What is order management

June 14, 2021
Nolan Paiuk

Customers want to buy your products - great! But it might not be time to celebrate just yet. 

In essence, order management is the process of keeping track of customers orders and fulfilling them. It’s a key step in the supply chain process that directly impacts a customer’s experience with your brand - from the minute they place an order, to the moment they receive their goods, and even beyond.

Like most business processes, order management is handled differently depending on the type of business you run. What you sell, where you sell, who you sell to, and how much you sell, will determine how you tackle orders. Ensuring customer satisfaction is met, creating brand loyalty and securing repeat purchases heavily relies on having a good understanding of how this process works and making it as efficient as possible.

Despite how different this process might look from business to business, there is a generally agreed upon flow that most businesses follow.

That workflow consists of: 

1.) Customer places order

2.) Payment is processed

3.) Order information is received by warehouse to fulfill the order

4.) Order is picked, packed, and shipped

5.) Order is delivered to customer

6.) Check if the customer is satisfied with their order. Outcomes:

7.) If they are, ask them to leave a review

8.) If they aren’t, resolve the issue with the customer and if applicable, handle any refunds or returns

Seems simple enough, but let’s take a closer look at what these steps actually entail…

Customer places an order

A customer decides to place an order for your product. This triggers a series of events in the order management flow. First, you will receive the order. In B2B sales, orders are often placed over the phone or via email. But, when it comes to e-commerce sales, businesses will need a platform that lets them list their products for sale, accepts the sale and facilitates the check-out process. Setting up an online storefront, such as a Shopify store or listing products in a marketplace like Amazon, are great ways to facilitate the purchase process with a sleek front end, a smooth check-out experience, and secure payment processing. 

Regardless of what type of business you run, you’ll need the capacity to accept payment. Online retailing usually requires that payment be made before an order can be fulfilled. This is recognized via an invoice which is created as the order is placed. With B2B sales, the invoice may be issued at a later date with specified payment terms by the seller. 

Warehouse receives the order

After the order is placed and payment is received successfully, it’s onto your warehouse or your 3PL to fulfill this order and make sure that it ships to the customer. At this point, order information such as the product’s SKU and quantity need to be relayed to the warehouse so they know what items need to be shipped. This is where information can start falling through the cracks. You need to be able to quickly record all incoming orders and have an inventory system that will mark the sold items as reserved to ensure their availability. 

Using an order management system to keep track of all incoming orders is crucial, especially if your sales volume is growing and you want to avoid tedious manual data entry. Platforms like Shopify provide great base level functionality to keep track of inventory movements. However,  many businesses often find that they need a more in-depth system that can track inventory movements in their warehouse. With visibility into incoming orders, warehouse workers can allocate inventory to those sales and the physical fulfilment process can begin. It’s time to move the box...

Order is picked

Pick tickets are created from incoming orders to indicate which products need to be taken off which shelf, so a worker in the warehouse can go pick these orders in an accurate and timely manner. Picking methods generally depend on the volume of orders, and quantity per order that is being received. 

Order is packed

At the packing station, the items need to be properly packed to ensure that customers' orders get delivered in good condition. This involves verifying the order's accuracy, what kind of materials need to be used for packaging when it comes to the fragility of the items and the appropriate sized box for optimal use of resources.

Out for delivery!

Once the orders are packed, they are ready to be shipped out to customers. Typically at this stage, shipping labels and invoices are printed and placed on each box. Once the order leaves the warehouse, it’s marked as shipped and this information updates inventory levels in relevant sales channels, while a shipment confirmation and order tracking details are sent to the customer.

Post-sale follow up

A crucial step that is oftentimes overlooked, is handling post-sales follow up and support. This involves checking in with customers to see if they are satisfied with their order. In cases when a customer expresses dissatisfaction with their order, if handled correctly, it  can be an opportunity to build positive brand perception by resolving the issue and surpassing expectations. This can often be accomplished through issuing refunds or a credit, and offering hassle-free returns. On the backend, returns can be tracked by issuing a Returns Merchandise Authorization (RMA), which can be helpful if you want to keep a paper trail of any returned items and tie the return back to the original order.

