What is order management?

1. What is order management? Definition and explanation

Order management is the process of order capturing, tracking, and fulfilling customer orders. This definition encompasses the entire journey from when a customer places an order until they receive their product and beyond, including any post-delivery activities such as returns or customer service.

The explanation of order management centres on its role as a comprehensive business process that coordinates multiple departments and functions. Order management is the tracking of orders from inception to fulfillment, and the management of the people, processes, and data connected to the order. It serves as the backbone of any business that sells products, ensuring that customer expectations are met whilst maintaining operational efficiency.

At its essence, order management transforms a customer's purchase intent into a delivered product through a series of coordinated activities. It involves managing inventory, processing payments, coordinating with suppliers, overseeing warehouse operations, arranging shipping, and maintaining customer communication throughout the entire process.

Unlike simple order processing, which focuses primarily on the transactional elements, order management takes a holistic approach that considers the entire customer experience and business impact. It integrates with various business functions including sales, inventory management, accounting, customer service, and logistics to create a seamless operation.

2. The order management process explained

The order management process is a systematic approach that ensures every customer order is handled efficiently from start to finish. The order management process begins when an order is placed, and ends when the customer receives their package, though modern order management extends beyond delivery to include post-sale activities.

Order lifecycle stages

Order placement and capture The process begins when customers place orders through various channels-online stores, phone calls, email, or in-person sales. Effective order management ensures that regardless of the channel used, all orders are captured accurately with complete customer and product information.

Order validation and verification Once captured, orders undergo validation to confirm customer details, payment information, and product availability. This critical step prevents issues downstream and ensures that only legitimate, payable orders proceed through the system.

Inventory allocation and reservation The system checks inventory levels across all locations and allocates stock to fulfill the order. This process may involve reserving specific items, coordinating with suppliers for out-of-stock products, or determining the optimal fulfillment location.

Order processing and preparation During this stage, the order moves to fulfillment teams who pick, pack, and prepare items for shipment. This includes generating picking lists, coordinating warehouse activities, and ensuring proper packaging and labeling.

Shipping and delivery coordination The process involves selecting appropriate shipping methods, coordinating with carriers, generating tracking information, and managing the actual delivery to customers.

Post-delivery management Modern order management continues after delivery, handling customer feedback, processing returns or exchanges, managing warranty claims, and maintaining ongoing customer relationships.

3. Key components of effective order management

Successful order management relies on several interconnected components that work together to create a seamless customer experience whilst maintaining operational efficiency.

Essential order management elements

✅ Multi-channel order integration Modern businesses receive orders from multiple channels including websites, marketplaces, mobile apps, phone systems, and physical stores. Effective order management consolidates all these channels into a unified system, ensuring consistent processing regardless of how customers place their orders.

✅ Real-time inventory visibility Accurate, up-to-date inventory information is crucial for preventing overselling and managing customer expectations. This includes tracking stock levels across multiple locations, understanding committed inventory, and coordinating with suppliers for replenishment.

✅ Customer communication systems Keeping customers informed throughout the order process builds trust and reduces service enquiries. This includes order confirmation emails, shipping notifications, tracking updates, and proactive communication about any delays or issues.

✅ Payment processing integration Seamless payment handling ensures orders can be processed quickly whilst maintaining security and compliance. This includes managing different payment methods, handling refunds, and coordinating with financial systems.

⚠️ Quality control processes Implementing checks throughout the order management process helps prevent errors and ensures customers receive exactly what they ordered. This includes order accuracy verification, product quality checks, and packaging standards.

Supporting infrastructure

Data management and analytics Effective order management generates valuable data about customer behaviour, product performance, and operational efficiency. Proper data management enables businesses to identify trends, optimise processes, and make informed decisions.

Integration capabilities Order management must connect with various business systems including accounting software, customer relationship management (CRM) systems, warehouse management systems, and e-commerce platforms.

Scalability and flexibility As businesses grow, their order management processes must be able to handle increased volume whilst maintaining service quality. This requires systems and processes that can scale efficiently without proportional increases in complexity or cost.

4. Benefits of proper order management

Implementing effective order management delivers significant benefits across all aspects of business operations, from customer satisfaction to financial performance.

Customer experience improvements

Enhanced order accuracy An OMS can help control costs and generate revenue by automating manual processes and reducing errors. Proper order management significantly reduces order errors through systematic validation, automated processes, and quality control measures. This leads to fewer customer complaints, reduced return rates, and improved customer satisfaction.

