An Order Management System — Your Way to an Efficient Manufacturing Business

What Is an Order Management System, and How Does It Work?

An order management system (OMS) is a complex software solution that helps you manage orders from placement to fulfillment. Its main purpose is to give end-to-end visibility of an order’s journey for both businesses and buyers, and thus prevent mistakes and delays.
An OMS collects, systemizes, and provides real-time data on nearly every aspect of your ordering and delivery lifecycle. Take this simple example:

1. A client places an order and completes their shipping details. 

2. A manager confirms the order details and chooses the most logistically suitable warehouse.

3. A warehouse employee generates an invoice; picks, packs, and ships the order; and updates inventory data.

4. The client receives the order and confirms it. If they aren’t satisfied with the product, they can return it and request a refund. 

With an OMS, you can track and manage information at each of these order management process stages. Of course, this simple workflow assumes that you’re manufacturing products in large batches, storing them, and retrieving them when a customer places an order. A more complex workflow could include raw material ordering (or stock retrieval) and product manufacturing.
A well-chosen and well-integrated OMS can manage simple and complex workflows equally well. To get the benefits, you need to understand the different types of order management systems and their differences. 

Types of Order Management Systems

There are plenty of ways to categorize solutions when it comes to order management for manufacturing. In this section, we’ve grouped them in terms of the main either/or options you have.

Spreadsheets vs full-fledged software

Spreadsheets aren’t technically a software product, but many companies still use them to manage orders. In fact, spreadsheets can be helpful for small businesses that operate one or two sales channels, but once a business starts to grow, this approach becomes ineffective.
This is where full-fledged software — i.e., an OMS solution — can help. An OMS automates order management tasks, optimizes workflows, tracks and manages inventory, and predicts demand peaks and lows.

On-premise vs cloud-based software

Another OMS product differentiator is how data is stored. On-premise software collects and stores data on your company’s local servers. A cloud-based solution, in contrast, isn’t tied to a particular location — all data is stored in the cloud, which means you can access it from anywhere. A cloud-based OMS service provides almost unlimited scaling capabilities, fast deployment, and “pay as you grow” pricing.  

Standalone tools vs software modules

A standalone OMS solution manages tasks directly related to order processing and shipping and doesn't interfere with other processes. 
But an OMS can also be just one part of a larger solution, along with other modules for customer relationship management (CRM), supply chain, finance, and other tasks designed to improve business processes overall. 

B2B vs B2C software

While most OMSs cover the needs of both B2B and B2C manufacturing companies, some offer tailored solutions. The main difference lies in how they streamline the sales cycle and related paperwork. For example, B2B systems often support Electronic Data Interchange (EDI): a standard format that digitizes the paper trail for B2B purchases.
The decision you make in each of these product categories will depend on your business setup, needs, and budget. But one thing is sure: choosing the right eCommerce order management system brings you a host of benefits. Let’s consider them now. 

The Benefits of an Order Management System in Manufacturing

When properly integrated, an OMS can give you a competitive edge thanks to multiple benefits.

Streamlined order processing and fulfillment

Manually retyping orders, shipping data, and payment details when you move from one stage of order management to another is tiresome. Employees are also prone to make mistakes with mundane, repetitive tasks.
An OMS addresses these issues by automating repetitive tasks such as:

• Collecting and storing customer details

• Updating inventory levels after selling items

• Printing shipping labels 

• Creating invoices and accepting payments

This improvement allows you to optimize your staffing levels, as your employees have more time to perform more complex tasks.

Business-wide inventory management 

Poor inventory management costs big money. In 2020, the cost of inventory distortion amounted to $1.8 trillion, and the pandemic wasn't its only cause.
An advanced order management system can track inventory levels across all your warehouses, storages, brick-and-mortar shops, and other channels. In particular, it can alert you when a warehouse or store is close to stockout, analyze which channel or region is generating the most orders, and calculate optimum stock levels and order frequencies. 
As a result, you’re less likely to lose customers to competitors because a product is out of stock. 

More accurate demand forecasting

A stockout is bad, but with warehouse rents on the rise, so is the opposite problem: a warehouse full of unsold inventory. Overestimating demand can lead to thousands of dollars wasted on manufacturing and storage. 
OMS solutions use machine learning and AI to make more accurate demand forecasts that help optimize your production and storage costs. In one market study, machine learning-based forecasts were found to be more accurate than statistical forecasts in 71% of cases. 

Efficient returns handling 

Unfortunately for most businesses, customer returns are expected as standard. What’s more, 77% of customers believe that the greatest feature of a VIP/loyalty program is an instant refund. This suggests that you can satisfy more customers by simplifying your return and refund processes.
An advanced order management system makes this possible. It can process product return applications automatically and also track and control the movement of returning orders across your company and third-party drop-off locations. 

