What is an order management system and how to choose the right one?

When your business starts to grow, it’s important to find an order management system that supports D2C manufacturers looking to get more control over their manufacturing and sales order management, inventory, and production planning. That’s why we’ve put together a hotlist of tips to help you get started on this search.

In this article, we explore order management solutions, tips you can follow to pick the right order management software, and the benefits of improving your order management.

What is an order management system (OMS)?

An Order Management System (OMS) is a software platform designed to help businesses manage and track their orders from multiple channels. The system integrates with various sales channels, such as e-commerce websites, marketplaces, point of sale systems, and more, to automate and streamline order processing and fulfillment.

The primary purpose of an OMS is to provide a centralized system for managing orders, inventory, and customer data. It allows businesses to monitor and track orders in real-time, from the point of sale through to delivery, so they can quickly identify and resolve any issues and manufacturing bottlenecks that may arise during the process.

An OMS can be particularly useful for businesses that have opted for multichannel selling, have a high volume of orders, or operate in complex supply chains. It can help reduce errors, improve order accuracy, and provide a better customer experience by ensuring timely and efficient order processing and delivery.

What is the difference between EMS and OMS?

Enterprise Management System (EMS) and OMS are both software systems used by businesses to manage their operations, but they serve different functions.

EMS is an integrated software platform that helps businesses manage and automate various business processes, including accounting, human resources, supply chain management, and customer relationship management. An EMS provides a centralized system for managing business operations, with features that may include financial management, payroll and benefits, inventory management, and customer engagement.

The key difference between EMS and OMS is that an EMS is a broader, all-encompassing software system that helps businesses manage all aspects of their operations, while an OMS is a more specialized system that focuses specifically on managing the order fulfillment process. While an EMS may include order management as one of its features, an OMS is designed to provide comprehensive support for order processing, fulfillment, and delivery.

In summary, EMS is a broader system for managing various aspects of a business, while OMS is a specialized system for managing the order fulfillment process.

What does an order management system do?

An OMS typically offers features such as order processing, multilocation inventory management, shipping and logistics management, customer management, and reporting and manufacturing analytics. With these features, businesses can manage inventory levels, track shipping and delivery status, manage make-to-order or make-to-stock workflows, update customer information, and generate reports to gain insights into their sales performance.

Some of the core functions of an OMS typically include the following:

• Order processing — This includes creating new orders, tracking the status of existing orders, and updating order information as necessary.
• Shipping and logistics — You can use OMS to automate the shipping process by calculating shipping costs, generating shipping labels, and tracking the shipment of orders.
• Customer management — An OMS can store customer information, including order history and shipping information, and enable customer service representatives to view and update this information as necessary.
• Inventory management — Businesses can use an OMS to track their inventory levels in real-time, so they can quickly identify low stock levels and avoid stockouts.
• Reporting and analytics — An OMS can generate reports on order and inventory data, providing businesses with insights into their sales performance and inventory levels.

Overall, an OMS can help businesses improve their order processing, reduce errors and delays, and provide a better customer experience.

The order management process explained

The order management process involves various steps that a business follows to process an order, from receiving to delivering it to the customer. The process may differ slightly depending on the specific business and industry but generally includes the following 7 steps:

1. Order placement — The first step in the order management process is when a customer places an order through a business’ sales channels, such as a website, marketplace, or in-store.
2. Order capture — The business captures the order information, which includes the customer’s name, shipping address, product details, and payment information. This information is typically stored in an order management system (OMS).
3. Order processing — The OMS processes the order, which involves verifying the customer’s information, checking the inventory for the requested products, and calculating the total order cost, including any taxes or shipping fees.
4. Order fulfillment — Once it’s processed, the business proceeds to fulfill the order. This step may involve picking and packing the products, generating shipping labels, and arranging for the order shipment.
5. Shipping and delivery — The order is shipped to the customer using the chosen shipping method, and the customer is provided with a tracking number to monitor the delivery status.
6. Order tracking and updates — The OMS tracks the order status, updates the inventory levels, and provides updates to the customer on the order progress, such as estimated delivery time and any delays.
7. Order confirmation — Once the order is delivered, the customer is notified, and the order status is updated in the OMS. The customer may be asked to confirm the delivery and provide feedback on their purchase experience.

When do you need an order management system?