Faster processing times Streamlined processes and automation enable businesses to process orders more quickly, reducing the time between order placement and delivery. This improved speed often becomes a competitive advantage, particularly in markets where customers expect rapid fulfillment.

Better communication and transparency Customers receive timely updates about their orders, including confirmation, processing status, shipping information, and delivery tracking. This transparency reduces customer anxiety and service enquiries whilst building trust in the brand.

Operational efficiency gains

✅ Reduced manual work Automation eliminates repetitive manual tasks such as data entry, order routing, and documentation generation. Staff can focus on higher-value activities like customer service, process improvement, and strategic initiatives.

✅ Improved inventory management Real-time visibility into inventory levels and committed stock helps businesses optimise their inventory investments whilst maintaining service levels. This reduces carrying costs and minimises stockouts.

✅ Better resource utilisation Coordinated processes ensure that warehouse staff, customer service teams, and delivery resources are used efficiently. This leads to improved productivity and reduced operational costs.

Financial benefits

Cost reduction Efficient order management reduces costs through automation, error reduction, improved inventory turnover, and better resource utilisation. These savings directly impact profitability.

Revenue optimisation Faster processing, improved accuracy, and better customer experience lead to increased customer satisfaction and repeat business. Additionally, better inventory management can increase sales by reducing stockouts.

Cash flow improvement Efficient order processing accelerates the conversion of orders to cash, improving working capital and cash flow management.

5. Order management workflow stages

Understanding the detailed workflow of order management helps businesses identify optimisation opportunities and ensure all critical steps are properly managed.

Pre-order preparation

Inventory planning and management Before orders can be processed efficiently, businesses must have proper inventory planning in place. This includes demand forecasting, supplier coordination, and stock level optimisation across all locations.

System setup and integration Proper order management requires well-configured systems that integrate seamlessly with all necessary business functions. This foundation is crucial for smooth operations.

Order processing workflow

1. Order receipt and initial processing The order management workflow starts when the department receives a customer's order. The system captures all relevant information including customer details, product specifications, quantities, pricing, and delivery requirements.

2. Order validation and credit checks Orders undergo comprehensive validation including customer information verification, payment method confirmation, and credit limit checks where applicable. This step prevents problematic orders from entering the fulfillment pipeline.

3. Inventory checking and allocation The system verifies product availability across all locations and allocates specific inventory to fulfill the order. If items are unavailable, the system may automatically coordinate with suppliers or suggest alternatives.

4. Order routing and prioritisation Based on factors such as customer priority, shipping requirements, and operational capacity, orders are routed to appropriate fulfillment locations and prioritised within the workflow.

5. Pick, pack, and ship preparation Fulfillment teams receive detailed instructions for order preparation, including picking lists, packing requirements, and shipping specifications. Quality control measures ensure accuracy throughout this process.

Post-processing activities

Delivery coordination and tracking Once orders are prepared, shipping arrangements are finalised, tracking information is generated, and customers are notified. The system continues to monitor delivery progress and handle any issues that arise.

Customer service and support After delivery, order management continues with customer support activities, handling enquiries, processing returns or exchanges, and managing any warranty or service requirements.

6. Order management vs order fulfilment

While often used interchangeably, order management and order fulfilment represent different aspects of the customer service process, each with distinct roles and responsibilities.

Order management scope

Order management encompasses the entire customer order lifecycle, from initial inquiry through post-delivery service. It includes strategic planning, process coordination, and relationship management activities that extend well beyond the physical handling of products.

Strategic elements

• Customer relationship management
• Inventory planning and optimisation
• Process design and improvement
• Performance measurement and analysis
• System integration and technology management

Coordination functions

• Multi-channel order integration
• Cross-departmental communication
• Supplier and vendor management
• Customer communication and service
• Exception handling and problem resolution

Order fulfilment focus

Order fulfilment specifically refers to the physical processes involved in getting products from inventory to customers. It's primarily concerned with the efficient execution of picking, packing, and shipping activities.

Operational activities

• Warehouse picking and packing
• Shipping and logistics coordination
• Inventory handling and movement
• Quality control and inspection
• Returns processing and handling

The relationship between order management and fulfilment

Order management provides the framework and coordination that enables efficient order fulfilment. While fulfilment focuses on execution, order management ensures that execution happens in the most effective way possible, considering factors such as cost, speed, accuracy, and customer satisfaction.

Effective businesses integrate both aspects seamlessly, using order management to coordinate and optimise fulfilment activities whilst ensuring that fulfilment capabilities inform order management decisions.