An improved customer experience without the overwhelm

A well–implemented OMS improves customer experience in many ways without compromising employee well-being. 
In addition to eliminating mistakes during order fulfillment and handling product return requests, an OMS can

• Give up-to-date data on orders and previous customer interactions, allowing agents to offer instant and personalized service

• Send notifications to customers regarding order status

• Let customers track their order’s location and arrival date 

These things lead to higher customer satisfaction with no increase in employee workload.

Increased revenue

All the above advantages lead to the main benefit of an OMS — higher profit. With an order management solution in place, you can cut spending on inventory management, reduce losses caused by stockouts or overproduction, and drive sales by attracting more customers with excellent service. 
Still, to reap the rewards, you need to get the best OMS option for your needs. One way to do this is to build a custom solution from scratch.
So what does custom development involve?

How to Build an Effective eCommerce Order Management System

Every order management system development project is different, since it depends on a customer's unique challenges, requirements, and vision. Still, all projects share the same basic stages.
Here’s the main workflow you can expect if you decide to build your own solution with a vendor.

Clarifying your requirements and establishing effective communication

At this stage, the vendor clarifies your overall vision for your solution and the features you want to include. They formalize your business goals, budget, and time constraints and double-check that your product vision aligns with them and is realistic.
This stage also establishes the principles of effective communication and how you’ll interact with the development team throughout the project.

Analyzing your challenges and existing order creation process

Building an effective order management system for a manufacturing business begins with a careful analysis of your current challenges.
First, the development team compares your current order management workflow with your vision, in order to pinpoint critical system features. Then, by analyzing your challenges, the vendor defines the additional system elements you’ll need to overcome them. 
A good vendor will also point out things you hadn’t considered. For example, you might want to develop a price calculator as a solution for employees. Making this feature available to your customers too might speed up their checkout process. 

Documenting system architecture and design

Your vendor draws up the final solution architecture and design for your approval. Technical writers also prepare documentation for the development team in order to assign team members, project tasks, and responsibilities.

Creating a project roadmap and establishing deadlines

Next, the vendor creates and approves a project roadmap with milestones, deadlines, and task descriptions. This roadmap is shared between you and the development team. It lets you see how your expectations will be met and reduces the chances of misunderstandings about deadlines or project results. 

Development, testing, and release

Engineers and designers develop your order management software according to your roadmap and technical documentation. Your vendor will update you on the project's progress and challenges.
A QA team rigorously tests the technical capability and usability of your solution according to predefined test requirements and scenarios. When the product meets all requirements, the team deploys and delivers it.
The overall success of order management system development depends on your vendor's experience and expertise, quality of service, and team skills. Each stage involves many important details that could lead to poor results if missed. This is why it’s important to check vendor case studies on building a custom order management system to choose the best development company for your project.
Still, building an OMS solution from scratch isn't always the best way to improve your order management process. In many cases, buying a turnkey solution could be a better choice. Here’s what you need to consider. 

Choosing an OMS: Buy or Build?  

Your choice of whether to buy or build an OMS solution will depend on your budget, deadlines, requirements, and other factors. Let’s look at each option.

When to buy a turnkey eCommerce order management system 

Buying an existing OMS solution may be a better choice in the following situations. 

Your budget is limited

Purchasing off-the-shelf software saves you the costs of software development, testing, maintenance, and updates. You can also choose a more affordable product or an OMS with just basic features if your needs are simple. 

You need a system here and now

A pre-built system is ready to go, which is perfect if you don’t have time to build a custom product and want to start processing orders fast.

You don’t have specific requirements

Off-the-shelf OMS solutions usually come with a range of pre-tested features and integrations. As a result, they’re usually enough to cover your needs, if you don’t have specific requirements.

When to develop an order management system

If you’re in the following situations, it makes more sense to choose OMS development.

Your company has unique business requirements

Developing a custom solution is a better choice if your business has a unique business model or manufacturing processes that can’t be addressed by an existing OMS. Custom development gives you a product that’s tailored to your specific needs.

You have specific integrations

Though advanced order management solutions have built-in integrations with a wide range of third-party services, they may not cover everything you use, especially if you use in-house or less common software. In this case, developing a custom solution may be more efficient than trying to build APIs or using multiple apps in your workflow.

You plan to deal with high volumes

If you have a high production volume and process hundreds of orders daily, you need an OMS that’s built to scale. Because the cost of most off-the-shelf OMSs increases with order volume, building a custom order management system can work out more cost-effective in the long run as you no longer have ongoing subscription fees.

Ready to Optimize Your Order Management?

An OMS gives you a birds-eye view of your order management process and boosts your production and delivery efficiency. Task automation, inventory channel monitoring, and reporting all help streamline every step of order processing, manufacturing, and fulfillment. As a result, you can provide better customer service, increase loyalty, and boost sales. 
Still, all this is only possible when you choose the right OMS for your needs. In some cases, an off-the-shelf solution is the right choice; in others, only custom OMS development will cover all your requirements. 
If you need a custom OMS from an experienced vendor, contact BitsOrchestra, and let’s discuss your project!