In your business’s early days, handling orders was pretty easy. You can probably even recall your first, from the customer’s information to the product you sold, and even how you delivered it. But with each new sale, you’ll lose that magic you once felt as more and more sales roll in. And the quicker you grow your brand and reputation, the faster the number of sales your business handles increases.

In this make or break moment, if you’re unable to fulfill the increasing orders, you will do more harm than good.

At this stage, it’s important to find the perfect order management software specifically built for manufacturers. Otherwise, you’re going to drive away customers, damage your reputation, or get set up with system for order management that doesn’t support your specific workflows, for example, D2C manufacturing.

6 benefits of using an order management system

Now you have a good overview of order management systems, their basic functionality, and how they work. Let’s move on to the benefits of adopting an order management system.

1. Efficiency through automation

You might be the lord and master of spreadsheets, but unfortunately, you won’t be able to outperform manufacturing process automation.

Effective order management can help you save money on manual labor, decrease the risk of human errors, and free up time so you can refocus your priorities on growing your business and improving customer satisfaction.

2. Around the clock access

If you suddenly wake up in a nervous sweat and want to quickly check your orders for peace of mind, without order management software, it will be a sleepless night for you. Getting set up with cloud manufacturing software, especially one with order management capabilities, allows you to check your orders from any place at any time.

Other than settling any paranoid thoughts about your order management being out of whack, this instant, 24/7 access allows for greater data control, improved customer services, and a more efficient order management process.

3. Growth

Your order management system automates your order processes. More importantly, it takes all your sales channels into one single platform.

This smooth automated process will run in the background, so you can free up time to collect and analyze data.

Invaluable free time to gather this information allows you to intelligently plan to further grow your business and identify any issues along your manufacturing processes.

4. Inventory management

Order management solutions will greatly improve your inventory management by giving you real-time information on current stock levels, and items sold, returned, exchanged, or in production. This helps manufacturers avoid over-selling inventory or not manufacturing enough.

Most e-commerce order management software is built for retailers or drop shippers hoping to get more control over their business. When looking into an order management tool, be sure to find something that can help you out with your raw material inventory management.

5. Centralize your business

As touched upon earlier, using an order management system allows manufacturers to not only manage their sales channels in one place but rather their entire business.

An order management tool will break down complex information to simplify your orders into one place, protecting you from order errors, customer dissatisfaction from delays, lost revenue from low inventory, and incorrect invoicing.

But once again, as a manufacturer, you want to centralize your sales but also find a tool that can help you manage your production planning and scheduling too.

6. Real-time information

Finally, and once again touched upon in the earlier points, real-time information about your business’s performance with an order management system is critical to growing your business. Having live updates on inventory and sales is going to help you react to any issues immediately with your automated order management rather than allowing problems to develop and for the customer to be left dissatisfied.

Alongside this, having all your information in real-time means the product, manufacturing, and payment data are up to date.

So, that’s everything you need to know about order management systems, the only issue now is choosing the right one for your business.

What are the 5 best practices of order management?

The 5 best practices for effective order management are:

1. Streamline order processing — One of the best practices for effective order management is streamlining the order processing workflow. This can involve automating various order management tasks, such as order capture, processing, and fulfillment. By streamlining these processes, businesses can reduce the risk of errors and ensure a faster, more efficient order fulfillment process.
2. Centralize order information — Another best practice is to centralize order information. This can be achieved through the use of an Order Management System (OMS), which provides a centralized hub for order information, including order details, shipping information, and customer information. By centralizing this information, businesses can more effectively manage orders, reduce errors, and improve order fulfillment speed.
3. Maintain accurate inventory — Effective order management requires maintaining accurate inventory levels. This involves regular inventory checks, cycle counting, and real-time inventory updates. By keeping accurate inventory levels, businesses can fulfill orders more quickly and accurately, improving customer satisfaction.
4. Prioritize order fulfillment — Another best practice is to prioritize order fulfillment based on order volume, shipping requirements, and other factors. By prioritizing orders, businesses can ensure that orders are fulfilled promptly and efficiently, reducing the risk of order cancellations or dissatisfied customers.
5. Monitor order performance — The final best practice for effective order management is regularly monitoring order performance. This includes tracking order fulfillment times, shipping times, and order accuracy. By monitoring order performance, businesses can identify areas for improvement and optimize their order management processes to improve order fulfillment speed, accuracy, and overall customer satisfaction.

How to choose the right order management system

There are so many options available on the market right now. It’s hard choosing an order management system. Unfortunately, the majority out there support regular old retailers, and wholesalers, and not manufacturers.

