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The ultimate guide to Order Management

2020-11-22

Order Management is an all-encompassing process that begins with customers buying and paying for an order through delivery of goods and collection of customer satisfaction metrics.

If this sounds like it will entail a lot of separate processes — it will. But having a rock-solid Order Management process is what has made companies like Amazon worth trillions of dollars.

While your company might not quite be at Amazon’s level, you can make your Order Management process an advantage when compared to your competitors. With this series of blog posts, we will show you how to do that.

What is Order Management?

Let’s start with the basics. Order Management is the process of receiving, tracking and fulfilling customer orders. This includes managing the people, processes and potential partnerships needed to fulfill these orders. When a customer comes to your e-commerce store, hits the buy button and pays, or uses an after-pay service, the firing gun on the process is started.

Not only do you need to keep track of and deliver the physical goods, but also you need to manage the data around the customer: What is their payment history like? Are they an a-list client? How does their order history look?

All sounds pretty complicated, right? That’s why we have distilled the process down to its key elements below. We call this the Order Management Cycle.

Why is Order Management Important?

Before we get into the Order Management Cycle, we wanted to give you the “so what”. You surely have a full to-do list already, so why prioritize Order Management as well?

Customers can be demanding and the internet has conditioned people to expect exemplary service delivered to their doorstep with a single click. You should keep in mind that 65% of customers have cut ties with a brand over just a single negative encounter. That’s a lot of pressure, so you need to be sure your process is watertight.

The reason that Order Management is so important is not just because customers will leave, it is because a strong Order Management process can generate positive reviews and word-of-mouth marketing for your service.

Both of these forms of marketing are completely free and among the most valuable of assets you have. 85% of people trust online reviews as much as a personal recommendation, so make sure you give your customers space to congratulate you on your excellent service.

What is the Order Management Cycle?

When you are considering the processes below, we would encourage you to take note of where your process currently stands. Is it functioning well? Do you do this manually? Has this caused problems? You can then decide which part of the process needs work first and how you will go about improving it.

1. Order Placed

Customers expect to be able to place orders from anywhere — phone, laptop, iPad. Your e-commerce store needs to be optimized to receive orders from any of these channels if you want to compete.

2. Order received

Once the order has been placed, you need your e-commerce system, inventory system and order approval system to communicate and okay the order.

3. Order approved

You trust the customer to pay and you have the available inventory. Now the order processing begins, and you start the process of physically delivering the goods.

4. Order is picked

You or a 3PL is now responsible for gathering the items on the picking list from the warehouse. The more inventory you hold, the more complex this process becomes, and the more gains are to be made through optimization.

5. Order is packaged

You’ve got the items, now it’s time to package them in the most cost-efficient manner while maintaining items’ safety in transit. You can add little customizations at this point to wow your customers.

6. Order ships

It’s time for shipment to the customer. Whether you work with a preferred shipment provider or hunt for the best rates, you will need to ship in a timely manner with a shipment provider who delivers in a professional way.

7. Item delivered

Your customer has a beaming smile as they receive their order. But will it stay that way once they open the box? This is where the coordination of your e-commerce, inventory and pick & pack systems is tested. Do the customers have the correct items in the correct quantities?

8. Is your customer satisfied?

You should always check-in on your customer to make sure the correct goods arrived in a good condition. Gathering this feedback not only increases retention, but also gives you insights on areas of your process that can be improved.

9. What could be improved?

Based on the feedback from your customer and the efficiency of your process, you should define areas for improvement and create actionable plans to make those improvements.

What KPIs should I be focused on?

With any process, it is important to define KPIs that help you measure the effectiveness of your system. We have outlined a few key KPIs you should be tracking below.

Rate of return

This metric tells you how often items are being returned by your customers. It is a good insight into how well your systems communicate. If this rate is high, you need to ask yourself why.

Do this by distinguishing between different reasons for returns. This gives you guidance on which part of your process is letting you down the most. And where to focus first.

Picking accuracy

This measures how often you send incorrect items to customers.

A low picking accuracy KPI leads to unsatisfied customers and negative reviews. This is a crucial step in the process, so make sure you master it.

Low picking accuracy scores can lead to huge inefficiencies as there is much human effort that goes into reshipping the correct products.

Order lead time

This KPI looks at the period of time (days or weeks) from a customer placing an order to it being delivered.

Calculate order lead time based on an average time of all the orders that were fulfilled.

Fast and accurate lead times can be a major advantage for you as they allow customers to plan ahead. Make sure you don’t sacrifice speed for accuracy though.

Purchase frequency

This metric looks at how often a customer orders from you over a given period of time.

This metric helps you to track your CRM campaigns and can serve as a timeline where you can see if a specific action, or lack of action, caused a customer to stop ordering.

What can I do to improve my process?

While reflecting on your Order Management process, you will need to make an assessment of where you currently stand.

You should make this assessment based on the Order Management Cycle we have outlined above. Based on this assessment, you can then prioritize areas you need to improve.

Once you have identified areas you'd like to work on based on your assessment, you should use the KPIs outlined to verify where the numbers, and your customers, are telling you to work.

Combining these two sources of information will give you a plan to improve your Order Management process.