Strategy, Legal & Operations

What is an order management system?

For businesses handling high order volumes, an order management system (OMS) can be the difference between seamless fulfillment and costly errors. Discover how an OMS works and what to look for when choosing one.

June 10, 202619 min read Share

This article was originally published in March 2025 but has been refreshed and re-published with new content.

An order management system (OMS) is software that helps businesses track, manage, and fulfil customer orders across their entire life cycle, from order capture through to delivery and returns.

That sounds straightforward. In reality, it rarely is.

As your business grows, orders start coming in from multiple channels, inventory lives in different places, and customer expectations keep rising.

Without the right system in place, things can slip, with delays creeping in, stock going missing, and support teams getting overwhelmed.

Once you learn how order management systems work, why they matter, and how to choose the right one for your business, you can avoid these issues.

Key takeaways:

• An order management system (OMS) is software that centralizes and automates the entire customer order lifecycle—from capture and payment through to fulfillment, shipping, and returns—eliminating the manual errors and inefficiencies that come with disconnected tools.
• Key OMS features include real-time inventory visibility, fulfillment routing optimization, omnichannel order orchestration, returns management, and reporting and analytics, all working together to reduce costs and improve the customer experience.
• OMS platforms vary by industry, with specialized versions available for retail, e-commerce, wholesale, manufacturing, healthcare, hospitality, food and drink, and financial services (trade order management systems).
• AI and machine learning are increasingly embedded in modern OMS platforms, improving order promising accuracy, fulfillment routing, fraud detection, demand forecasting, and returns prediction.
• An OMS works alongside, not instead of, an ERP and WMS: the ERP manages core business operations, the WMS handles physical warehouse execution, and the OMS coordinates customer orders across all fulfillment locations.

Here’s what we’ll cover:

What is order management?

Order management is the process your business uses to receive, track, and fulfil customer orders from start to finish. It covers everything from order capture and payment processing to inventory management, shipping, and returns.

In practice, it’s a constant balancing act to keep stock accurate, orders moving, and customers informed at every step.

As order volumes grow, managing this process becomes more complex and harder to control without a structured approach.

That’s why having a well-defined order management process (and the right systems to support it) is essential for staying efficient, competitive, and responsive to your customers’ expectations. expectations.

What common challenges in order management does an OMS solve?

An efficient, centralized OMS will help you manage and overcome a range of common challenges, including processing errors, inventory visibility issues, multichannel complications, fulfillment inefficiencies, returns management, and poor customer experiences.   

Let’s consider these in more detail:

• Manual processing errors: relying on spreadsheets or disconnected tools for order entry increases the risk of mistakes, like wrong items shipped, duplicate orders processed, or payments mis-recorded.
• Lack of inventory visibility: without real-time stock data, businesses struggle to confirm availability at the point of sale, leading to overselling, stockouts, and delayed fulfillment.
• Multichannel complexity: businesses selling across e-commerce, retail, and wholesale channels often manage orders in separate systems, creating data silos, inconsistent customer experiences, and reconciliation headaches.
• Fulfillment inefficiencies: without automated routing logic, orders may be fulfilled from suboptimal locations, increasing shipping costs and delivery times.
• Poor customer experience: customers expect real-time order updates, fast delivery, and frictionless returns. Without an OMS, delivering this consistently at scale is very difficult.
• Returns management burden: processing returns manually is time-consuming and error-prone, and without proper tracking, returned inventory may not be restocked accurately.

An order management system addresses each of these challenges by centralizing order data, automating key workflows, and connecting the systems your business already uses.

How do order management systems work?

Order management systems work by connecting each stage of the order life cycle into a single, coordinated workflow, from order capture to fulfillment and returns. They act as a central hub for order data, inventory, and fulfillment processes, giving your business real-time visibility and control.