But don’t worry, we’ve got your back. We’ve put together a checklist that you can follow to select the perfect order management software for your business:

Your budget

Your order management system is going to be a crucial ally in your business’ success. You might commit to a cheap system to save money, but it will cost your business much more in the long run.

The same can be said about the other extreme. Some systems can cost tens of thousands, but if you only end up using 20% of the features, it’s not a good use of your resources.

Be realistic with the amount you’re willing to spend, as most systems will charge different rates depending on what you need, so be sure to compare the market.

Compare the market

There are a lot of order management systems that don’t match well with manufacturers. Yes, you can use them, but you run the risk of having to set up many additional tools. Make sure you get an order management system that can support your entire business from one platform.

Be sure to check out review sites and see what other people say about the software.

Integrations

At the end of the day, if you’re a traditional manufacturer, e-commerce business, or D2C business, you’ll need an order management system that can integrate with your existing e-commerce, accounting, and other tools your business has decided to adopt.

After you’ve made your list of the order management systems you want to use, explore their integration features to see if they support all your sales channels. But be warned, with most order management solutions, the more integrations you need, the higher the cost will be.

Be tactical, and only select a system with the necessary integrations.

Production flow

D2C manufacturers’ production processes are very likely to change. Maybe you realize that an assemble-to-order model is better for the holiday season, or perhaps you start offering bespoke products for customers looking for more customization.

Regardless of the reason for your production flow change, you need a system that can adapt to your business and support you in whichever way you take.

A flexible order management system will make it easy to change your business processes, handle stocked inventory and custom orders, and allow you to make edits to customers’ orders on the move.

Free trials and demos

Following the four points above, you should now have a list of different order management systems that:

• Are reasonably priced
• Can integrate with your other software
• Can support different types of manufacturing processes

Go through each piece of software and sign up for a trial to see if the OMS is suitable for your business.

But don’t be intimidated by booking demos, either. Some software providers offer a live step-by-step integration session, using your business as an example, so you can see firsthand how their order management solutions can benefit your business.

Review Your Shortlist

However, it’s important not to just outright commit with one that seems like a match.

A survey by Retail Systems Research found that 29% of logistic firms, suppliers, and retailers identified legacy systems as their biggest obstruction to omnichannel execution.

You also need to consider wider criteria as you need to take into account the entire business relationship that you will have with your chosen order management system. Consider factors such as their expertiese in this area.

Software that comes with an order management system and more

Katana’s manufacturing ERP software helps thousands of manufacturers get a live look at their business. It also comes with features built specifically for manufacturers looking to get more control over their:

• Order management
• Inventory management
• Production management

Finding an order management system as a maker is a nightmare, as most software on the market is just missing those tools needed by manufacturers, especially when it comes to handling raw materials and tracking the conversion of those materials into a finished product.

Katana was built to fill this gap in the market. Let’s explore Katana’s features a bit closer.

Real-time master planning

Never lose track of materials, and remove the headache of manually committing your raw materials into production. With Katana, you can create a manufacturing order, and the software will allocate available materials to the open order for you. No more second-guessing yourself, so you can return to making your products.

Reorder points

If you don’t like production stopping from stockouts, imagine how your customers feel about it. Katana lets you set reorder points to highlight when inventory is running low, allowing you to dramatically reduce your manufacturing lead time.

Multilocation inventory management

Do you have warehouses or inventory stored here, there, and everywhere? Not a problem! If you have inventory on consignment, with an outsourced manufacturer, or sat at another location, Katana allows you to track each location. This way you have a clear overview of your entire inventory, regardless where it’s stored.

Running low on inventory in one location but got some spare at another? Perform a stock transfer, and have the issue solved with few clicks.

Production scheduling

Fed up of constantly making a schedule, but a new order or a lack of material forces you to redevelop the entire thing? Leave that hassle behind with an order management process flow that you can easily rearrange with a quick drag-and-drop. Best of all, Katana will redistribute your finished goods and raw material to satisfy the new workflow.

Purchase order management

Sometimes your orders don’t arrive together, and you can quickly forget some is on the way and order more material you don’t need. Katana’s order management software allows you to partially receive deliveries, so you and your team members know more is on the way.

Integrations

Katana offers seamless integration with the best platforms out there, including e-commerce and accounting software such as:

• QuickBooks Online
• Xero
• Shopify
• WooCommerce
• BigCommerce