On the flip side, if a customer is happy with their order, requesting an honest review is a great way to build brand trust. After all, in the age of ecommerce and online shopping, companies live and die by reviews. 

Top 4 signs of bad order management 

When you are trying to get your products into your customers’ hands, there are many moving parts that need to work seamlessly, and a lot can go wrong if not properly managed. Efficiently managing the fulfillment process can be the foundation for building a strong and reputable brand but without a good order management process, things can fall off the rails quickly. 

1. There are gaps in the process 

Processing one order successfully is like a game of hot potato. The goal is that information gets passed from one employee or department to the next without dropping it. But as your company grows, more orders mean more chances that this vital information doesn’t get passed along without something being dropped. When your warehouse workers don’t know what items to pick, pack and ship, more likely than not, there is a chance that orders that don’t meet basic quality standards will be shipped. This lack of coordination will have your employees scratching their heads and your customers anticipating undelivered shipments. 

2. Human error is part of being human 

Humans make mistakes, and while we can learn from them, not finding the right solution to a problem means that the same mistakes can be made over and over again. The online retail world is ruthless; competition is tough and today's consumers have high expectations. Imagine you sell customizable t-shirts, and that a batch of 100 shirts goes into production but they are missing the custom logo modifications.  Now you are left with idle inventory that you can’t sell, and your customer doesn’t have the product they paid for. Resulting in wasted time, effort and resources.

3. Your customers are left unsatisfied

The (almost) inevitable aftermath of a bad purchase experience is a bad review. Customers who aren’t satisfied with their order walk away and often leave behind a three star ( or lower!) review to warn others of their experience. As a growing business, this can damage your brand's reputation and affect future sales. Which is why facilitating a smooth shopping experience and preventing friction points should always be a business’s number one goal.

4. You don’t have visibility 

Running a business without insight as to what is going on is like driving a car blindfolded. There is so much data and transactions to keep track of, that if something slips, it can cause dangerous mistakes. And, if you can’t see the data, you can’t spot inefficiencies, best sellers or hidden opportunities that can push your business to the next level.  

Order management is highly susceptible to failure when working with platforms that don’t communicate with each other. Using your online storefront, like Shopify or Amazon, to manage your product catalog and inventory is a good start, but many businesses quickly realize that it’s simply not enough. As a result, small and medium sized businesses lose visibility across different sales channels and struggle to get orders out on time. 

Seamless order management is achievable

ParagonSMB is a cloud-based software that makes order management easy by centralizing the platforms you are already using. With connections to Quickbooks Online, Amazon and Shopify, it handles your orders, fulfillment and shipping in one centralized place. 

Better order management means:

- Efficient operational processes  

- Accurate data entry

- Satisfied customers 

- Full data insights and reporting  


With smart automation, business intelligence and 3rd party connections Paragon gives you access to everything you need to run an efficient order management process from one central source. This gives you the clarity you need to make informed decisions and the peace of mind of knowing you are keeping your promises and exceeding your customer expectations.

Glossary 

  • Warehouse: where raw materials or manufactured goods are stored until they are exported or sold.
  • 3PL: a service enabling the outsource of operational logistics from the warehousing to the delivery of goods.
  • Allocate inventory: a process to manage stock levels and costs by setting an allocated amount of inventory for items to be sold or used at a later date.
  • Pick: the items that need to be picked for an order before shipment.
  • Pack: the items that need to be packed for an order before a shipment.
  • Returns Merchandise Authorization (RMA): returning a product to receive a refund, exchange or repair. 
  • Order fulfillment: the process from receiving an order to getting it delivered to the end customer.
  • Product catalog: a list of products and product details intended to help customers make buying decisions.
  • Shipping labels: are used to describe what is inside of a package for shipment. They include things like addresses, sender, recipient, weight and barcodes. 
  • Centralized system: all users are connected on the same network. All relevant information is passed from to to this one place. 
  • Cloud based: applications, services or resources that are stored on servers and accessible via the internet from any location via the internet.
  • Lot number: a numerical identifier associated with goods that were made or processed using the same equipment, made from the same materials and at the same time. All products in a given lot will have the same lot number. 
  • Inventory: the goods and materials held by the business with the purpose  to sell, produce or use. 

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