Order Management vs Order Fulfillment: What’s the Difference?

A significant portion of American sales are made through online orders. Amazon sells 1.6 million items per day. 

You’ve come to the correct spot if you’re new to the order fulfillment business or want to review the fundamentals of inventory management. Continue reading to discover how to increase online product sales while enhancing your customers’ shopping experiences. 

What Is Order Management?

Does your company provide online product sales? It probably does in the contemporary, modern economy. 

Order processing and receipt are referred to as order management, sometimes known as order processing. The administration of any sales-related firm requires excellent order management. 

Here are a few justifications for why order management is crucial. First, an essential aspect of inventory management is the ordering procedure. By using order management, you can prevent overstocking problems. 

Second, order management system has an impact on client retention and satisfaction. The wrong items may end up being sent to the wrong buyer due to shipping problems. The relationship your firm has with clients may be negatively impacted by this.

Finally, order management has an impact on your business’s revenue. Wasteful orders use up resources.

How Does Order Processing Work?

Order processing is a crucial part of fulfilling orders. This comprises, among other things, sorting, packaging, and shipping. Distribution management keeps track of each of these actions. 

The order is delivered first. The fulfillment staff is then notified to prepare it for shipping. Orders are placed by customers via the phone, in person, or online. 

Before reaching the destination, packages are revised and sent as necessary.

Do You Need an Order Management System?

Whether an OMS is necessary is a question that businesses frequently raise concerning the order fulfillment procedure. An order management system manages orders through a single interface using management software. 

The technology makes placing orders easier. It also gets rid of mistakes. For companies that employ several sales channels, an order management system is extremely crucial.

Benefits of OMS

There are several advantages to having an OMS. Long-term cost savings are the most important. Costly mistakes can be reduced by eliminating human error. 

Additionally, OMS software frees up management to focus on other crucial activities. Reduced administrative expenses and inventory management costs are further cost reductions. 

OMS eases tension in your warehouse as well. There won’t be too much merchandise to overwhelm the workforce. OMS’s automation features can promote employee happiness and retention. 

OMS is beneficial in terms of customer satisfaction. Fast order fulfillment benefits the customer. 

Customers are hesitant to use retailers that ship items late. Order fulfillment completed quickly can boost revenue by 10% or more. 

In summary, OMS may improve your ordering procedures, which may increase revenue. 

What Is Order Fulfillment?

The procedure of receiving and sending orders is referred to as order fulfillment. Typically, this entire procedure takes place within a company’s warehouse. Employees or a team that has been contracted out to do the job. 

The procedure starts with order picking. When a customer placed an order it is referred to here. The item has to be removed from the warehouse by someone. 

Sounds easy, doesn’t it? When it comes to lead time, picking up the order is a crucial consideration. Owning a warehouse with millions of items might make the work seem insurmountable very fast. 

If your business does not follow best practices, you could not be maximizing consumer happiness.

Packing orders is sometimes a difficult process. The correct materials and labels must be used to package things in a proper manner. All of this needs to be completed without considerably increasing the product’s weight.  

Before shipment, labels are essential for recording the contents of the box. Labels ought to include the weight, measurements, and other characteristics. 

Shipping is, of course, the final step. You must think carefully about the shipping company you intend to hire. Your business can benefit greatly from comparison shopping.

How Do You Choose an Order Fulfillment Strategy?

Businesses can choose from a variety of order fulfillment strategies. Depending on the resources and capabilities your company has to provide, you could prefer internal or external fulfillment.

If you have the resources on hand, conducting fulfillment in-house gives you more control over operations and expenses. If your organization has a mix of internal people and resources, you might wish to use a hybrid approach to gain some advantages from both worlds.

If fulfillment and logistical resources and capabilities are limited, it could be preferable to completely outsource order fulfillment. Your staff will be able to focus on developing and promoting the product, which typically leads to enhanced predictability. With internal fulfillment, you are responsible for hiring the workers, maintaining the warehouse, and guaranteeing that each item is shipped flawlessly. Many of these difficulties disappear when you outsource order fulfillment.

Consider the goods, prospective shipping choices, and fulfillment costs to make the best choice for your company. A thorough financial analysis should direct you toward the right choice.

Order Fulfillment Models

Although order fulfillment methods have been improved over many years, the fundamentals remain the same, and this is for very good commercial reasons.

What are the types of order fulfillment?

There are four different order fulfillment strategies available: internal, external, drop shipping, and hybrid. Each model meets certain business requirements.

In-house:

The term “in-house model” simply refers to the fact that every step of order fulfillment is carried out internally.

Third-party:

This technique comprises outsourcing every aspect of order fulfillment to a vendor or other outside entity.

