Order Management and Order Processing: Why They’re So Important for Business

Dealing with order management as a new business can be overwhelming. There are so many moving parts that it seems impossible to keep up! On the one hand, it’s a good thing that so many orders are coming in. On the other hand, if you can’t keep up with these orders, you risk making mistakes, taking too long, and ending up with dissatisfied customers as a result. You should also have a backorder policy, too.

Thankfully, we have created this guide to order management so that you can become an expert and successfully complete each step in the process for every order you receive. 

What Is Order Management?

Order management involves tracking the orders that come into a business and managing the processes that are needed to fulfill them. Instead of thinking of order management as a single action, you need to think of it as a process with many steps that all need to be completed in order to successfully fulfill all your orders. This process begins the second that a customer places an order and doesn’t end until the customer receives their items and is completely satisfied. 

The Order Management Process

The order management process can be complex, so it helps to break it down step by step:

1. The Customer places an order. The order management process begins when a customer places an order for your products. There should always be a minimum order quantity.
   
   While it may seem easy to keep track of all the orders that are being placed, if you have multiple different channels operating, this can quickly become complicated. That’s why it’s so important to utilize a multichannel order management tool that can compile all your different orders from all your different locations so that you can easily keep track of them and get them on their way.
   
   
2. The payment is processed successfully. It’s not a sale if you don’t get paid! That’s why you always need to make sure that an order has been paid for before you begin processing it. Sometimes things happen along the way and the payment doesn’t go through. You can eliminate issues on your end by utilizing a reliable and secure payment processor that you can trust to close your sales.  
   
   
3. The warehouse receives the order. Once the payment has been verified, you can pass on the order details to the warehouse that will fulfill the order. It’s always a good idea to keep in mind the warehouse’s geographical location and the distance from the order’s destination. For example, if you have two warehouse locations -- one on each coast -- you will want to send orders from the West Coast to your California warehouse and orders from the East Coast to your North Carolina warehouse. 
   
   
4. The order is picked. Once the warehouse has received the order, they need to retrieve the items that are a part of that order and get them ready for packaging. There are several different picking methods to choose from depending on the size of the business, the number of SKUs, the volume of orders, etc. Some different options include single order picking, batch picking, zone picking, and wave picking. 
   
   
5. The order is packed. After all the items in an order have been pulled from the shelves, it’s time to pack them all together. It’s important to package an order correctly in order to avoid damage and save on shipping costs. For this reason, you will want to use appropriately sized boxes that are strong and durable without being overly heavy. 
   
   We recommend going with a corrugated material that can safely insulate fragile items while still being lightweight and easy to assemble. In addition to the actual box, you also need to consider packaging extras -- this is especially true if you are packaging fragile items or multiple different products. There are extras such as packaging inserts, bubble wrap, air pillows, packing peanuts, and shredded paper to keep your items safe throughout their journey.
   
   
6. The order is shipped. Once the order has been placed and sealed into its package, it’s finally time for shipment! The actual shipping process involves generating the shipping label, scheduling pick up by the carrier, and sending the tracking information to the customer so that they can track the status of their order and know when to expect the delivery. 
   
   
7. The order is delivered. Contrary to popular belief, the order management process doesn’t end just because the order is out of your warehouse! The order actually has to be delivered correctly on time -- which is easier said than done. 
   
   
8. Measure customer satisfaction. Once the order has been delivered, you need to check back in with the customer to make sure that they are satisfied with the order. Feedback is very valuable for any business, but especially for eCommerce businesses that depend on good reviews to secure future sales. 
   
   If there is something wrong with the order, be sure to take steps to rectify this issue. This could be correcting the order if the wrong items were sent, offering a discount code for free shipping in the future if the order arrived late, or simply offering a coupon code for another purchase. Anyway, as an eCommerce entrepreneur, you are supposed to know what to do in a case of a delivery exception.

Key Metrics in the Order Management Process to Monitor

As a business owner, you’re probably already familiar with the concept of key performance indicators, or KPIs. There are several different KPIs within the order management process that you need to monitor and track to ensure that your processes are operating successfully: 

• Rate of return: This involves how often customers are returning items and is equal to the number of units returned divided by the number of units sold. It’s also helpful to get reasons for the return and sort them accordingly -- as some returns will have nothing to do with you while others will. That way, you can easily determine the areas that you need to improve. 
  
  
• Picking accuracy: This involves how often customers receive an incorrect order due to poor picking and is equal to the total number of orders minus the incorrect item returns divided by the total number of orders, then multiplied by 100. Poor picking can easily lead to dissatisfied customers and bad reviews, so this is extremely important to track. 
  
  
• Order lead time: This involves the length of time in between the customer placing the order, and the order actually being delivered and is equal to the lead time for each order divided by the number of total orders fulfilled. Customers love short lead times and have actually come to expect them! So be sure to do what you can to decrease your order lead time. 

Why Are Order Management and Order Processing So Important for Business?

Even though we have already touched on some of the reasons why order management and order processing are so important for business, it’s still a good idea to really break them down so that you can fully understand the weight of this process: 

• Maintaining ideal stock levels by avoiding understocking and understocking. When you’re tracking all your order management information, you can get a better idea of how often you need to restock each item. Also, you should know how to calculate finished goods inventory.
  
  
• Maintaining the information and data you need to keep your business running smoothly. When it comes to running a business, knowledge is power, so you need to take advantage of all the information you have access to. 
  
  
• Maintaining an accurate fulfillment process by eliminating room for error along the way. When you have to handle this process manually, there’s tons of room for error. However, using a specialized tool and automation where you can cut out a lot of errors that tend to occur during the fulfillment process. 
  
  
• Maintaining high levels of efficiency by cutting down on manual processes that can easily eat into your time and profit. If you’re a business owner, you know that your time is better spent elsewhere -- so feel free to take this area off your plate by embracing order management systems that allow you to focus on more important things. 

How to Best Optimize These Processes for Your Business

Clearly, efficient order management for your business is easier said than done. Thankfully, there are things you can do to optimize these processes to become more efficient and profitable as a result:

• Utilizing an order management software tool 
• Printing shipping labels in bulk
• Automating tasks within your software tool to cut down on the time and thought that has to go into each stage of the process

Final Thoughts on Order Management and Order Processing

As you can see, order management and order processing are key components of any business that conducts itself online. When you’re able to get through this process seamlessly, you can end up with satisfied customers, increased efficiency, and more money in your pocket. 

Sources:

1. The Best Practices in Measuring Customer Satisfaction | Small Business
2. Handling Product Returns: 7 Common Reasons Why Your Customers Send Back Their Order | Home Business Mag
3. 5 Things Small Business Owners Should Prioritize According To A Brand Strategist | Forbes