Order Management System (OMS): What is it and how does it work?
Order Management System (OMS): What is it and how does it work?
An Order Management System (OMS) allows businesses to track sales, process orders and returns, manage inventory, and ensure the delivery process, guaranteeing the perfect digital shopping experience. This system is essential for enhancing efficiency and accuracy in a company's order management process, which in turn can lead to a better customer experience and more profitable business operations. These systems are often highly customizable and adapt to the specific needs of each business. An OMS is a business solution that addresses a series of issues related to order management and logistics in companies. One of the fundamental problems it solves is the lack of visibility and tracking in the order fulfillment process. Many companies struggle with tracking the status of orders and effectively communicating this information to their customers. An OMS provides real-time tracking of orders, allowing customers to know exactly where their purchase is, from the moment of purchase to the final delivery. It also aims to reduce costs associated with poor logistics management. This includes problems like lost orders, lack of control in shipments, and late deliveries. The coordination and automation of order fulfillment processes through an OMS minimize the likelihood of human errors in order processing, ensures efficient inventory management, and improves accuracy in product preparation and shipping. This, in turn, reduces excess inventory and costs associated with unnecessary storage, while ensuring that products are available for shipment at the right time. The primary goal of an OMS is to optimize order management and deliver timely and correctly to customers, controlling costs, but also the electronic handling of flows, especially when there are returns. OMS allows you to manage all types of orders and channels from a single place: it unifies inventory management across all channels; facilitates real-time demand visibility to handle supplier, store, and customer orders; prioritizes tasks and optimizes inventory performance, as well as facilitates access to sales applications. This ensures and maintains the customer promise that their order will be delivered on time. Currently, companies invest in eCommerce platforms, creating automated process flows that release orders, payment methods, cancellations, and returns. Therefore, the integration of an OMS is fundamental since it allows segmenting customers, products, and relevant information.
What is an Order Management System?
An Order Management System (OMS), translated as "Sistema de Gestión de Pedidos" in Spanish, is a software tool utilized to manage the entire order management process effectively, from the initial order capture to the final delivery to the customer. These systems are particularly prevalent in eCommerce businesses, retailers, wholesalers, and any company that deals with a high volume of orders and requires an organized record of them. The primary functions of an Order Management System include:
Order Capture: record and process purchase orders or customer orders.
Inventory: manage the available product inventory, tracking the quantity in stock, the locations, and the availability.
Customer Management: store information about customers, such as contact details, order history, and preferences.
Payment Management: process the payments from customers and coordinate billing.
Order Tracking: track the status of orders in real-time, from processing to delivery, allowing both customers and internal staff to be aware of the status of their orders.
Returns and Changes Management: facilitate the management of product returns and changes in orders.
Integration with Other Systems: connect with inventory management systems, point of sale (POS) systems, customer relationship management (CRM) systems, and other business systems.
Supply Chain Optimization: assist in supply chain management, which may include assigning orders to optimal storage locations and coordinating with suppliers and shipping partners.
Reports and Analysis: produce reports and analysis on sales performance, operational efficiency, and other key performance indicators related to order management.
Why is it important to have an OMS?
An Order Management System plays a crucial role in operational efficiency and customer satisfaction by effectively managing a company's orders and inventory, which in turn can have a positive impact on profitability and business competitiveness. These are the main features it should have:
Allows better inventory management:
An OMS assists in tracking and managing inventory more efficiently by providing real-time information on stock levels.
It can be set up to issue alerts when inventory levels are low, facilitating the timely replenishment of products.
It optimizes the allocation of inventory to pending orders, preventing overselling and stock outages.
Reduces costs and provides better purchasing decisions:
By offering accurate information on demand and sales performance, an OMS helps in making more informed purchasing decisions.
It minimizes the need to maintain excess inventory, reducing storage costs.
It facilitates the identification of efficient suppliers and negotiating better terms with them.
Provides more control and security over orders:
An OMS establishes workflows and order processing rules, ensuring orders are handled consistently and following established procedures.
It helps prevent order processing mistakes, such as incorrect shipments or duplicate orders, improving accuracy and customer satisfaction.
It facilitates the tracking and auditing of order records to ensure transparency and accountability.
Creates a smoother customer experience:
An OMS streamlines the purchasing and delivery process, leading to a more satisfying customer experience.
It allows customers to track their orders in real-time and provides accurate information about product availability.
It facilitates the management of returns and exchanges, which can enhance the customer's perception of service quality.
How does an Order Management System work?
An Order Management System functions as a centralized platform or software that coordinates and automates various stages of a company's order management process. Here's how an OMS typically works:
Collects and processes customer orders: The OMS gathers orders from customers across multiple channels, such as online stores, physical stores, mobile apps, or call centers. The order data is recorded in the system, which includes information about the requested products, the quantity, customer details, and delivery address.
Establishes fulfillment policies: The OMS applies predefined fulfillment rules and policies to ensure orders are processed correctly. These policies might include inventory constraints, shipping methods, applicable discounts, and other business-specific conditions.
Processes payments and releases the order: The system integrates with payment processing methods to verify the authenticity of transactions and ensure funds are available. Once payment is confirmed, the OMS releases the order for processing and shipment.
Sends tracking updates to the customer: The OMS provides real-time updates on the order status to both the customer and internal staff. Customers can receive notifications via email or text messages with information about the shipping process, tracking numbers, and estimated delivery dates.
In addition to these main stages, an OMS can also have additional features, such as returns management, report and analysis generation, integration with other business systems, and customization capability to meet the company's specific needs. An OMS is designed to simplify and automate the order management process, enhancing efficiency and customer experience.
