What is an Order Management System (OMS)? Your Guide to Choosing One

oms

For many businesses—especially high-growth merchants—the act of capturing, tracking, and fulfilling orders across two or more sales channels is tricky. To make matters worse, 55% of retailers are still using pen-and-paper manual processes at some point in their logistics process, leading to order inaccuracies and confusion.

From click to customer stands an ocean of challenges:

  • Aligning inventory and orders across multiple channels
  • Complex shipping schedules and order profiles
  • Tracking fulfillment 
  • Reporting, analytics, and evaluation

One solution to solve these problems? An order management system (OMS), which tracks stock levels across warehouses, combines order data across multiple channels, and coordinates with third-party logistics providers to get products to the end customer, fast. 

But there’s more to choosing and using an OMS than simply running order data through the platform. Some 42% of retailers say the OMS they have in place needs improvement.

So, which tasks should an OMS handle? What are the benefits of having a centralized dashboard to take, process, and fulfill customer orders? And how do you evaluate the type of OMS your business needs? This guide covers exactly that. 

Table of Contents

What is an order management system (OMS)?

An order management system is a platform that tracks sales, orders, inventory, and fulfillment. It enables the people, processes, and partnerships necessary for products to find their way to the customers who bought them.

Today, order management requires a multi-dimensional system that touches nearly every facet of how your business operates, including:

  • Customers
  • Sale channels
  • Product information
  • Inventory levels and location
  • Suppliers for purchasing and receiving
  • Customer service (namely returns and refunds)
  • Order printing, picking, packing, processing, and shipping

What does an OMS do?

Now that we know what one is, let’s take a look at the most important features, capabilities, and tasks that an OMS can help ecommerce businesses with.

Track inventory levels by channel 

The beauty of modern-day business is that brands have the ability to reach customers through a variety of channels. Customers can purchase items in-store through point-of-sale (POS) software, self-serve through a brand’s direct-to-consumer ecommerce store, and even combine online and offline activity with delivery options like buy online, pickup in-store (BOPIS).

Managing inventory across different channels is the third largest challenge for supply chain executives. Keeping track of the volume, velocity, and fulfillment of omnichannel orders will bottleneck your business if you haven’t set the right foundations for scalable growth. 

An OMS helps retailers manage inventory across the multiple channels they’re selling through. It’s a tool designed to help the 43% of ecommerce brands that plan to improve their inventory management process over the next two years. 

With one, you can:

  • Update inventory levels across all sales channels
  • Understand which SKUs sell best through each channel and restock accordingly 
  • View bestselling products by region or channel 

Automate the order fulfillment process

Modern OMSs treat the complete supply chain as an interconnected ecosystem, allowing merchants to automate their internal processes from order through to fulfillment. 

To push orders through the processing, picking, and shipping process in as little time possible, ecommerce merchants can rely on an OMS to:

  • Accept payments regardless of shipping destination or order currency
  • Feed order information through to distributors or 3PLs for fulfillment
  • Automatically print shipping labels if you’re fulfilling orders in-house 

This doesn’t just apply to customer orders within close proximity to your warehouse. While an OMS can route customer orders from warehouses based on proximity to destination, an OMS assists in scaling cross-border sales.

The order management system receives and perceives information from all points of sale, including online, physical stores, and so on. Some products even support orders from around the globe and with different currencies.”

—Zarina Bahadur, CEO and founder of 123 Baby Box 

Handle reverse logistics

We all know the importance of getting an order picked, packed, and shipped in as little time possible. Yet many brands dismiss the reverse logistics process—having a customer post an item back to your warehouse and process a refund, exchange, or credit note. 

That’s an expensive mistake to make considering one in five products bought online are returned. The vast majority (96%) of those customers will return to shop again if the returns process was easy. 

With an order management system, your ecommerce business can provide that fuss-free returns experience for everyone involved.

An OMS can automatically print return labels in case a customer needs to send items back. The return address will differ from parcel to parcel depending on the customer’s location, letting you receive and process refunds in as little time as possible. Customers can also gain insight into the status of their return with online tracking information. 

Not only that, but customer service teams get immediate information on the product(s) a customer has shipped. Everyone gets the same level of service regardless of what, how, or where they bought a product. 

Manage customer information

An order management solution acts as a customer relationship management (CRM) platform. With one, merchants can access all information they have on a customer, including previous orders, lifetime value, and their location. 