7. Industries that rely on order management

Order management is critical across virtually all industries that sell physical products, though specific requirements and challenges vary significantly based on industry characteristics.

E-commerce and retail

Online retailers face unique order management challenges due to high volumes, multiple sales channels, and customer expectations for fast, accurate delivery. Ecommerce Order Management is the process of capturing, routeing and supporting customer orders from any channel.

Key requirements:

• Multi-channel integration (website, marketplaces, mobile apps)
• Real-time inventory synchronisation
• Rapid processing and fulfilment
• Comprehensive customer communication
• Efficient returns processing

Wholesale and distribution

Wholesalers and distributors typically handle larger order volumes with different customer types, from small retailers to large corporate accounts. Their order management needs focus on relationship management and operational efficiency.

Specific considerations:

• Customer-specific pricing and terms
• Complex product catalogues and variations
• Bulk order processing and handling
• Credit management and payment terms
• Supplier coordination and drop-shipping

Manufacturing and industrial

Manufacturers often deal with custom products, longer lead times, and complex supply chains. Their order management must coordinate production planning with customer requirements.

Manufacturing challenges:

• Make-to-order vs. make-to-stock decisions
• Production scheduling and capacity planning
• Supply chain coordination
• Quality control and compliance
• Technical specification management

Services and subscription businesses

Even service-based businesses require order management for physical products, equipment, or materials associated with their services.

8. Order management challenges and solutions

Despite its importance, effective order management presents several challenges that businesses must address to maintain optimal performance.

Common order management challenges

❌ Manual processes and data entry errors Many businesses still rely heavily on manual processes, leading to errors, delays, and inefficiencies. Manual data entry between systems creates multiple opportunities for mistakes and increases processing time.

Solution: Implement automation and system integration to eliminate manual handoffs and reduce error opportunities. Use validation rules and automated workflows to ensure data accuracy and consistency.

❌ Inventory visibility and accuracy issues Without real-time visibility into inventory levels across all locations, businesses struggle with stockouts, overselling, and poor customer communication about product availability.

Solution: Implement real-time inventory management systems that provide accurate, up-to-date information across all locations and channels. Regular cycle counting and inventory audits help maintain accuracy.

❌ Poor communication and coordination Disconnected systems and processes lead to communication breakdowns between departments, resulting in delayed orders, customer service issues, and operational inefficiencies.

Solution: Establish clear communication protocols and use integrated systems that provide visibility to all stakeholders. Implement standardised processes and regular coordination meetings.

Technology-related challenges

⚠️ System integration complexity Many businesses use multiple systems that don't communicate effectively, creating data silos and process inefficiencies.

Solution: Invest in integration platforms or choose systems with strong integration capabilities. Develop clear data standards and governance policies.

⚠️ Scalability limitations As businesses grow, their order management processes may become overwhelmed, leading to decreased performance and customer satisfaction.

Solution: Design processes and choose technologies with scalability in mind. Regularly review and optimise processes to handle increased volumes efficiently.

Customer expectation challenges

Modern customers have increasingly high expectations for order processing speed, accuracy, and communication. Meeting these expectations whilst maintaining operational efficiency requires careful balance and continuous improvement.

Addressing customer expectations:

• Set realistic delivery commitments and consistently meet them
• Provide proactive communication throughout the order process
• Implement flexible delivery and return options
• Invest in customer service capabilities and training

9. Orderwise: warehouse-first order management solution

Orderwise represents a new approach to business management software, designed specifically as a warehouse-first, stock-centric solution rather than a traditional system that simply includes warehouse functionality as an afterthought.

Understanding the warehouse-first approach

Unlike conventional business software that treats inventory and warehouse operations as secondary functions, Orderwise places stock management at the centre of everything. This fundamental design philosophy recognises that for many businesses-particularly wholesalers, distributors, and trade-focused retailers-inventory is the heart of their operation.

Stock-centric design benefits:

• All processes revolve around inventory optimisation
• Real-time stock visibility across all locations and channels
• Advanced inventory allocation and reservation capabilities
• Seamless integration between purchasing, sales, and warehouse operations
• Comprehensive stock movement tracking and reporting

Target market focus

Orderwise focuses firmly on wholesalers and distributors, as well as trade-focused retailers who operate both physical stores and online channels. These businesses share common characteristics that make them ideal for a stock-centric approach:

• High inventory turnover and complex stock management needs
• Multiple sales channels requiring real-time inventory synchronisation
• B2B relationships with complex pricing and terms
• Warehouse operations that demand efficiency and accuracy
• Need for detailed stock reporting and analysis

Integrated order management capabilities

Rather than treating order management as a separate function, Orderwise integrates it seamlessly within the stock-centric framework. This approach provides several advantages:

Unified stock and order visibility Every order is processed with complete awareness of current stock levels, committed inventory, and incoming purchases. This prevents overselling whilst optimising inventory allocation across multiple channels and locations.

