Five options for order management: Pros and cons of each approach

What is order management?

Order management includes everything from receiving, processing, routing, fulfilling and potentially returning orders for customers, whether in a business-to-business (B2B) or a business-to-consumer (B2C) model. Order management is the business process of managing the data associated with an order including inventory availability, customer information, order details, transaction data, financials and fulfillment data.

Brief history of commerce and order management

According to Investopedia, the definition of commerce is “the exchange of goods or services among two or more parties.” Commerce has been an essential aspect of society since the beginning of time when humankind would trade and barter goods. Over time, the commercialization of buying and selling would become more formalized, introducing physical locations to buy and sell such as markets, shops and retail stores.

As the internet and personal computers gained popularity in the 1990s, sellers began to create online channels, adding digital ways for buyers to purchase. Now with smartphones, widespread internet access and the omnichannel commerce mentality – meaning an order can be placed or fulfilled in many different ways — buying and selling can be as simple as one click.

But managing inventory, orders and data across multiple channels is complex.

Why order management is critical

Effective order management helps make your customers happy. It encompasses the technology and processes most closely related to your customer experience, and therefore can help or hinder customer acquisition, retention and brand loyalty.

Order management touches every stage in the order lifecycle:

• Inventory — Exposing available to sell (ATS) and available to promise (ATP) inventory across the enterprise including distribution centers, stores, goods in transit or vendor drop shipping
• Order processing – Centralizing all product, order, customer data from all order sources
• Order routing — Determining the best node to fulfill an order from, whether based on proximity, cost, fulfillment capacity or other business preferences
• Fulfillment — Sending orders for fulfillment (i.e., pick/pack/ship, or pick/pack/pickup)
• Transactions — Processing all “transactional activities” associated with an order including payment, tax, fraud, loyalty programs, etc.
• Notifications and alerts— Notifying customers of order status (ideally beginning with the creation of an order) and preventing time-consuming “where is my order?” (WISMO) support calls
• Appeasements — Enabling customers, customers service agents and store associated to update, modify, cancel or potentially return an order.

Simply put, poor order management results in poor customer experience. In fact, in their future of customer experience report, PwC found that 1 in 3 customers will leave a brand they love after just one bad experience. Additionally, PwC reports that churn results are potentially even more impactful in a B2B model.

End-to-end order management

Options for order management

So, what are the best systems for order management? The answer depends on several criteria, but for the remainder of this article, we will look at the five most common options for order management:

Pros and cons for each option for order management

Summary

Order management is not “one size fits all.”  Depending on your business, there are technology systems that may be a better option for meeting your long-term organizational goals.