Because an OMS gives merchants insight into their customer data, retailers have the ability to hyper-personalize any marketing messages they’re sending to customers when trying to secure another sale. 

For example, an ecommerce brand can pull data from its OMS to create the following customer segments: 

  • Customers located in Europe
  • High-value customers with an AOV of $50+ 
  • People who’ve bought one item and not yet returned

Each customer segment then has its own marketing strategy. Those located in Europe won’t get the same generic marketing emails as your US audience. Expensive items are recommended to customers with a high AOV—those more likely to buy. Bestsellers are put front and center of your emails to one-time customers. 

It’s the type of personalization proven to yield 10% to 15% higher conversion rates—made easy with customer reports automatically generated inside an OMS.  

Merge order and financial data

It’s all well and good to see order data inside one central location. But an essential part of running an ecommerce business is judging whether you’re actually turning a profit—and if so, where/how so you can zone-in on making more.

Most OMSs have the ability to integrate with other back-office functions—particularly your finance software. The platform can pull information from your accounting software to merge inventory and sales data. You’ll be able to gain insight on accounts payable and receivable, as well as automate invoice and purchase order creation. No manual data entry required. 

The benefits of a good OMS 

Now that you know what an OMS does, let’s take a look at the advantages of using one as part of your order fulfillment process. 

Improve order accuracy

Fulfilling orders without an OMS is risky business. Processing orders manually using spreadsheets makes you prone to human error. For 62% of retailers, human error from manual process management is the root cause of inventory or fulfillment issues. 

Not only does this ruin customer experiences (particularly if you ship the wrong product to the wrong customer), but it creates logistical nightmares. The number of returns you’ll need to process skyrockets, as does the money you spend correcting inaccurate orders. 

The basic feature of the order management system is to reduce manual and repetitive work. An OMS offers automation wherever it is possible, from calculating costs to storing customers’ information. They are not prone to any human errors.”

—Leonardo Gomez, founder of Try Runball 

The same concept applies to manual data entry cross-platform. Some 28% of ecommerce brands still spend time building and issuing purchase orders manually. Relying on an OMS to automate their creation, however, prevents the back-and-forth communication between your brand and a vendor when the manually created purchase order is incorrect. 

Pick, pack, and ship faster

While cost of delivery is still of paramount importance to modern shoppers, the speed in which a product goes from ordered to delivered is critical. Some 43% of consumers opt for next-day delivery when shopping online—an expectation brands need to meet in order to secure the opportunity for repeat business.

“When it comes to fulfilling orders, time is of importance,” says Tanner Arnold, president and CEO of Revelation Machinery. “The longer it takes to process orders and assign them to a facility, the longer it will take for them to arrive.”

An OMS streamlines the picking and packing process by checking stock across multiple warehouses. It identifies the fulfillment center closest to the customer with available inventory. It sends order information directly to that center for the product to get picked, packed, and shipped in as little time as possible. 

An OMS automates the process of selecting the most expedient fulfillment method, resulting in faster delivery and more customer satisfaction.”

—Tanner Arnold, president and CEO of Revelation Machinery 

Meet customer expectations

It’s clear that shipping is a touchy subject for modern consumers. But it’s not just the timing of your order fulfillment process that customers value. Some 97% of customers expect to have insight into the status of their order—including its current location and estimated delivery date. 

An OMS helps merchants meet those expectations. Most platforms have built-in tracking pages to give customers an update on their order (or return) when requested. 

It’s the type of transparency that prevents customers from plastering negative reviews across the web. Almost three-quarters of negative TrustPilot reviews happen because of poor communication from a brand post-purchase. 

Prevent stockouts and forecast inventory 

Data shows that 54% of retailers don’t have access to forecasting software. Another 18% have too much money tied up in inventory. A lack of insight into inventory levels often results in two big problems, collectively costing retailers as much as 12% of sales every year:

  1. Over-stocking. Large quantities of unsold inventory means you have cash tied up—both in terms of the stock itself and the storage fees you’re paying to hold it. 
  2. Stockouts. Not having enough inventory to fulfill demand costs retailers $1 trillion each year. You’ll have to turn customers away, convincing them to return when stock has been replenished. 

