What is an order management system (OMS)?

In today’s fast-paced business world, managing your orders efficiently is key to success.

But keeping track of your customer orders, inventory, and deliveries can quickly become overwhelming without the right tools. This is where an order management system (OMS) comes in.

An OMS can help your businesses streamline your order management processes, increase efficiency, and improve customer satisfaction.

In this article, we’ll break down what an OMS is, why it’s important, and how to choose the right one for your business.

Here’s what we’ll cover:

What is order management?

Order management is the entire process your company goes through when receiving, processing, and fulfilling customer orders.

It includes everything from tracking orders, managing inventory, and processing payments to shipping products out to customers and dealing with returns, refunds, and exchanges.

Order management is especially crucial for businesses that deal with physical products.

Without an efficient order management process, there is a higher risk of mistakes, such as stockouts, delayed deliveries, or incorrect orders.

As your company grows, you’ll need a system that can handle these tasks seamlessly to stay competitive and meet your customer expectations.

Order management systems explained

An order management system is software that helps your business manage the lifecycle of customer orders.

It automates many aspects of your supply chain order management, making sure that orders are fulfilled accurately and efficiently.

With an effective OMS, your business can track and streamline every step of the order process, from when the order is made to delivery with the customer and returns.

The system provides real-time insights into inventory levels, order status, payment processing, and shipping.

It can also integrate with other business tools, including your customer relationship management (CRM) system and enterprise resource planning (ERP) software, to create a seamless operation.

In short, an OMS is your business’s central hub for order processing, helping you stay organized, reduce errors, and deliver a better customer experience.

How do order management systems work?

Order management systems work by streamlining, automating, and coordinating many of the tasks involved in the order fulfilment process.

Here’s how it facilitates supply chain order management:

• Order placement: customers might order through multiple channels, such as websites, retail stores, or mobile apps. An OMS will capture these orders in real-time and consolidate the information into unified, easy-to-use dashboard and reports.
• Inventory check: an OMS will monitor current inventory levels to establish if the ordered products are available. If stock is low or unavailable, the system can reorder more stock to replenish or suggest alternative products for your customers.
• Payment processing: once the order is confirmed, the OMS will process payments through integrated payment gateways. This can include credit card transactions, PayPal, or even customer financing options.
• Order fulfilment: an OMS manages order fulfilment, whether the products are shipped from a warehouse, dropshipped, or picked up from a store. The system tracks inventory levels to ensure there’s enough stock to meet demand.
• Shipping and delivery: when an order is ready to ship, OMS integration with shipping carriers like UPS or FedEx means the system will calculate the best shipping options and track delivery progress.
• Customer updates: the OMS can send automatic order status updates to customers, providing real-time information on their order’s progress, estimated delivery date, and tracking number.
• Returns: the OMS can also automate and track the entire returns process, starting from the initial return request. The system can flag eligible returns based on pre-set policies, such as return windows, product condition, or original payment method.

Why is an order management system important?

An order management system (OMS) is an invaluable tool if your business needs to manage order-related interactions with external partners—such as suppliers, warehouses, and shipping carriers—in addition to its internal processes.

Without an OMS, managing the flow of orders, inventory, and shipments across multiple partners can become difficult and increase the risk of mistakes and delivery issues.

By centralizing all your order data, an OMS gives you a real-time view of the entire process, from order placement and fulfilment to returns and refunds.

It can integrate with shipping carriers and logistics partners, automatically generating shipping labels, calculating delivery costs, and tracking packages.

This will help your business fulfil orders quickly and accurately while keeping your customers informed of their delivery status at every step.

With an OMS, you can automatically notify your customers when orders are processed, shipped, and out for delivery.

These automated alerts help reduce the burden on your customer services team and improve satisfaction levels, as your customers feel informed and in control of their purchase.

If delays or issues do arise, the system also offers you a way to easily notify affected customers and work to resolve the situation swiftly.

No matter how good your products are, there will of course be times when a customer needs to return an item and ask for a refund or an exchange.

This process can be complicated and time-consuming without the right tools, especially when third parties are involved.

An OMS can support you by automating return approvals, tracking the status of returns, and processing refunds or exchanges quickly.

This enhances your customers’ experiences and keeps your inventory and financial records up-to-date.