Streamlined fulfilment processes The warehouse-first design ensures that order fulfilment processes are optimised for efficiency. Pick lists, packing instructions, and shipping documentation are generated automatically with full integration to warehouse operations.

Comprehensive business integration Orderwise connects order management seamlessly with CRM, accounts, courier integration, and more, creating a unified business management solution rather than a collection of separate systems.

Remove rekeying with Orderwise order management

In purely manual systems, valuable staff hours get wasted on repetitive rekeying. Information must be conveyed between multiple disconnected systems, ensuring that everyone from accounts operatives to warehouse pickers and fulfilment agents has every field and form completed accurately.

When using Orderwise order management, all documentation generates automatically. Staff don't need to worry about who will provide information or how quickly it will arrive-everything flows seamlessly from the moment an order is received.

Eliminate errors with Orderwise order management

Manual error is always unavoidable, but there are ways to make it less probable. In manually managed arrangements, the number of staff touchpoints is much higher given how often data must be replicated. This increases opportunities for mistakes to multiply throughout the process.

In a business coordinated by Orderwise order management, these problems are circumvented. All documentation is generated automatically, keeping manual intervention to an absolute minimum. This ensures the lowest possible chance of mistakes whilst keeping warehouse operations, business processes, and customers properly and accurately informed.

Inform insights via Orderwise order management

When using manually managed order processing systems, getting a complete picture of your business's overall situation can be very difficult. The rekeying and potential errors are challenging enough when simply trying to get products out the door. Adding the need to continuously maintain detailed activity records makes the entire business slower and every order more liable to experience errors.

With Orderwise order management, record-keeping is implicit and built into every stage. All transaction details flow through a single unified system, making it far easier to develop clear, concise pictures of broader business situations and react rapidly when circumstances change.

Discover Orderwise's optimised order management solution

See how Orderwise can optimise your business with industry-leading order management software designed specifically for stock-centric operations. Discover why more than 1,300 businesses in the UK and beyond trust Orderwise to deliver expertly engineered efficiency that integrates everything from CRM to accounts, couriers, stock control, warehouse management, and much more. Speak to a specialist today and see how you can revolutionise your enterprise with Orderwise.

10. Technology and automation in order management

Modern order management increasingly relies on technology and automation to handle the complexity and volume of contemporary business operations.

Automation opportunities

Order processing automation Automated systems can handle routine order processing tasks including validation, inventory allocation, documentation generation, and customer communication. This reduces processing time whilst improving accuracy and consistency.

Inventory management automation Automated inventory systems provide real-time stock level updates, automatic reordering when levels reach predetermined thresholds, and sophisticated allocation algorithms that optimise inventory distribution.

Communication automation Automated customer communication keeps buyers informed throughout the order process without requiring manual intervention. This includes order confirmations, shipping notifications, delivery updates, and service follow-ups.

Advanced technology applications

Artificial intelligence and machine learning AI and ML technologies enable predictive analytics for demand forecasting, dynamic pricing optimisation, and intelligent routing decisions. These technologies can identify patterns and optimise processes beyond human capability.

Internet of Things (IoT) integration IoT devices in warehouses and throughout the supply chain provide real-time data about inventory levels, equipment performance, and environmental conditions. This information enables more responsive and efficient order management.

Mobile technology Mobile applications enable warehouse workers, delivery personnel, and customer service staff to access order information and update systems in real-time, improving communication and reducing delays.

11. Best practices for order management

Implementing effective order management requires adherence to proven best practices that ensure optimal performance and continuous improvement.

Process design principles

Standardisation and consistency Develop standardised processes for all order management activities, ensuring that orders are handled consistently regardless of channel, product type, or staff member involved. This reduces errors and improves efficiency.

Exception handling procedures Design clear procedures for handling exceptions such as out-of-stock items, payment issues, or delivery problems. Having predefined responses to common issues prevents delays and ensures consistent customer service.

Continuous improvement methodology Implement regular review processes to identify optimisation opportunities. Use data and customer feedback to drive improvements in speed, accuracy, and customer satisfaction.

