that helps businesses oversee and optimize the entire process of handling customer orders, eliminating manual processes. It integrates various aspects of the order lifecycle, such as order capture, inventory management, payment processing, and shipping logistics. By centralizing these processes, an OMS facilitates efficient order fulfillment, reduces manual errors, and enhances the overall customer experience. It helps businesses manage complex order types like split or back-ordered items and adapt to changing customer demands and market conditions.
Effective order management systems vary from standalone systems to modules within larger Enterprise Resource Planning (ERP) suites. They cater to businesses of all sizes, from small online retailers to multinational corporations managing complex supply chains. Modern OMSs are flexible and scalable, customizable to meet specific business needs and integrate seamlessly with existing infrastructure and workflows.
What Is an Order Tracking System?
An OMS’s order tracking system provides real-time visibility into order statuses throughout the fulfillment process. It allows businesses to monitor orders from receipt to delivery, tracking updates on processing, fulfillment, shipment, and expected delivery. This transparency improves operational efficiency and customer satisfaction by providing accurate, up-to-date information.
Advanced order tracking systems often include features such as shipment notifications, delivery alerts, and customer-facing order status portals. These functions streamline operations and improve the customer experience by keeping buyers informed at every order stage.
Why Are Order Management Systems Important?
Order management systems are essential for businesses as they centralize and streamline the order process, facilitating accurate and efficient order handling. They improve customer satisfaction by providing reliable order updates, ensuring on-time deliveries and enabling smooth returns and exchanges. OMS enable organizations to offer personalized services, handle complex order types such as subscriptions or customizable products, and maintain high operational efficiency, even during peak demand.
Customers expect fast, accurate, and flexible order fulfillment, OMS play a critical role in differentiating businesses. By automating order intake, payment processing, and inventory management, OMSs reduce processing times. It also minimizes errors and ensures timely deliveries. They are essential for scaling operations and managing growth effectively, supporting businesses in meeting customer expectations and adapting to market demands.
How Does an Order Management System (OMS) Work?
An order management system (OMS) oversees every stage of the order lifecycle, from initial order processing through to inventory management and fulfillment. It seamlessly integrates with e-commerce platforms and enterprise resource planning (ERP) systems, ensuring smooth data flow across all touchpoints. The software handles order intake, payment processing, reduces shipping costs and coordination, and customer communication, offering a comprehensive, real-time overview of order status and inventory levels for both the business and the customer.
OMSs utilize advanced algorithms to optimize order routing, warehouse management, and inventory allocation. These algorithms consider factors such as proximity to the customer, inventory availability, shipping costs, and delivery timelines to determine the most efficient fulfillment strategy for each order. By automating these complex decisions in the supply chain, OMSs enable businesses to reduce overhead costs, improve resource utilization, and maintain high service levels.
Why Do Online Sellers Need an OMS?
Online sellers benefit significantly from an OMS due to its ability to manage complex order processing across multiple sales channels and locations. It provides real-time inventory synchronization, automates shipping processes, and supports omnichannel operations, ensuring consistency and reliability in order fulfillment. Effective order management systems also empowers sellers with actionable insights into sales data, facilitating informed business decisions and enhancing customer satisfaction.
For online sellers, the ability to integrate seamlessly with various e-commerce platforms, marketplaces, and payment gateways is essential. OMSs streamline the flow of data between these systems, reducing the risk of errors and delays in order processing. They also enable sellers to offer diverse shipping options, track shipments across carriers, and provide customers with accurate delivery estimates—a crucial factor in building trust and loyalty in online retail.
What is the Difference Between Distributed OMS and OMS?
“Traditional” OMS primarily on automating basic tasks related to order processing such as handling transactions, communicating with customers, and providing services. Distributed order management builds on this foundation by incorporating advanced order routing and rule-based logic to determine which fulfillment location is best equipped to fulfill each customer’s order.
OMS works well for retailers with simple operations (i.e. a single sales channel and 1-2 fulfillment locations). On the other hand, distributed order management systems cater to retailers with extensive fulfillment networks and multiple sales channels, including omnichannel, multi-brand, international operations, and more complex fulfillment. This capability enables retailers to offer faster delivery times, reduce shipping costs, and enhance the overall customer experience by ensuring orders are fulfilled from the most suitable location.
What Are the Benefits of an Order Management System?
The benefits of using an order management system include:
- Improved Order Accuracy: By automating order processing, an OMS reduces human error, ensuring orders are correct and minimizing costly returns.
- Faster Fulfillment: OMS streamlines the pick, pack, and ship process by identifying the most efficient fulfillment center, speeding up delivery times and boosting customer satisfaction.
- Lower Shipping Costs: Integration with major shipping carriers allows businesses to access discounted rates and print shipping labels directly from the OMS, saving time and money.
- Centralized Channel Management: An OMS centralizes orders from various channels, offering a unified view of orders and inventory, minimizing errors and missed orders, and improving response times.
- Meeting Customer Expectations: OMS provides real-time order tracking and updates, enhancing customer satisfaction and reducing negative feedback.
- Optimized Inventory Management: OMS helps prevent stockouts and overstocking by providing insights into sales trends and consumer buying patterns, improving cash flow and storage management.
What Features to Look for in OMS?
When selecting an order management system, consider features that support key areas within the order management process.
- Sales Channels: Look for an OMS that integrates and consolidates data from all sales channels, such as online stores, physical locations, and call centers. Ideally, it should also handle orders from different regions and currencies.
- Sales Support: The system should update product information and availability in realtime for both customers and employees, including the customer service team. It should also facilitate omnichannel returns and exchanges.
- Customer Database: Choose an OMS that maintains detailed customer records, including contact information and order history. This enables tailored service, upselling opportunities, and recognition of high-value customers.
- Inventory Management: Ensure the OMS provides a consolidated view of inventory, tracks stock levels, and includes algorithms to route orders to the best warehouses and identify optimal shipping methods. It should support all stages of fulfillment, from picking and packing to shipping and tracking.
- Accounting Integration: Look for seamless integration with your accounting system, allowing OMS data to flow directly into general ledger and subsidiary journals such as accounts receivable and accounts payable, reducing manual data entry and potential errors.
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