Ultimately, a good order management system helps your business operate more efficiently, build stronger relationships with partners, and offer your customers a higher level of service.

Order management system features

If you’re considering an order management system, make sure you understand the key features that can optimize your specific business operations.

Here are some of the core functionalities and capabilities to look into:

Sales automation

Sales automation features in an OMS help streamline the order intake process.

It automatically processes incoming orders and populates customer information.

It can even automate upsells or cross-sells based on customer behavior.

Inventory control

Many order management systems provide real-time visibility into inventory levels, tracking the quantity and location of your products.

They can automatically update your stock levels when orders are placed or returned, making sure your inventory management is accurate and efficient.

Payment collection

OMS integration with various payment gateways can help you securely process transactions.

With the right solution in place, the software will ensure that payment details are secure and correctly logged, immediately updating your financial system accordingly.

Document tracking

Order management systems help track important documents, such as order confirmations, invoices, shipping receipts, and packing slips.

This helps you make sure you have proper documentation for each transaction and facilitates smooth auditing and reporting.

Reporting tools

Order management systems often have powerful reporting tools that provide actionable insights into business performance.

You can track sales, inventory levels, order statuses, customer behavior, and returns to make better strategic decisions going forward.

Shipping and receiving

An OMS integrates with shipping carriers and logistics providers to calculate shipping costs, track shipments, and manage deliveries.

It can even optimize routes and delivery methods to ensure faster and cheaper deliveries.

CRM functionality

Many modern order management systems come with built-in customer relationship management (CRM) tools.

This allows your business to keep track of customer information, preferences, and purchase history, which can help elevate your customer service and sales strategies.

Cloud-based agility

A cloud-based OMS can offer seamless flexibility and scalability, making them ideal for dynamic and growing businesses.

Cloud solutions also give you 24-7 access to your OMS from anywhere, while providing automatic updates and reducing the need for expensive on-premise hardware.

Key benefits of order management systems

As we’ve already seen, there are many handy features and advantages to using a dynamic order management system.

In this section, we’ve listed some of the most important benefits your business can gain from an effective OMS.

When looking at software options, consider the following benefits:

Better inventory management

An OMS gives your business a real-time view of inventory across all locations, helping you reduce stockouts and overstocking while improving stock accuracy.

Improved efficiency and time-saving

An OMS will automate many manual order management tasks, such as data entry, order tracking, payment processing, and inventory updates.

This will save your teams valuable time, allowing them to focus on higher-value tasks and boosting productivity.

Improved order accuracy

Automation and better data integration minimize the risk of human error.

 This will help improve your order accuracy, resulting in fewer customer complaints.

Supply chain visibility

An OMS provides real-time tracking of the entire supply chain.

This will give your business more control over order fulfillment and empower you to address any issues proactively.

Detailed analytics and reporting

With the right OMS, you’ll have a wealth of valuable insights into sales trends, customer behavior, and inventory performance at your fingertips.

You’ll easily be able to access customized dashboards and pull tailored reports, helping you make data-driven decisions.

Better customer experience

An OMS can provide faster and more accurate order processing.

Your customers can track their orders in real-time and receive updates about their shipments, giving them a better experience of your company and helping boost customer satisfaction.

Cost savings

By streamlining the order process, businesses can lower the cost of manual admin and errors, improve warehouse operations, and reduce shipping delays.

This can have a direct impact on your profitability.

Omni-channel support

For businesses that sell across multiple platforms (online, in-store, etc.), an OMS integrates all order data into one centralized system.

This gives you instant visibility into all your customer orders, inventory, and sales, regardless of the sales channel.

Scalability

As your business grows, an OMS can scale with you.

It helps you handle a larger volume of orders, maintain better control over inventory, and improve order accuracy—all without overwhelming your teams.

Different types of order management systems

There are various types of order management systems tailored to meet the needs of different industries.

The base functionality and many of the key features will be the same or similar, but you’ll find software tools that have been built for specific industries, incorporating features that address their unique needs.

Securities, investment, and trading

A trade order management system is designed to manage and track orders for financial securities and investment products—such as stocks, bonds, options, futures, and derivatives.

It helps firms make sure their order management is efficient and compliant with regulatory standards, while aligning with their strategic objectives.

