What is order processing?

Every business that sells products relies on order processing—the system that ensures customers get what they ordered, when they need it.

Whether you’re a small e-commerce store or a global retailer, getting orders from A to B efficiently is crucial.

But it’s not always smooth sailing.

Order processing involves multiple steps—checking stock, packing items, arranging shipping—and if something goes wrong, delays, errors, and frustrated customers follow.

Bottlenecks in the process can cost businesses time and money, making it critical to have a system that works seamlessly.

So, how does it work, and how can you improve your current system?

This guide breaks down the order processing cycle, common challenges, and best practices to help you streamline operations and keep customers happy.

Here’s what we’ll cover

What does order processing mean?    

Order processing is the step-by-step workflow that ensures a customer order is prepared and delivered quickly and accurately.

It starts the moment an order is placed and continues through inventory checks, picking and packing, shipping, and tracking.

A well-optimized process keeps everything running smoothly and minimizes errors.

Whether handled manually, semi-automated, or fully automated, the goal is always the same: to get the right product to the right customer on time.

Without an efficient process, businesses risk lost inventory, shipping errors, and slow fulfillment, which can impact revenue and customer trust.

That’s why having a structured, scalable order processing system is essential for long-term success.

An order processing examples

To see order processing in action, let’s look at how real businesses have optimized their workflows to improve efficiency and customer satisfaction.

Decathlon (UK): Scaling up for demand

Decathlon, a major sporting goods retailer, needed a faster way to fulfill thousands of online orders each day.

To streamline their order processing, they installed a three-story mezzanine with nearly 2,000 shelving units at their Northampton logistics center.

This upgrade allowed them to process around 3,000 online orders daily, improving order accuracy and reducing shipping delays.

Motocard (Spain): Speeding up fulfillment

Motocard, a European motorcycle gear retailer, faced challenges keeping up with a growing number of online orders.

By integrating a Warehouse Management System (WMS) and reorganizing their storage with picking shelves, they improved their order processing efficiency.

The result?

900 orders processed per day, with 90% of orders placed before noon dispatched the same day.

SAM Outillage (France): Automating for efficiency

SAM Outillage, a tool manufacturer, struggled with slow order fulfillment due to outdated logistics processes.

To fix this, they automated their order processing system, introducing a mini-load system and WMS.

The impact was immediate—a 25% boost in productivity and 24-hour order fulfillment for orders placed before 4:00 p.m.

Each of these businesses tackled order processing challenges in different ways—whether through automation, better storage solutions, or smarter logistics.

Methods of order processing     

Some businesses stick to manual methods, while others use automation to speed things up.

The right approach to order processing depends on your order volume, technology, and how quickly you need to fulfill orders.

Here are some of the most common methods:

Manual order processing

A traditional approach where staff manually record orders, update inventory, and arrange shipments.

It works for small businesses with low order volumes but is prone to errors and delays.

Automated order processing

Automation reduces manual effort by handling order entry, inventory updates, and shipping logistics.

With WMS, barcode scanners, and AI-driven software, businesses can process orders faster and more accurately.

Just-in-Time (JIT) order processing

JIT focuses on minimizing excess stock by processing orders only when needed.

While it reduces storage costs, any supply chain disruption can cause delays.

Real-time order processing

This method provides instant updates on order status, inventory levels, and shipping progress.

Industries like e-commerce, food delivery, and subscription services rely on it for speed and accuracy.

Every business needs a solid order processing system, and many use a mix of these methods to get the best results.

Why is a good order processing system important?

A strong order processing system keeps your business running smoothly and your customers happy.

Here’s why it matters:

• Happier customers: orders that arrive on time and without mistakes build trust and encourage repeat business.
• Lower costs: streamlining order processing reduces manual work, errors, and unnecessary expenses.
• Better inventory control: real-time tracking helps prevent stockouts and overordering.
• Smarter decision-making: insights from order data allow for better forecasting and planning.
• A competitive edge: businesses that fulfill orders quickly and accurately stand out.

The order processing cycle          

A smooth order processing cycle keeps everything moving—so you can get products to customers quickly and accurately.

The exact order processing steps depend on your business, but most follow a similar process.

1. Order placement

It all starts when a customer places an order, whether online, over the phone, or in-store.