An OMS with inventory control helps retailers combat both problems. Gerrid Smith, chief marketing officer at Joy Organics, explains that, with one, “retailers will be able to obtain complete information outlining high- and low-selling seasons, popular products, and consumer buying trends.” 

That data can be used to forecast how much stock individual warehouses will need, putting each in the sweet spot: not having too much (or too little) inventory. 

Accurate reports and forecasts allow you to properly manage your inventory so that you are not overselling, or under-ordering, or going overboard with stock replenishing. As a result, your order management process becomes more efficient and highly optimized.”

—Patrick Crane, CEO of Love Sew

Sell internationally 

 “We live in the 21st century, where globalization is increasing at a rapid rate,” says Erin LaCkore, founder of LaCkore Couture. “Many brands are selling products around the globe.” 

It’s true: the global ecommerce market has an estimated $4.5 trillion valuation. Ecommerce brands have the ability to reach customers all over the world. Prior to an OMS, their only limitation was the processes needed to take and fulfill international orders

Order management software helps ecommerce businesses ramp up their international presence. With one, retailers can:

  • Take payment for international orders in different currencies 
  • Automatically send order details toward 3PL partners in each country 
  • Route orders to the warehouse closest to the end customer 

The best ecommerce OMS software and tools

Are you convinced to implement an order management system in your business? Whether you’re searching for a new OMS or looking to replace your existing one, here are five great options to consider. 

Shopify Plus

Shopify Plus is an ecommerce platform for scaling brands. Merchants can process orders in-store, through their website from international customers, and track order information through one central dashboard. 

The best part? Stores using Shopify’s OMS have the option to use the Shopify Fulfillment Network (SFN). It’s a third-party logistics solution that natively integrates with the Shopify OMS. Merchants will have their OMS updated with accurate stock levels at each strategically located fulfillment center. 

Then, when an order is processed through the OMS, it will automatically get diverted to the warehouse closest to the end customer for fast and efficient fulfillment. 

Shopify streamlined order management for us. It’s one hundred times better than what we had. The standard order data model accounts for all of the nuances of payments, refunds, gift cards, and discounts, making it much easier to build customizations.”

—TJ Moretto, Director of Engineering at Babylist

Veeqo

Veeqo is another order management solution for growing ecommerce brands. The system receives order information from each sales channel and combines it within one online dashboard. 

Retailers can create custom workflows to streamline the order fulfillment process. For example, orders generated through Amazon Prime can automatically have next-day shipping labels printed. They can also create custom invoices for orders made through a wholesale trade site. 

One of the best parts about Veeqo’s OMS is that it gives retailers in-depth information about their sales history. Merchants can see total sales by channel, product, category, store, and order status. There’s also the option to sync the OMS with accounting software like QuickBooks to view important financial data, such as marketplace fees, gross profit, and net sales. 

Orderbot

With Orderbot, you can import orders from your Shopify store, send shopping notices, and sync inventory across channels and websites. It can also process payments and update both pricing and products in your stores, as well as consolidate orders that come in from multiple channels with clear fulfillment and inventory visibility.

The tool integrates with different accounting software, like Xero and QuickBooks, and shipping providers like UPS, FedEx, DHL, and USPS. With a bit more customization, you can integrate with enterprise resource planning (ERP) software like SAPB1 and Netsuite Dynamics.

Brightpearl

Brightpearl is an ERP with order management capabilities. Designed for multichannel merchants, the platform collates information from various sales channels and pools it into one dashboard. Its advanced order fulfillment settings mean merchants can automate pre-selling, split or partially fill orders, and manage back orders. 

Brightpearl also has a built-in CRM. Retailers can see where, what, and how a customer bought items. It contains basic contact information customer service teams would need to handle support queries. 

Pulse Commerce

Looking for an order management system that connects incoming orders from your marketplace, online store, dropshipping partners, and retail stores? Merchants using Pulse Commerce’s platform improve order accuracy by 80%, cut processing times by 15%, and see 20% uplifts in customer brand loyalty. 

Customers have access to online tracking with the OMS’s real-time order status page. They can also choose from a variety of delivery options, like BOPIS and click and collect

Pulse Commerce integrates with finance platforms including PayPal, Avalara, and Netsuite. Data from shipping and logistics providers, including FedEx, DHL, and the United States Postal Service, can also be fed back into the OMS. 