Here’s how the process typically works:

• Order placement: customers place orders across channels (website, retail, mobile), which the OMS captures and consolidates into a unified dashboard.
• Inventory check: the system verifies stock availability and can trigger replenishment or suggest alternatives if needed.
• Payment processing: payments are processed through integrated gateways (e.g. card, PayPal, financing options).
• Order fulfillment: orders are routed for fulfillment, whether from a warehouse, store, or third-party provider, while inventory is updated in real time.
• Shipping and delivery: the OMS integrates with carriers to select shipping options and track delivery progress.
• Customer updates: automated notifications keep customers informed with status updates and tracking details.
• Returns: the system manages returns, validates eligibility, and tracks refunds or exchanges.

Why is an order management system important?

An effective order management system is key to reducing errors, improving efficiency, and delivering a consistent customer experience by offering centralized control and real-time visibility across the order life cycle.

As order volumes grow and operations span multiple channels, locations, and partners, managing everything manually (or across disconnected tools) quickly becomes unsustainable.

Left unresolved, these challenges don’t just slow down operations but begin to impact delivery performance, increase costs, and erode customer trust.

An order management system addresses this by bringing structure and visibility to the entire process. With real-time access to order and inventory data, your business can respond faster, make better decisions, and avoid bottlenecks before they escalate.

It also improves coordination between teams and external partners, helping ensure that orders move smoothly from purchase to delivery, even as complexity increases.

Ultimately, an OMS allows your business to scale more confidently, maintain consistency across channels, and deliver a more reliable customer experience.

What are the key features of an order management system?

The key features of an order management system bring together capabilities like order orchestration, real-time inventory visibility, fulfillment routing, and returns management to keep orders accurate, efficient, and under control at every stage.

Real-time inventory visibility

A core OMS capability is providing an accurate, live view of stock levels across all locations—warehouses, retail stores, and third-party fulfillment centers.

Real-time inventory data prevents overselling, reduces stockouts, and ensures the system can confirm product availability at the point of order placement.

Without this, multichannel businesses frequently sell items they can’t fulfill.

Order promising

Order promising is the OMS’s ability to commit to a delivery date at the time of purchase, based on current inventory levels, fulfillment center capacity, and carrier lead times.

Accurate order promising improves customer trust and reduces post-purchase support queries about delivery timelines.

Advanced systems use machine learning to improve promising accuracy over time.

Fulfillment sourcing optimization

When an order comes in, the OMS determines the best location to fulfill it from based on proximity to the customer, available stock, and shipping cost.

This routing logic, sometimes called fulfillment sourcing or order routing, reduces delivery times and shipping costs while balancing load across warehouse and store locations.

Omnichannel order orchestration

Modern OMS platforms manage orders regardless of where they originate (online, in-store, via mobile, or through wholesale channels) and consolidate them into a single operational view.

This enables scenarios like Buy Online/Pickup In Store (BOPIS), ship from store, and Buy Online/Return In Store (BORIS), which customers increasingly expect as standard.

Distributed order management

Distributed order management (DOM) is a specific OMS capability that determines the optimal fulfillment source for each order in real time, drawing from a network of warehouses, stores, and third-party logistics providers.

DOM reduces fulfillment costs, improves delivery speed, and helps businesses avoid stockouts by routing orders to wherever inventory is available.

Reverse logistics and returns management

Managing returns efficiently is as important as managing outbound orders.

An OMS automates the returns process, from the initial return request and eligibility check through to restocking or disposal and refund or exchange processing.

More than 19% of online orders are returned, making reverse logistics a significant operational and cost consideration for most businesses.

Payment processing

OMS integration with payment gateways ensures transactions are securely processed and immediately reflected in financial records.

This includes support for multiple payment methods, like credit and debit cards, digital wallets, and B2B payment terms, and flags failed or disputed transactions for review.

Reporting and analytics

A well-designed OMS provides dashboards and reports covering order volume, fulfillment speed, order accuracy, return rates, and inventory performance.

These insights help operations and finance teams make data-driven decisions, identify bottlenecks, and benchmark performance against targets.

Sales automation

Beyond order capture, some OMS platforms automate upselling and cross-sell logic at the point of order or trigger workflows based on customer behavior, such as abandoned cart follow-ups or loyalty program updates.

Cloud-based deployment

Cloud-based OMS platforms offer 24/7 accessibility, automatic updates, and scalability without on-site infrastructure costs.

