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What Is an Order Management System? Exploring the Fundamentals

In today’s fast-paced business landscape, efficiently managing orders across multiple channels is crucial for success. An Order Management System (OMS) is a powerful tool that helps companies streamline their sales processes, from order creation to delivery and even returns. As businesses grow and expand their sales channels, implementing an OMS becomes increasingly important to maintain a competitive edge. For more information on choosing the right OMS for your business, read our comprehensive guide: How to Identify the Optimal Order Management System for Ecommerce Growth

What is an Order Management System?

An OMS is a comprehensive software solution that enables businesses to organise and automate key aspects of the purchasing and fulfilment processes. It acts as a centralised hub for managing orders from various sales channels, such as:

  • Bricks-and-mortar stores
  • Ecommerce websites
  • Call centres
  • Mobile apps

By consolidating order data into a single platform, an OMS simplifies the buying experience for customers and allows businesses to efficiently manage inventory, fulfilment and returns.

The primary functions of an OMS include:

  1. Capturing and processing orders from multiple channels
  2. Tracking inventory levels and availability
  3. Routing orders to the appropriate fulfilment centres
  4. Generating picking lists and shipping labels
  5. Providing real-time order status updates to customers
  6. Handling returns and exchanges
  7. Integrating with financial systems for invoicing and payment processing

By leveraging an OMS, businesses can enhance their operational efficiency, reduce errors, and improve customer satisfaction.

How Does an Order Management System Work?

An OMS works by providing visibility into available inventory across all fulfilment locations, including warehouses, stores, and third-party logistics providers (3PLs). When an order is placed, the OMS captures and validates the order details, such as customer information, product SKUs, and shipping preferences. It then determines the optimal fulfilment location based on factors like inventory availability, proximity to the customer, and shipping costs.

Once the order is routed to the appropriate fulfilment centre, the OMS generates picking lists and shipping labels to facilitate the order processing. The system also communicates with the Warehouse Management System (WMS) to ensure accurate inventory tracking and updates. As the order progresses through the fulfilment stages, the OMS provides real-time status updates to the customer, enhancing transparency and trust.

Finally, the OMS integrates with financial systems to handle payments, invoicing, and accounting processes. In the event of a return or exchange, the OMS manages the reverse logistics, updating inventory levels and initiating refunds or credit notes as needed.

Types of Order Management Systems

Order management systems come in different forms to cater to the specific needs of businesses. The two primary categories are individual and enterprise systems.

Individual OMSStandalone software modules that focus solely on order management functionalities. Suitable for smaller businesses with limited integration requirements.
Enterprise OMSPart of a broader enterprise resource planning (ERP) ecosystem. Seamlessly integrate with other business modules, such as CRM, SCM, and financial management. Provide a holistic view of the business and enable more informed decision-making.

Another distinction lies in the deployment model of the OMS:

Deployment ModelDescription
Cloud-Based (SaaS)Offer scalability, accessibility, and lower upfront costs. Vendor manages the infrastructure, maintenance, and updates.
On PremisesRequire businesses to host and manage the software on their own servers. Provide greater control and customisation options.

Additionally, as part of the NetSuite platform, Jcurve Solutions‘ OMS is cloud-based, offering the benefits of a SaaS model, such as scalability, accessibility, and a managed service where the vendor takes care of the infrastructure, maintenance and updates. This allows businesses to focus more on their core activities rather than IT management. Contact us to learn how NetSuite ERP can do for your business.

The Order Management Process

The order management process encompasses all the activities involved in receiving, processing, and fulfilling customer orders. The typical steps in the order management process include:

1. Order capture: Receiving orders from various sales channels and updating customer accounts.

2. Inventory management: Checking stock availability, allocating inventory, and maintaining optimal levels.

3. Order processing: Picking, packing, and shipping orders, as well as handling payments.

4. Shipping and delivery: Coordinating with carriers, tracking shipments, and communicating delivery status to customers.