10 Benefits of an Order Management System
Implementing an Order Management System in a company brings several significant benefits that can enhance operational efficiency, customer satisfaction, and profitability. Some of the benefits are:
Faster and More Accurate Orders: An OMS automates the order management process, leading to faster order processing and reduced data entry errors, resulting in more accurate orders.
Coordination of Online Platforms and Vendors: An OMS can integrate with multiple online sales channels and vendors, simplifying order management from various sources and improving online sales coordination.
Reduction of Inventory Costs: By providing real-time inventory information, an OMS reduces the need to maintain excess inventory, saving storage costs and decreasing obsolescence risk.
Elimination of Paperwork: Digitizing and storing order and transaction-related documents in the cloud eliminates the need for physical paperwork, facilitating information access and reducing the likelihood of document loss.
Customized Reports and Documents: An OMS can generate personalized reports and documents compatible with various e-commerce channels, facilitating information management and communication with customers and suppliers.
Coordination of Warehouse Operations: An OMS can optimize warehouse operations by offering features like mobile barcode scanning, warehouse capacity maps, and inventory tracking, improving inventory and warehouse management efficiency.
Prevents Stockouts: By internally updating e-commerce channels and integrating marketplaces and shopping carts, an OMS helps avoid stockouts and ensures products are available when customers need them.
Ensures Order Delivery: Integration with third-party logistics services ensures orders are reliably and timely delivered, enhancing the customer experience.
Simplifies Complex Orders: An OMS can efficiently handle complex and customizable orders, eliminating human errors in manual data input and output.
Direct Billing and Accounting: An OMS introduces clear and transparent billing systems and can integrate with accounting systems to simplify financial management.
These benefits make an OMS a valuable tool to enhance operational efficiency and customer satisfaction while reducing costs and errors associated with order and inventory management.
6 Order Management Softwares
In the market, there are many order management software options. The key is to choose the one that best suits your company's needs. The choice depends on several factors, such as the size of your business, your specific needs, and your budget.
1. Zoho Inventory
Offers exciting features such as payment processing, shipment tracking, inventory management, invoice management, batch and serial number tracking, multi-warehouse management, and automation.
It also aids in creating orders, purchase orders, and drip shipments.
Comes with basic functions and is cloud-based, meaning it can effectively deploy its products in the cloud.
Its most popular tool facilitates the automation of manual order processing along with inventory check synchronization while regulating shipment scheduling and complex orders.
It can track online orders, streamlining their delivery.
Can unify your backend data from orders, points of sale, and inventories to sell live anywhere from one place; multiple sales channels and shipping carriers can be integrated.
Being cloud-based, operations such as warehouse designation, shipping label printing, attending to multichannel orders, or redirecting orders can be carried out.
Its main functions, especially for retailers, include increasing order volumes, routing, and orchestrating in-store fulfillment orders, and improving customer service.
This cloud-based solution includes a mobile store coordination application, which adapts customer demands to store inventory and picks up online purchases and orders from each store.
This omnichannel tool specializes in virtually unifying stocks, increasing product availability through mobile applications, tabs, physical and virtual stores, thus generating more sales.
It integrates the stocks of all inventories, creating an infinite shelf for customers, increasing the efficiency of logistics and commercial operations.
Customers can easily and clearly view the inventory before buying.
It's a simple OMS that offers features for basic inventory and order management solutions.
It sends information and tracking to customers and sales channels and allows for label printing.
Considerations When Implementing an OMS
Each order management system is different. Before choosing one, it's essential to identify the company's goals, objectives, and needs. Here are some key considerations to keep in mind when implementing an OMS:
Business Needs Assessment: Before selecting an OMS, pinpoint your specific business needs. What's your order volume? Which sales channels do you use? Do you need advanced inventory management capabilities? Understand your business requirements and objectives to select the most suitable OMS solution.
Platform Selection: Research and compare among the various options available in the market. Consider factors like scalability, integration with your existing systems, ease of use, and cost. Conduct demos and tests to ensure the platform fits your needs.
Integration with Existing Systems: Ensure that the OMS effectively integrates with other business systems you use, such as inventory management systems, Point of Sale (POS) systems, Customer Relationship Management (CRM) systems, and e-commerce platforms. Efficient integration is essential to avoid compatibility issues.
Staff Training: Prepare your staff for the new system. Provide adequate training so they can make the most of the system's capabilities and minimize errors.
Data Management: Ensure that customer, product, and order data are correctly imported and migrated to the new system. Data quality is crucial for the OMS's success.
Test Process: Thoroughly test the system before fully implementing it in your business. Identify and address potential issues to prevent disruptions in business operations.
Customization: Consider whether the OMS needs to be tailored to meet your specific business needs. Customization can be costly and prolong the implementation, so make sure it's genuinely necessary.
Data Security: Data security is paramount. Ensure the OMS meets security standards and is configured properly to protect confidential customer data.
Scalability: Think about your business's future growth. Choose an OMS that's scalable and can adapt to changing needs as your company grows.
Technical Support and Updates: Look into the technical support options offered by the OMS provider. Ensure there's a clear plan for receiving updates and maintenance over time.
Currently, most businesses use cloud-based OMSs, as they tend to be more accessible and easier to manage. With cloud-based systems, the platform operates remotely, allowing the team to access it from anywhere as long as they have an internet connection. This is billed as a Software as a Service subscription, ensuring you only pay for what you need.
Investing in a modern OMS ensures you have the necessary tools to grow and maintain a competitive edge in the market. Implementing an OMS can be a complex project, but with proper planning and careful consideration of these factors, you can maximize the benefits for your business.