Written by Judy Li Dec, 4th 2020
With the blooming success of e-commerce, we can purchase whatever we want at our fingertips. While enjoying the convenience and efficiency of online shopping, have you ever thought of all of the processes that take place once you make an order? This blog post provides an overview of the order processing & management basics, as well as some tips in speeding up the order management cycle.
Order processing & management
Order processing & management can probably dispel any of your doubts about the backend of a purchase. Some of us may know that order processing & management is indispensable to every business.
Before we delve into the significance of it, do you know what order processing is? In this post, we will be answering these questions – 1) What is order processing & management? 2) Why is it pivotal to both businesses and customers? 3) How does it work? And 4) What do business owners need to know about order management software?
Understanding 101: What is order processing?
Order processing begins with the order from a customer. After confirming the order, the firm checks the stock availability. It doesn’t merely take that stock and then deliver straight away. Why? Every business aims to optimize its resources in a cost-efficient way.
In this sense, it selects the best way to process orders. After all these steps, the firm finally packs and then delivers the inventory from the warehouse. Some after-sales actions to be taken are to check if the customer is satisfied. In case he or she is not, the firm then must resolve the issue to generate customer value. In short, order processing is the chain of actions to be taken after receiving customer’s order.
How does it work?
An order processing system explains how the procedure mentioned above is appropriately carried out. It is a centralized system for capturing order data from customer service departments or from customers directly.
In this day and age, process ordering is mainly carried out by automation. Compared to the manual process, automatic process ordering requires less labor and a shorter cash cycle. Most importantly, it is more efficient and less error-prone.
In an automated order processing system, different customers’ orders from multi sales channels undergo treatment as electronic transactions, regardless of the format. The system also validates and manages the extracted data into the appropriate people in charge of the company. Consistency, transparency, efficiency, and accuracy all add up to a better customer service experience and competitive advantage for the company.
Understanding 101: What is order management?
Sales orders come from multiple sales channels; capturing, tracking, and fulfilling orders creates enormous obstacles for many businesses. Order management centralizes and automates order processing from all sales channels. What is order management? It includes the cycle of customers and suppliers, as well as inventory visibility that spans across warehouses to create a positive customer experience.
The order management process flow starts from the order’s placement, where that order is then tracked until it is fulfilled. The order management cycle is then being carried out. Order management is a broad concept after all. In the following parts, we will look into different modules of an order management system – Order processing, Financial processing, and Inventory available to promise (ATP) and sourcing.
Modules of an order management system – Order processing
An order processing system comprises interactions between a wide range of categories not limited to businesses and consumers.
First and foremost, order processing encompasses selection, picking, packing, and shipping. Imagine you order a shirt from an online boutique merchandizer; you first put the shirt you want in the shopping cart.
Next, you confirm your transaction by settling payment. The moment you click the ‘submit’ button, the order processing system automatically places your order in the ‘queue’ inside the centralised operating system. Upon selection, the system requests further information from you for confirmation, for example your address and payment method.
After settling the confirmation of an order, a quote and receipt is sent to you and all you need to do is wait to receive your order. However, for a company, they start going through several steps in order to process orders. The centralized order processing system checks the stock availability and selects the ‘correct’ product from the warehouse. Finally, external logistics partners are then responsible for the delivery of that product.
Modules of an order management system – Financial processing
Apart from order processing, the system is comprised of financial processing as well. This is often abbreviated using the term, ‘FinTech’ – financial technology. Fintech is related to the financial processing category. Fintech acts as a catalyst to virtual shopping. It is a technology and innovation that aims to override traditional ways of payment. In an order management process flow, both are involved in financial processing, on the buyer side and the seller side.
For example, buyers may settle their transactions by means of credit cards. Sellers might accumulate payments monthly to accrue payment on account. Some expenses amassed might be delivery costs, salaries, and rental expenses. Merchandizers might want to settle their payment through Fintech to optimize operational efficiency and bring the cost down.
Modules of an order management system – Inventory available to promise (ATP) and sourcing
Alongside financial processing in the order processing system, ATP and sourcing are essential in supply chain management. ATP is the provision of a response to an order request. Available-to-promise functions are IT-enabled and usually integrated into business management. The push-pull strategy is the base of ATP functionality.