For growing businesses, cloud deployment means the system can handle increased order volumes without requiring significant additional IT investment.

Together, these capabilities translate into faster processing, fewer errors, lower costs, and a more consistent customer experience.

What types of order management systems are there?

Order management systems come in numerous configurations to suit different industries, such as retail, investing, hospitality, manufacturing, and health care.

The base functionality and many of the key features of these systems will be the same or similar, but tools that have been built for specific industries may incorporate 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

Retail order management systems manage both online and in-store orders within a unified platform, integrating with Point-of-Sale (POS) systems, e-commerce storefronts, and inventory management tools.

For retailers operating across multiple locations, a retail OMS enables real-time stock visibility across all sites, supports omnichannel fulfillment scenarios like BOPIS and ship-from-store, and ensures the customer-facing order status is consistent regardless of channel.

As consumer expectations around delivery speed and flexibility increase, retail OMS capability has become a meaningful competitive differentiator.

E-commerce

E-commerce businesses rely on an 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 are designed for the specific complexity of B2B transactions, where order volumes are high, pricing is often negotiated, and fulfillment may involve multiple warehouses or distribution centers.

Key capabilities include purchase order management, tiered pricing and contract terms, bulk order processing, credit limit management, and multi-location inventory allocation.

For distributors managing relationships with dozens or hundreds of business customers, a wholesale OMS provides the operational infrastructure to fulfill orders accurately and at scale without manual intervention at every step.

Manufacturing

Manufacturers use an 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.

What is a trade order management system?

A trade order management system (TOMS) is a specialized OMS used in financial services and investment management to manage the life cycle of securities trades, including equities, bonds, options, futures, and derivatives.

While a commercial OMS manages physical product orders, a TOMS manages financial instrument orders, handling the routing, execution, compliance, and settlement of trades across multiple markets and counterparties.

Key capabilities of a trade order management system include:

• Order routing: automatically routing trade orders to the appropriate exchange, broker, or execution venue based on pre-set rules or best execution requirements.
• Compliance and regulatory controls: ensuring trades comply with regulatory requirements such as Securities and Exchange Commission rules or Financial Industry Regulatory Authority (FINRA) guidelines before execution.
• Portfolio management integration: synchronizing with portfolio management systems to ensure trade decisions align with fund strategy and position limits.
• Execution management: tracking order status in real time across venues, with the ability to modify or cancel orders as market conditions change.
• Settlement and reconciliation: managing post-trade processes including settlement instructions, confirmation matching, and reconciliation with custodians and prime brokers.

TOMS platforms are used primarily by asset managers, hedge funds, broker-dealers, and institutional investors.

They are a distinct category from commercial OMS solutions and are typically evaluated and procured separately.

What is supply chain order management?

Supply chain order management refers to the coordination of order processing activities across the entire supply chain, from supplier procurement through to customer delivery. It extends the scope of a standard OMS to include upstream supplier relationships, inbound inventory flows, and third-party logistics coordination.

For businesses with complex supply chains, effective supply chain order management depends on:

• Supplier integration: connecting the OMS with supplier systems so that purchase orders, lead times, and inbound shipment data flow automatically, reducing manual coordination and improving inventory planning accuracy.
• Third-Party Logistics (3PL) coordination: managing fulfillment relationships with external warehouse and logistics providers within the OMS, so order routing, inventory visibility, and tracking remain centralized even when physical operations are outsourced.
• Demand forecasting integration: using historical order data within the OMS to inform procurement decisions and avoid the stockouts or overstock situations that disrupt supply chain flow.
• Multi-location inventory management: allocating inventory intelligently across multiple fulfillment nodes like warehouses, distribution centers, and retail locations to minimize shipping costs and maximize fulfillment speed.

As supply chains grow more complex and global, the line between OMS and supply chain management software increasingly blurs.

Modern enterprise OMS platforms are designed to sit at the center of this ecosystem, connecting every node from supplier to customer.

What is retail order management?

Retail order management is the process of capturing, tracking, and fulfilling customer orders across all retail channels, including online stores, physical locations, and mobile platforms within a single unified system.