Your system captures the details, including what they bought, how much, and where it needs to go.

2. Order confirmation

Once an order comes in, it needs a quick check.

You confirm the product is in stock, process payment, and verify customer details.

At this stage, customers usually get an email with their order number and estimated delivery date.

3. Inventory sourcing

Your system locates the products in a warehouse or fulfillment center.

If something is out of stock, you might source it from another location or put the order on backorder.

4. Picking and packing

Now it’s time to grab the right items and pack them up for shipping.

Whether your team is handling this manually or using automation, efficiency at this stage reduces errors and ensures orders arrive in good condition.

5. Shipping

Once packed, the order is handed off to a carrier.

Your system generates a shipping label, and tracking details are sent to the customer so they can follow their package’s journey.

6. Delivery and customer support

The order arrives at the customer’s door.

If there’s a problem—like a damaged item or a return request—your customer support team steps in to help.

A smooth post-purchase experience builds trust and keeps customers coming back.

What factors can impact the order processing cycle?

Now that we’ve covered the steps in the order processing cycle, let’s look at what can slow things down.

Delays and inefficiencies can come from many places—some within your control, others harder to predict.

Understanding these challenges helps you stay ahead and keep orders moving.

Type of products

Some products are easier to process than others.

Perishable goods, fragile items, or oversized shipments often need special handling, which can slow things down.

Digital products and small, durable items tend to move through the system faster.

Order volume and seasonality

Processing a handful of orders a day is very different from handling a seasonal rush.

Sales spikes—whether from holidays, promotions, or sudden demand—can overwhelm your system if you’re not prepared.

Without the right processes in place, businesses can struggle to keep up, leading to missed deadlines and frustrated customers.

Inventory management

Orders can’t be processed if the stock isn’t there.

Poor inventory tracking leads to stockouts, delays, and even cancellations.

On the other hand, holding too much inventory ties up cash and warehouse space.

A real-time inventory management system helps you keep the right balance and ensures products are available when needed.

Workforce efficiency

Even with the best systems in place, order processing relies on people.

A well-trained team can keep things running smoothly, while understaffing, slow workflows, or a lack of automation can cause delays.

Investing in training, technology, and efficient processes helps businesses stay on top of orders.

Shipping and logistics

Getting an order out the door is one thing—getting it to the customer on time is another.

Delays with couriers, supply chain disruptions, or inefficient shipping processes can all slow down fulfillment.

Working with reliable carriers and optimizing shipping methods can help minimize these issues.

What are the most important order processing metrics?     

To keep your order processing running smoothly, you must track Key Performance Indicators (KPIs) that highlight areas for improvement.

Here are some important metrics to monitor:

Order accuracy rate

This measures the percentage of orders fulfilled without errors.

High accuracy means customers receive exactly what they ordered, leading to increased satisfaction.

Errors can result in returns, additional shipping costs, and potential loss of customer trust.

How to calculate:

(Number of error-free orders / Total number of orders) × 100

Order cycle time

This metric tracks the average time it takes to process an order from placement to delivery.

Shorter cycle times indicate a more efficient process, which can enhance customer satisfaction and reduce operational costs.

How to calculate:

Total processing time for all orders / Number of orders

Perfect order rate

This combines several factors—accurate orders, on-time delivery, and undamaged goods—to assess the overall efficiency of your order processing.

A high perfect order rate reflects well on your entire supply chain.

How to calculate:

(Number of perfect orders / Total number of orders) × 100

Order fill rate

This measures the percentage of customer orders that are fulfilled completely from available stock without backorders or delays.

A high fill rate indicates effective inventory management and the ability to meet customer demand promptly.

How to calculate:

(Number of orders fulfilled without backorders / Total number of orders) × 100

Return rate

This tracks the percentage of orders that customers return.

Monitoring return rates can help identify issues with product quality, descriptions, or fulfillment accuracy.

How to calculate:

(Number of returned orders / Total number of orders) × 100

By keeping an eye on these metrics, you can pinpoint areas that need attention and make informed decisions to enhance your order processing system.

How to improve order processing

Enhancing your order processing system can lead to faster deliveries, fewer errors, and happier customers.

Here are some effective strategies to consider:

1. Automate where possible

Manual processes slow things down and increase the risk of errors.