A push strategy is nothing but real-time ATP. When an order is placed, the quantities available are derived based on the forecasted demand. This system reduces uncertainty in inventory management and as well as enhances order management process flow. In a pull strategy, stock availability is calculated only after receiving a confirmed order from customers.
Why are they pivotal to both businesses and customers?
Now we understand what order management is. The importance of the order management process lies in cost efficiency and product accuracy throughout the practice of an order management process flow. Most of the companies not only receive sales orders within the organization’s structural levels, they also negotiate and compromise with external partners, for example, retailers, merchandisers, and logistics companies. The order management process creates a seamless flow for the order management cycle, from the order placement to the final destination upon completion of after-sales services.
On the other hand, the traditional practice is to receive orders by fax or post. Employees responsible for sales orders no longer need to manually enter each order into decentralized systems. An order processing system eliminates the labor and time cost and improves product accuracy. Throughout the order management process flow, a bunch of data is handled and extracted using automation instead of manpower, meaning we do not need to process orders by ourselves anymore. In the meantime, the frequency of recording erroneous information regarding charges is minimized.
We don’t want retailers to wrongly place our orders, do we? In turn, the order management cycle contributes back to customer satisfaction, the ultimate goal which firms are working hard to strive for.
Three key features that make an order management cycle effective
As a business owner, you do not want to get your customers’ requests answered incorrectly. Having an order management process flow is essential in bringing your business one step closer to success. This brings us to the point of what makes the order management cycle effective and efficient.
Number 1: Broad and approachable connection
You want to develop your business in an extensive manner, spanning local and international customers. A profound order management cycle demonstrates the ability to integrate across the company.
Within the organizational structure, a broad network connection enables business owners to keep track of the accounting system’s inventory and records of the accounting system. These significantly reduce uncertainties and eliminate the probability of not getting orders appropriately placed due to being out of stock.
Beyond the organizational level, an extensive and integrated system facilitates communication between external parties. Keeping an approachable connection with logistics companies and warehouses accelerates your order management flow. Imagine a customer wishes to keep an eye on his or her products, but you do not have any handy access to the procedure of delivery. This greatly disappoints the customer, leading to the company losing faith and acquiring a negative reputation due to poor integration. We don’t want this to happen, do we?
Number 2: Real-time analysis by automation
Clearly, automation is the key to a successful order management system. Automation improves process control and minimizes manual errors.
Compared to the traditional methods of order management, employees in customer service and accounting departments are responsible for entering customers’ orders one by one. The orders come in non-standardized formats and channels. Without a unified and centralized system to gather all the data, not only is the procedure error-prone, but it is also time-costly.
We all live in a digital age where technology handles many tasks, leaving us hassle-free. In an order management cycle, automation does the work. By keeping the process in-house, automation provides real-time analysis of customers’ orders. At our fingertips, we can obtain detailed information regarding the orders without hesitation. Business owners incur lower operating costs, and the saved value in turn can be used for further improvements to the system, bringing the business more success.
Number 3: Follow-through after-sales treatment
Regarding the order management process flow, a lot of people deem after-sales treatment as less important than other steps. Myth debunked!
After-sales treatment and improvement are as vital as the other steps. Upon arrival to the final destination, an effective order management cycle should keep track of the customers’ feedback and responses. A completed and systematic process collects customers’ data and sorts it into a centralized system.
Data are to be classified into different categories. Upon classification and analysis, merchandisers can better understand what they are expected to improve. These data are essential for businesses in a bottleneck—figuring out how their customers think can be a way to sustain and enhance their industry.
Potential pitfalls of order management software
Pitfall 1: Discrepancies between buyers and sellers
One of the key features making the order management system extremely powerful is its ability to integrate data across multiple channels. However, some order management software is unable to utilize this feature. This creates discrepancies between buyers and sellers.
Once the buyer places the order, the seller is supposed to receive the order spontaneously. In case the software system fails to capture the order and pass the message into the warehouse, the business loses track of an order and fails to satisfy the customer’s need.
Pitfall 2: Insensitive customers response system
Continuing with the above case, when placement of orders fails, customers turn to customer service. I believe most of us have experienced the following circumstance – you call the customer service department, but no one answers the call. Then, you send an email to the business’ email address, only to get a reply three weeks later, after you gave up on solving the issue already.
As a customer, you want to get your problem solved as quickly as possible, but this is how an insensitive and irresponsive customer service system can disappoint a customer.