5. Returns and refunds: Processing customer returns, issuing refunds, and updating inventory accordingly.

Benefits of an Order Management System

Implementing an OMS offers numerous benefits to businesses, including:

Improved inventory management

An OMS provides real-time visibility into inventory levels across multiple locations, reducing the risk of stockouts and overstocking. By optimising inventory management, businesses can improve cash flow and customer satisfaction.

Reduced data entry and errors

Automating order processing tasks minimises manual data entry, reducing the likelihood of human errors. This leads to more accurate order fulfilment and fewer customer complaints.

Enhanced visibility and customer service

With an OMS, all stakeholders have access to up-to-date order information, enabling better collaboration and faster issue resolution. Customers can also track their orders in real-time, enhancing their overall experience.

Valuable analytics and reporting

OMS solutions generate insightful reports and dashboards, allowing businesses to monitor key performance indicators (KPIs) such as order volume, fulfilment rates, and customer preferences. This data-driven approach facilitates informed decision-making and continuous improvement.

Challenges of Implementing an Order Management System

While the benefits of an OMS are significant, businesses may face certain challenges during implementation:

Integration with existing systems

Ensuring seamless integration between the OMS and other business systems, such as ERP, CRM, and WMS, can be complex. Incompatible systems or poor integration can lead to data silos and operational inefficiencies.

Ensuring necessary features and configurability

Choosing an OMS with the right set of features and customisation options is crucial. Businesses need to carefully assess their requirements and select a solution that aligns with their specific needs and growth plans.

Overcoming potential hurdles

Implementing an OMS may require significant time, resources, and change management efforts. Businesses must be prepared to address resistance to change, provide adequate training, and continuously monitor and optimise the system to maximise its potential.

Why Online Sellers Need an OMS

In the rapidly growing ecommerce landscape, online sellers face unique challenges in managing orders and inventory. An order management system is particularly crucial for these businesses, as it helps streamline processes and enhance the customer experience.

For single-channel sellers, an OMS provides a structured approach to managing the entire order lifecycle. By automating tasks such as order processing, inventory tracking, and shipping, online sellers can improve efficiency and focus on growing their business. An OMS also enables sellers to handle higher order volumes without compromising on quality or customer service.

Moreover, an OMS empowers online sellers to expand their reach by selling through multiple channels. By centralising order and inventory data from various platforms, such as marketplaces, social media, and their own website, sellers can efficiently manage their operations and provide a consistent brand experience across all touchpoints.

Key Features to Look for in an OMS

When selecting an order management system, look for the following key features:

1. Sales channel integration: Ensure the OMS can seamlessly integrate with all your existing and planned sales channels, including online marketplaces, social media platforms, and bricks-and-mortar stores.

2. Customer database management: Choose an OMS that offers robust customer relationship management (CRM) capabilities, allowing you to store and manage customer data, preferences and order history.

3. Inventory management and order routing: Look for an OMS that provides real-time inventory visibility across all fulfilment locations and intelligently routes orders based on predefined rules and criteria.

4. Accounting system integration: Ensure the OMS can integrate with your accounting software to streamline financial processes, such as invoicing, payment reconciliation and tax calculations.

To learn more about the essential features your order management solution should possess to effectively support your business, read our article 9 Modern Features Your Order Management Solution Must Have.

A Final Overview

Overall, an OMS is a vital tool for businesses looking to streamline their sales processes, improve operational efficiency, and deliver exceptional customer experiences. As companies expand their sales channels and face increasing competition, implementing an OMS becomes a strategic necessity.

By providing a centralised platform for managing orders, inventory, and fulfilment, an OMS enables businesses to make data-driven decisions, reduce errors, and adapt quickly to changing market dynamics. Moreover, an OMS plays a crucial role in providing a seamless and consistent customer experience across all touchpoints, fostering brand loyalty and driving long-term success.

As businesses embark on their digital transformation journey, partnering with Jcurve for your order management system is essential to optimise operations, gain a competitive edge and lay the foundation for sustainable growth in the digital age.

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