Retail

In the retail industry, OMS platforms help manage both online and offline orders.

Retail order management systems ensure smooth integration with point-of-sale (POS) systems, maintain inventory levels, and optimize order fulfillment.

E-commerce

E-commerce businesses rely on OMS to handle customer orders from various online platforms.

OMS software for e-commerce often integrates with shopping carts, payment gateways, and shipping providers to streamline the entire order process.

Wholesale and distribution

Wholesale order management systems help wholesalers and distributors manage large quantities of orders and shipments.

These systems are designed to handle B2B transactions, ensure timely fulfillment, and track inventory across multiple locations.

Manufacturing

Manufacturers use OMS to manage orders for raw materials and finished products.

The system integrates with production schedules to make sure that the right materials are available for manufacturing and that products are shipped on time.

Hospitality

Order management in the hospitality industry focuses on managing guest orders, reservations, and service requests.

OMS integration with property management systems and POS terminals allows you to offer a seamless guest experience.

Food and beverage

An OMS benefits companies in the food and beverage industry by managing orders for restaurants, catering services, and food distributors.

It can handle everything from ingredient tracking to customer orders in real-time.

Healthcare

In healthcare, an OMS manages orders for medical supplies, pharmaceuticals, and equipment.

It also helps keep organizations compliant with regulations, maintains inventories of critical products, and enables quick fulfillment to meet patient needs.

How to choose an OMS

Choosing the right order management system for your business takes careful consideration.

Here are some of the main things to keep in mind when looking at different options:

• Integration capabilities: make sure the OMS integrates with your existing systems, such as your ERP, CRM, and accounting software. This will help streamline operations and avoid data silos.
• Customization: every business has unique needs, which may well change over time. Look for a flexible OMS that can be customized suit your specific company’s needs, including your industry, workflows, and customer requirements.
• Scalability: as your business grows, your OMS should be able to shift gears to handle higher order volumes and more complex processes. Choose a system that can scale with you.
• User-friendliness: your team should be able to navigate the OMS easily. Look for an intuitive, user-friendly interface that minimizes training time.
• Customer support: it’s essential to have access to a good support team in case issues arise. Make sure the OMS provider you choose offers reliable customer service to help you resolve any problems promptly.

OMS integration

Integration is a critical aspect of implementing an OMS.

The system should integrate with your other solutions, like e-commerce platforms, payment gateways, accounting software, and shipping provider tools.

Easy, efficient OMS integration helps create a seamless flow of data across all systems, making sure that orders are processed quickly and accurately.

When planning your OMS integration, consider the following:

• Data migration: can your historical order data be transferred smoothly to the new system?
• API capabilities: does your chosen OMS come with robust API capabilities, allowing it to easily integrate with your existing systems?
• Testing and training: have you planned enough time to test the integration thoroughly before going live and provide your team with training on the new system?

Wrapping up

An order management system is a game-changing tool for businesses that want to streamline their order processing, reduce errors, and elevate their customer service.

By understanding how an OMS works and the features it offers, you can make more informed decisions about which system best fits your needs.

Whether you are in retail, e-commerce, healthcare, or manufacturing, there is an OMS solution that can help optimize your operations.

Take the time to research and select the right OMS for your business to improve efficiency, gain better control over inventory, and enhance your customer experience.

Order management system FAQs

What is the difference between an OMS and a CRM solution?

An OMS focuses on the order processing aspect of your business operations, while your CRM (customer relationship management) system is designed to manage customer interactions and relationships.

An OMS handles your inventory, payments, and shipping, whereas a CRM is specifically designed to track customer communication, sales activities, and customer service.

What makes the order management process complex?

The order management process can involve multiple channels (e-commerce, retail, mobile), high volumes of orders, varying customer expectations, reliance on external partners (e.g., suppliers and shipping carriers), and the need for accurate inventory management.

Managing these different factors manually or without the right tools can lead to delays, errors, and inefficiencies.

What is distributed order management?

Distributed order management (DOM) forms part of the wider order management process.

While OMS systems manage and track the entire order process, DOM helps your business fulfill orders from the best available source, which could include warehouses, retail stores, or third-party logistics providers.

DOM makes sure the best fulfillment location is chosen based on real-time inventory levels and shipping requirements, optimizing the order fulfillment process.