In retail, the challenge isn’t just processing orders; it’s keeping the experience consistent across every touchpoint, from purchase to delivery to return.

This is increasingly important as customer journeys span multiple channels.

More than 66% of consumers use two or more channels before completing a purchase, highlighting how fragmented retail journeys have become.

A retail order management system helps address this by:

• Consolidating orders from all channels into a single view.
• Providing real-time inventory visibility across stores and warehouses.
• Enabling omnichannel fulfillment such as BOPIS, ship-from-store, and curbside pickup.
• Supporting consistent returns and exchanges across channels.
• Integrating with POS systems, e-commerce platforms, and loyalty programs.

What is wholesale order management?

Wholesale order management is the process of handling large-volume B2B orders (typically from retailers, distributors, or other business customers) with the specific workflows, pricing structures, and compliance requirements that B2B transactions involve.

Unlike B2C order management, wholesale order management must account for:

• Negotiated pricing and contract terms: individual customers often have unique pricing agreements that the OMS must apply automatically at the point of order.
• Purchase Order (PO) management: B2B buyers typically issue formal POs before payment, and the OMS must match incoming POs to orders and track approval status.
• Credit terms and limits: business customers may purchase on credit, requiring the system to check credit availability before confirming orders and manage outstanding balances.
• Bulk order processing: wholesale orders typically involve large quantities of different products, sometimes across multiple product lines, requiring efficient batch processing and inventory allocation logic.
• Multi-location fulfillment: a single wholesale order may need to be split across multiple distribution centers to meet delivery requirements or balance inventory.

For distributors and manufacturers selling direct to trade, a wholesale order management system is the operational foundation that makes scaling B2B sales without proportionally increasing administrative overhead possible.

How does AI fit into modern order management systems?

Artificial Intelligence (AI) and Machine Learning (ML) are increasingly embedded in enterprise OMS platforms, improving the speed, accuracy, and intelligence of key order management decisions.

The main areas where AI is making a practical difference include:

• Order promising accuracy: ML models analyze historical fulfillment performance, carrier lead times, and real-time inventory data to generate delivery date commitments that are more reliable than rule-based systems.
• Fulfillment routing optimization: AI continuously learns from order outcomes to improve routing decisions, balancing delivery speed, shipping cost, and inventory availability more effectively than static rules.
• Fraud detection: pattern recognition models flag anomalous orders, spotting things like unusual quantities, mismatched billing and shipping addresses, or atypical payment behavior before fulfillment begins, reducing chargebacks and losses.
• Demand forecasting: AI-powered forecasting within the OMS uses order history, seasonal patterns, and external signals to predict future demand, helping businesses maintain optimal stock levels.
• Returns prediction: some advanced platforms use ML to predict which orders are likely to be returned before they ship, enabling proactive interventions like improved product information or personalized sizing guidance.

For businesses evaluating OMS platforms, AI capability is increasingly a differentiating factor, particularly for those operating at scale or managing complex multichannel fulfillment.

What is the difference between an OMS, ERP, and WMS?

While an OMS manages the lifecycle of your customer orders, an Enterprise Resource Planning (ERP) system manages the entire scope of your business operations, and a Warehouse Management System (WMS) focuses on the physical operations within a warehouse specifically.

These three tools are sometimes confused because they overlap somewhat in functionality, but they serve distinct primary purposes:

• Order management system: manages the lifecycle of customer orders, from placement through to fulfillment, shipping, and returns. The OMS is the central coordination layer between the customer and your fulfillment operations. It’s customer-order-centric.
• Enterprise resource planning: manages the full scope of your business operations, including finance, HR, procurement, manufacturing, and order management. An ERP system provides a single source of truth across the entire business. Many ERP platforms include order management functionality, but the OMS remains a separate, specialist tool in organizations where order complexity demands it.
• Warehouse management system: manages physical operations within a warehouse, like inventory locations, picking strategies, packing workflows, and shipping dock management. A WMS operates at the level of the individual warehouse; an OMS operates at the level of the customer order across all fulfillment locations.