Performance monitoring

Key performance indicators (KPIs) Establish clear metrics for order management performance including order accuracy, processing time, customer satisfaction, and cost per order. Regular monitoring enables proactive issue identification and resolution.

Customer feedback integration Actively collect and analyse customer feedback about the order experience. Use this information to identify improvement opportunities and validate the effectiveness of changes.

Staff training and development

Comprehensive training programmes Ensure all staff involved in order management understand their roles, responsibilities, and the broader process context. Regular training updates keep skills current and reinforce best practices.

Cross-training initiatives Train staff in multiple aspects of order management to provide flexibility during peak periods or staff absence. This also helps employees understand how their work impacts other process areas.

12. Measuring order management success

Effective measurement is crucial for understanding order management performance and identifying improvement opportunities.

Essential metrics

Order accuracy rate Measure the percentage of orders fulfilled correctly without errors. This includes product accuracy, quantity accuracy, and delivery accuracy. High accuracy rates indicate effective quality control processes.

Order processing time Track the time from order receipt to shipment preparation. Reducing processing time improves customer satisfaction and operational efficiency whilst identifying bottlenecks.

Customer satisfaction scores Monitor customer satisfaction specifically related to the order experience through surveys, reviews, and feedback systems. This provides direct insight into customer perceptions of service quality.

Financial performance indicators

Cost per order Calculate the total cost of processing each order, including labour, technology, and overhead costs. This metric helps identify efficiency opportunities and supports pricing decisions.

Return rate and return costs Monitor the percentage of orders that result in returns and the associated costs. High return rates may indicate quality issues or order management problems.

Operational efficiency metrics

Inventory turnover Track how efficiently inventory is converted to sales. Higher turnover rates generally indicate more effective inventory management and order processing.

Staff productivity measures Monitor orders processed per staff member and identify opportunities for training, process improvement, or automation that could improve productivity.

13. Future trends in order management

Order management continues to evolve as technology advances and customer expectations change. Understanding emerging trends helps businesses prepare for future requirements.

Technology-driven developments

Advanced analytics and artificial intelligence AI-powered analytics will provide increasingly sophisticated insights into customer behaviour, demand patterns, and process optimisation opportunities. Predictive analytics will enable proactive rather than reactive order management.

Blockchain integration Blockchain technology may provide enhanced transparency and security in order management, particularly for complex supply chains or high-value products where authenticity and traceability are crucial.

Robotic process automation (RPA) RPA will automate increasingly complex order management tasks, handling exceptions and making decisions that currently require human intervention.

Customer experience evolution

Personalisation and customisation Customers increasingly expect personalised experiences, including customised products, delivery options, and communication preferences. Order management systems must support these individual requirements efficiently.

Sustainability considerations Environmental concerns are driving demand for sustainable packaging, carbon-neutral delivery options, and supply chain transparency. Order management must accommodate these preferences whilst maintaining efficiency.

Supply chain transformation

Distributed inventory models Rather than centralised warehouses, businesses are moving toward distributed inventory models with stock positioned closer to customers. This requires more sophisticated order management to coordinate multiple locations effectively.

Direct-to-consumer capabilities Even B2B businesses are developing direct-to-consumer capabilities, requiring order management systems that can handle both business and consumer requirements seamlessly.

14. Conclusion

Order management represents a critical business capability that directly impacts customer satisfaction, operational efficiency, and financial performance. Order management is the tracking of orders from inception to fulfillment, and the management of the people, processes, and data connected to the order, requiring coordination across multiple business functions and careful attention to both customer needs and operational realities.

The definition and explanation of order management extends far beyond simple transaction processing to encompass strategic planning, process optimisation, and relationship management. Successful businesses recognise that effective order management provides competitive advantages through improved customer experience, reduced costs, and enhanced operational flexibility.

As customer expectations continue to rise and business complexity increases, the importance of sophisticated order management approaches will only grow. Businesses that invest in proper order management processes, technology, and capabilities will be better positioned to succeed in increasingly competitive markets.

The future of order management lies in intelligent automation, predictive analytics, and seamless integration across all business functions. By understanding current best practices whilst preparing for emerging trends, businesses can build order management capabilities that support both immediate needs and long-term growth objectives.

Whether through traditional approaches or innovative solutions like Orderwise's warehouse-first methodology, the key to successful order management remains the same: putting customer needs at the centre whilst optimising operational efficiency and maintaining the flexibility to adapt to changing market conditions.