Automating tasks like order entry, inventory tracking, picking, and shipping ensures faster fulfillment and fewer mistakes.

Integrated systems can also sync real-time data across departments, reducing miscommunication.

2. Keep inventory levels accurate

You can’t process orders efficiently if stock levels are wrong.

A real-time inventory management system prevents stockouts and overstocking, helping you balance supply with demand.

Barcode scanning and automated tracking can make inventory updates seamless.

3. Optimize warehouse organization

A well-structured warehouse makes picking and packing much faster.

Grouping high-demand items together, clearly labeling sections, and using efficient storage layouts help reduce retrieval time.

Investing in a WMS can also optimize inventory placement and movement.

4. Improve demand forecasting

Knowing what customers will need before they order helps you avoid supply issues.

Using sales data, seasonal trends, and predictive analytics allows you to maintain optimal stock levels and plan for busy periods.

5. Streamline internal communication

Breakdowns in communication lead to delays and errors.

Ensure that all teams—sales, fulfillment, inventory, and customer support—have real-time access to order status updates.

Internal dashboards, automated alerts, and regular check-ins help keep everyone aligned.

6. Train and upskill staff

Even the best systems won’t work well if employees aren’t trained to use them properly.

Invest in ongoing training so your team understands workflows, uses automation effectively, and can troubleshoot issues as they arise.

7. Offer partial order fulfillment

Sometimes, sending part of an order right away is better than waiting for all items to be available.

If stock is limited, consider shipping what’s ready first and sending the rest later to keep customers satisfied.

8. Improve customer communication

Keeping customers informed reduces frustration and builds trust.

Automated email or SMS updates for order confirmations, shipping status, and delays help manage expectations and improve the buying experience.

9. Use mobile picking and barcode scanning

Equip warehouse teams with mobile devices for barcode scanning to speed up picking and reduce mistakes.

Scanning ensures the right items are packed, minimizing returns and fulfillment errors.

10. Regularly review performance metrics

Tracking key metrics like order accuracy, fulfillment time, and return rates helps pinpoint inefficiencies.

Reviewing this data regularly allows businesses to adjust processes, eliminate bottlenecks, and continuously improve order processing.

Order processing made easy with Sage

Processing orders shouldn’t be a struggle.

If you’re dealing with delays, inventory issues, or errors, our order management software can help.

With automation handling order tracking, stock updates, and fulfillment, you can cut out manual errors and speed up processing times.

Real-time inventory insights help you avoid stockouts and overordering, so you always know what’s available.

Our software gives you full visibility into your order process, from placement to delivery, helping you stay on top of key metrics like order accuracy and fulfillment speed.

Whether you need to scale up operations or simply streamline the way you work, Sage makes order management effortless.

Order processing FAQs

How do you effectively manage order processing?

Efficient order processing management is all about keeping everything running smoothly—from order placement to delivery.

The best way to do this is by automating repetitive tasks, like inventory updates and shipping confirmations, to reduce errors and save time.

Clear communication between teams ensures everyone is on the same page, while tracking key metrics like order accuracy and fulfillment speed helps you spot and fix bottlenecks.

How long does order processing take?

Order processing time varies depending on the business, order volume, and fulfillment process.

With automation, some businesses can process orders instantly, while others may take a few hours or days if they rely on manual systems.

Factors like inventory availability, shipping speed, and warehouse efficiency all impact timing.

The key to faster, more reliable order processing is streamlining workflows, reducing manual tasks, and keeping stock levels accurate to avoid unnecessary delays.

What is sales order processing?             

Sales order processing is the journey an order takes from the moment a customer places it to when it’s packed, shipped, and delivered.

It includes checking stock levels, confirming payment, picking and packing items, and arranging delivery.

What are the most common errors in order processing?  

The most common order processing errors include incorrect orders, stock discrepancies, shipping delays, and poor communication between teams.

Mistakes like sending the wrong item, overselling stock that isn’t available, or mislabeling shipments can lead to unhappy customers and costly returns.

Many of these issues come from manual processes or outdated systems.

Automating key steps—like inventory tracking, order verification, and shipping notifications—helps reduce errors, speed up fulfillment, and keep orders running smoothly.