Drop shipping:

The manufacturer creates and sends the order. On the other side, this lowers the entrance barrier and reduces overhead expenses, which is important for startups and e-commerce businesses. Additionally, it cuts out the middleman, which can cost the consumer less money. On the negative side, it may also rob businesses of control, particularly when it comes to inventory control and order fulfillment. Since many manufacturers are located in other nations, distant from the merchant’s consumer base, it can also cause significant delays in delivery to customers. In that situation, shipping may cost more and take longer, or an item may ship from a distribution center that has been established.

Hybrid:

A hybrid model is essentially a blend of two or more of the three types mentioned above. For instance, a business may decide to handle order fulfillment internally for all or just popular products, but it might also decide to outsource fulfillment at busy times, like the holidays, and drop ship large and bulky items from the supplier.

7 Tips to Improve Order Fulfillment

Businesses that handle their own order fulfillment should prepare ahead of time for a seamless order procedure that is automated when feasible. You can track orders, inventories, and shipments end-to-end with the aid of a fully-featured ERP for improved visibility, the greatest customer and staff experience, and ideally increased revenues.

Choose the best order fulfillment ERP system:

Pick a system that enables complete tracking of orders, inventory, and all other areas of your business as a starting point. You and your team can track the complete organization, including order fulfillment, finances, and human resources, through one secure, cloud-based system that is always available with the aid of an ERP like Oracle NetSuite, which has useful modules.

Integrate with suppliers and vendors:

You may interact with suppliers and vendors directly thanks to modern ERP systems. Your whole restocking and accounts payment process, for instance, may integrate and function without a lot of manual input. Your systems may take over after you establish your rules, communicate with your suppliers and vendors, and connect with them.

Set clear customer expectations:

Most companies would be good to follow the advice to “under promise and over deliver.” Customers will probably be accommodating of you and your anticipated timetable, especially in the post-COVID age where delays are frequent. When you get an order, establish clear expectations and then put up a lot of effort to fulfill them. If something seems to be taking longer than expected, let your customer know as soon as feasible so they won’t be dissatisfied.

Optimize inventory management:

You run the danger of running out of stock and not having enough for a client order if you keep too little inventory. Working capital and storage costs may go out of control if you keep an excessive amount of inventory. Your ERP’s high-quality inventory management feature will be quite useful for this task.

Select the right order picking strategy:

There’s a good probability that you don’t have a fleet of autonomous warehouse robots ready to select and package orders as one comes in. If you want to maintain costs low and efficiency high in your order fulfillment operation, it’s essential to utilize your human resources to their full potential. Typical order picking methods include zone and batch order picking, which picks several orders at once, discrete order picking, which picks each order one at a time, and other methods designed to reduce travel time and speed up picking.

Treat your shipper as an essential partner:

Your fulfillment procedure involves companies including the United States Postal Service, UPS, FedEx, and DHL. Treat your shipper differently from other vendors. Spend the time and effort to negotiate the best price and delivery window for your fulfillment requirements, and be proactive in your communication with your shipper to prevent delays.

Prepare for customer service and returns:

Even while you strive to provide every consumer a flawless experience, faults, flaws, and delays occasionally occur. No matter who was at fault—you, your client, or a supplier—it is better to be ready to put things right.

Improve Order Fulfillment With Order Management Software

Don’t undervalue the value of good order management and fulfillment software while creating your order fulfillment process. The most effective and joyful sales process is made possible by the proper ERP’s seamless integration of various technologies.

You might not be aware when you purchase online that a number of interconnected systems are at work to manage your orders, shipping estimates, payments, warehouse fulfillment, and delivery. While some businesses choose a hodgepodge strategy in which they employ several tools for various tasks, others opt for order management software that is integrated into a bigger ERP plan.

The NetSuite ERP includes NetSuite Order Management, which gives owners, managers, and fulfillment teams instant access to vital information as the system follows each order as it moves through the sales and fulfillment process. The system accommodates complicated order requirements including split orders and outsourced drop delivery, and users may safely access every order.

With a single data set and an automated order management procedure, the Order Management module enables ordering, fulfillment, and returns from any location in the globe. That is very beneficial for any company that fulfills orders.

It’s never too late to take a new look at your order fulfillment and management systems, whether you’re at the exciting start of a company or have years of fulfillment expertise. You might be able to reduce expenses while still providing better customer service. That benefits both the firm and its loyal consumers.

Author Bio 

Glad you are reading this. I’m Yokesh Shankar, the COO at Sparkout Tech, one of the primary founders of a highly creative space. I’m more associated with digital transformation solutions for global issues. Nurturing in Fintech, Supply chain, AR VR solutions, Real estate, and other sectors vitalizing new-age technology, I see this space as a forum to share and seek information. Writing and reading give me more clarity about what I need.