System	Primary focus	What it manages	Typical use case
OMS	Customer order life cycle	Orders from capture to fulfillment, including tracking, routing, and returns across all channels	Ensuring customers receive the right product from the right location at the right time
ERP	Core business operations	Finance, HR, procurement, inventory planning, and overall business reporting	Running the business back office and consolidating financial and operational data
WMS	Warehouse execution	Stock storage, picking, packing, shipping, and warehouse inventory accuracy	Managing physical movement of goods inside warehouses or distribution centers

In practice, these systems are complementary. A typical enterprise stack integrates all three: the ERP manages financials and procurement, the OMS manages customer orders and fulfillment routing, and the WMS manages physical warehouse execution.

The OMS sits between the customer-facing layer and the warehouse operational layer.

How do you choose the right OMS?

Choosing the right OMS comes down to five key factors: integration capability with your existing systems, customization flexibility, scalability as order volumes grow, ease of use for your team, and the quality of vendor support.

Your business model, whether B2B, B2C, or both, should be the starting point for defining your requirements.

• Integration capabilities: make sure the OMS integrates with your existing systems, such as your ERP, customer relationship management (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 to 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.

How do you implement or migrate to a new OMS?

Implementing a new OMS or migrating from an existing one requires careful planning across four phases: vendor evaluation, data migration, integration and testing, and training and go-live.

Vendor evaluation

Before selecting a platform, define your requirements clearly: order volume, channel mix, integration needs, and budget.

Issue a Request for Proposals (RFP) to shortlisted vendors and evaluate responses against your defined criteria rather than feature lists alone.

Ask vendors for references from businesses with a similar profile to yours.

Data migration

Migrating historical order, customer, and inventory data to a new OMS is one of the most technically complex parts of implementation.

Audit your existing data quality before migration; incomplete or inconsistent records will cause problems in the new system.

Work with your vendor or implementation partner to define data mapping rules and run parallel systems during the transition period.

Integration and testing

An OMS sits at the center of your technology stack, connecting to your ERP, e-commerce platform, payment gateways, shipping carriers, and warehouse systems.

Each integration needs to be tested end-to-end before go-live, including edge cases like partial fulfillments, returns, and payment failures.

Allocate sufficient time for user acceptance testing with the teams who will use the system daily.

Training and go-live

Ensure all staff who will interact with the OMS receive role-specific training before go-live. This includes staff in customer service, warehouse operations, and finance.

Plan a phased rollout where possible, starting with a lower-volume channel or location before expanding.

Establish clear escalation paths for issues in the first weeks of operation.

How does OMS integration work?

An OMS connects to the rest of your tech stack through an Application Programming Interface (API), linking systems like your ERP, e-commerce platform, payment gateways, shipping carriers, WMS, and CRM so that order data flows automatically and stays in sync from end to end.

When planning your OMS integration, the key connection types to prioritize are:

• ERP integration: ensures order, inventory, and financial data stay synchronized across systems, reducing manual reconciliation and improving reporting accuracy.
• E-commerce platform integration: captures orders from online storefronts in real time, with automatic inventory updates to prevent overselling.
• Payment gateway integration: processes transactions securely and logs payment status immediately in both the OMS and your financial system.
• Shipping carrier integration: automates label generation, calculates shipping options and costs, and provides real-time tracking updates to customers.
• WMS integration: passes fulfillment instructions from the OMS to warehouse operations and receives confirmation of picks, packs, and shipments.
• CRM integration: syncs order history and status with customer records, enabling customer service teams to resolve queries without switching systems.

When evaluating integration capability, look for thorough API documentation, pre-built connectors for the platforms you already use, and a vendor track record of successful integrations in your industry.

Making the most of your order management system

An OMS is one of the most operationally impactful investments a growing business can make, but the right system depends on your specific order volumes, channel mix, and integration requirements.

Manual errors, inventory blind spots, multichannel complexity, and fulfillment inefficiencies are all problems a well-implemented OMS can significantly reduce.

The key is matching the system’s capability to where your business actually is and where it’s heading.

Ready to connect your order and financial systems in one place?

Try Sage’s order management software and streamline your operations from day one.

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