Pitfall 3: Unorganized or slow syncs of data
Automation ought to be real-time and responsive in response to huge amounts of customer data. Lamentably, some order management software fails to perform these functions, and instead, they sync at a slow rate and are riddled with errors which translate to incorrect shipping and inventory data.
You may wonder? The data is just a bit laggy, what bothers?
The consequence can be serious.
The company wrongly assesses customers’ needs because of the wrong interpretation of statistics. This in turn leads to inaccurate and faulty projections on the quantity of inventories in the warehouse. At the end of the day, the company may make a ‘wrong’ business decision because of the unorganized syncs of data performed by software of a lower quality.
The good news is that erratic syncs can be avoided provided that the business chooses quality order management software which is equipped with advanced synchronizing engines.
Insight: How can businesses utilize software to facilitate an order management process flow?
Here we understand that a seamless order management process flow is something that businesses long to achieve. The main issue to be addressed is how businesses can fully and properly utilize an order management process flow?
Step 1: Figure out the scale and positioning of your business
A SWOT matrix analyzes the business’ current position by assessing and comparing it with similar competitors in the marketplace. For a large-scale and mature business, the order management process flow comes in fast in velocity and huge in volume.
Therefore, figuring out the business’ scale and positioning is a determining step in utilizing the flow efficiently.
Step 2: Eliminate unsuitable order management software
Out of many order management software options, filtering them allows comparison between the software to ensure a proper fit. Most of the order management software available in the marketplace performs some standard functions, such as sales tracking, orders, and inventory management.
However, they differ in quality and speed. For example, the integration level across multiple channels and synchronization of data can be different.
It is not always that the faster the speed, the better for your business it is. Since it’s crucial to balance the cost and the other parameters, a middle-level software synchronization of data probably works better for a small to medium-sized business instead of top-notch, high-ticket software.
Step 3: Practice a test run and pick the right option
After looking for the software you prefer, it is crucial to practice a test run. Most of the software options offer a trial period. A business can use the testing period to confirm whether this particular software is suitable for the company.
While doing the test run, we should not merely emphasize those fancier functions like data analysis; we should also pay extra attention to some basic yet essential tasks, such as the integration of multiple channels. These are to prevent the business from falling into the potential pitfalls of order management software.
Key takeaways:
Number 1: What is order processing & management?
Order processing is the process or work that the business performs after receiving orders from customers. The order processing management process flow begins with picking, packing, and delivery.
Order management is the art and science of getting the above procedures done properly. It involves not only the service providers, but other external parties like logistics teams and warehouses.
Number 2: Why are they pivotal to both businesses and customers?
Order processing and management significantly reduce operating costs as businesses do not need labor to process orders one by one. In turn, the efficiency and accuracy can be enhanced. Every company strives for higher efficiency and lower costs.
As a customer, we want our orders to be fulfilled as soon as possible. Order management minimizes the likelihood of getting our orders wrongly placed. As a result, we are happy with the product and the business is pleased about their ability to deliver a seamless buying experience.
Number 3: How do they work?
An order management system (OMS) is introduced above. It is an electronic system to execute orders efficiently and cost-effectively. The system is often associated with automation and the use of FinTech.
By gathering orders from multiple sales channels, the system passes the centralized data to accounting and inventory departments to appropriately fulfill the orders. There are follow-through actions to collect opinions from customers as well.
Number 4: Things business owners need to know about order management software
To accelerate an order management process flow, the software used should use an integrated and extensive network, with real-time data analysis by automation, probably with a fast synchronization of data from customers. These functions in turn bring us one step closer to our ultimate goal – to derive further sales by generating customer values.
There are multiple models of order management software available in marketplace. The business first needs to figure out its positioning and scale. Then, eliminate inappropriate software options and perform test runs to look for the ‘best’ software.
Wrap-up:
Order processing & management are of utmost importance to businesses at the end of the day, be it small-scale or large-scale. With the advancement of FinTech and automation, order processing & management will continue to integrate business in all forms and process big data with a real-time assessment.
CBX’s Supplier Management Software allows for retailers to collaborate with their vendor partners in order to keep track of the sourcing stages from start to finish, making order management more efficient.
Most business owners will continue to explore new horizons with order processing & management strategies in pursuit of excellence in business development.