How to choose an OMS 

Choosing the right order management system is a lot like choosing the right spouse or life partner. There are a lot of factors that you should consider when reaching a decision, both in terms of the workflows it can automate and the existing platforms it integrates with.

Here’s a step-by-step process for choosing an OMS, including the features to look for in the platforms that make your shortlist. 

1. Define your objectives and priorities 

Much like an investment in any new type of software, the first stage of finding an OMS is to understand what you need it for. Hold a meeting with your internal stakeholders to understand features that are absolute requirements versus ones that are nice to have. 

Throughout these conversations, don’t forget to factor in scalability and future thinking. Your plans to scale the business play an important role in your decision making. Ideally, you want an OMS that will grow as the business does. 

2. Draft a request for proposal (RFP)

Order management solution vendors will submit proposals that help make your decision. The goal of these proposals is to get both you and the vendor(s) on the same page in terms of the technical requirements and limitations of the system you’re hoping to implement. 

In your RFP, don’t forget to include details on how you expect the OMS to function. Provide vendors with the following information so they can tailor-make the proposal for your business:

  • Order volumes
  • Number of SKUs
  • Any existing software or hardware you use
  • A timeline for the systems acquisition process
  • Details on training and enablement

Learn more: Ecommerce RFP Template: 10 Questions & 157 Point Checklist for Replatforming

3. Evaluate your options

It’s unlikely that you’ll find an ideal fit for your business with your first contact. So compile a list of four to six potential vendors to evaluate. Reach out to each supplier to arrange a demo or trial of their product. 

Through this process, run each OMS vendor through the following checklist to confirm you’re making the right decision:

  • Do they allow you to eliminate manual processes—like creating purchase orders—through workflow automation?
  • Do they allow you to manage sales across multiple channels, currencies, and geographies?
  • Do they support multiple warehouse locations?
  • Do they provide real-time inventory updates?
  • Do they provide reporting and forecasting that allows you to better identify problems and plan for and anticipate change?
  • Do they provide access to an API that will allow you to innovate at your own pace?
  • Do they support native and third-party integrations into the broader supply chain ecosystem (i.e., accounting, warehouse management, fulfillment, 3PL, etc.)? 
  • Is the platform stagnant or continually adding new feature functionality?

The right OMS for you is one that eliminates as many manual processes as possible from your order management process, saving you precious time and effort. Determine which tasks you need automated and invest in an OMS that can efficiently automate these features, and much more.”

—Patrick Crane, CEO of Love Sew

It’s unlikely you’ll find a vendor that is a 100% fit. Your final selection will be based on a number of trade-off criteria. 

Feature and function alone shouldn’t be your sole selection criteria, as you’ll want to take into account the entirety of the business relationship you’re getting into. Are their teams helpful? Are they experts in their field? And are they continually evolving the platform to provide their customers with options for expansion and growth? 

The right OMS for your business ticks as many of those boxes as possible. 

Find the right OMS for your business

Choosing a new OMS isn’t a decision to take lightly. The right one has the potential to save time, cut costs, and deliver better experiences to your customers—those that convince shoppers to return time and time again.

Put together your shortlist, evaluate whether your options have the essential features your entire team needs, and ask vendors for guidance on implementing the new OMS. 

It might take some time to get into the swing of things. But you’ll soon see the positive impact of storing all order-related data, automatically fulfilling orders, and providing customers with real-time shipping updates within one centralized platform. 

Order Management System (OMS)

What does OMS mean in retail?

OMS stands for “order management system.” It refers to the tools that help retailers track orders, inventory, and fulfillment. Some retail OMS also help brands monitor their people, processes, and partnerships.

Why is an order management system important?

An order management system is important because, like all software, it helps automate manual processes and therefore reduces errors, saves time, and improves outputs. This can save and make retailers more money.

What are the features of an order management system?

Order management systems typically come with the following features: centralized order management, multiple payment gateways, inventory management, fulfillment and shipping integrations, customer management, and the ability to sync with the retailer’s shopping platform.

What is the process of order management?

The typical order process that an OMS can help you manage starts with a customer placing an order. If the payment is successful, the warehouse receives the order. It’s then picked, packed, and shipped to the customer. The order process can also include measuring process efficiency and customer satisfaction.

About the author

Elise Dopson

Elise Dopson is a freelance writer for leading B2B SaaS companies. She teaches everything she knows through Peak Freelance.