A Practical Guide to Order Management for Any Business
Order management is the foundation of any product-selling company. And it is more than receiving orders or shipping goods, as many people might think at first glance. Order management includes everything from entering customer orders to shipping goods and replenishing stock in the warehouse. Executed well, order management improves customer satisfaction, minimizes costs, and promotes business growth. Executed poorly, it can result in stockouts and missed sales, overstocking, and overall unhappy customers.
Order management is the whole process of handling customer orders - from receipt of the order to delivery, including payment handling, inventory verification, fulfillment, and returns processing.
The importance of order management is undeniable. Nearly 70% of consumers will stop shopping from companies that are unable to meet deadlines or provide a clear order status. Conversely, proper and timely order fulfillment can reduce delivery costs as much as 15% and remove inventory waste altogether. In simple words, order management is where customer commitment meets operating reality.
What Is Order Management and Why Does It Matter?
Order management functions typically consist of two primary areas, and handled by two separate teams:
The Two Sides of Order Management — Same Goal, Different Functions
Focused on taking in and filling customer orders from multiple channels - website, marketplaces, phone, or stores. It involves capturing the order, checking stock availability, processing payment, fulfilling, updating the customer, and handling returns.
Success in this case is measured by how well orders are processed and how satisfied customers are.
Customer Order Management (Sales Side)
Responsible for managing inventory levels and approving purchase orders to suppliers. Ensures there is adequate inventory in the right quantity at the right time, yet not too much on hand to consume too much capital.
The efficiency of its operation supports operational stability and financial health.
Supplier Order Management (Replenishment/Inventory Side)
In addition to these capabilities, there are most often two types of Order Management Systems (OMS), which are best integrated with the company's ERP system to provide real-time inventory visibility and company-wide coordination:
Two Types of Order Management Systems and ERP Integration
These systems help the sales department efficiently capture and process customer orders. They offer features such as multi-channel order capture, real-time inventory visibility to prevent overselling, automated payment processing, order routing for fulfillment, and customer communication functionality for notification and tracking.
Customer Order Management Systems
These systems help inventory teams automate the replenishment process. They monitor levels of inventory, based on consumption information, create purchase orders, track supplier deliveries, and help optimize inventory levels so that cash flow can be maintained alongside meeting demand.
A fundamental principle for effective order management is basing replenishment on actual sales - ordering only what is needed. Consumption-driven methodologies, such as Theory of Constraints (TOC) buffer management, utilize dynamic zones of stock levels (green, yellow, red) to manage inventory and create replenishment orders in line with the supply schedule, maintaining a balance between having stock on hand and saving cash. Order management is an integral part of inventory management. Inventory management systems regulate how much, when, and what to order. Therefore, when discussing Supplier Order Management Systems, we are essentially referring to Inventory Management Systems that include an order management function.
ERP integrates financial, procurement, inventory, and sales activities. With poor integration between ERP and OMS, businesses risk losing data consistency, inaccurate stock visibility, tardy replenishment, and compromised customer experience.
Integration enables:
Real-time centralized visibility of stocks
Adjustments in inventory and synchronization of sales orders
Procurement processes automated
Full reporting
Importance of ERP Integration
Practical Steps to Make Order Management Stronger
Integrate OMS and ERP systems.
Centralize orders across all sales channels.
Maintain up-to-date, current inventory information accessible across teams.
Establish supplier schedules and buffer levels based on actual consumption and replenishment time.
Automate order validation and alert customers.
Streamline the routing of fulfillment and monitor shipments.
Handle returns systematically to ensure inventory integrity.
Use analytics to identify process improvements.
Order management is a differentiator that impacts customer loyalty, operational efficiency, and financial profitability. Streamlined integrated order and inventory processes equate to reduced errors, faster delivery, better management of cash flow, and enhanced customer relationships.
By synchronizing customer order management and supplier replenishment systems, both with seamless integration into ERP, companies can satisfy customers consistently while maintaining operating flexibility and financial control.
Getting the order management right is a good foundation for long-term success, regardless of your business model or market.
fluentSTOCK is an inventory management tool that includes robust and reliable Supplier Order Management. Companies that use fluentSTOCK become more financially secure, reduce lost sales, and decrease cash flow waste caused by overstocking. Additionally, due to its professional supplier order management, replenishment orders are sent on time, in the correct quantities, and for the right goods. This ultimately increases customer satisfaction because customers get what they need.
