What is an Order Management System (OMS)? Definition, Options & Choosing

What is an Order Management System (OMS)? Definition, Options & Choosing

This is a special guest contribution by Andrew Bowden, Sr. Manager of Product Marketing at TradeGecko

From click to customer … stands an ocean of challenges:

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

For many businesses — especially high-growth merchants — the act of capturing, tracking, and fulfilling orders across two or more sales channels has reached a breaking point.

At TradeGecko, we often find ourselves working with merchants who are using labor-intensive systems and processes. This can range from teams who are extremely proficient in performing “spreadsheet Olympics” … to legacy systems that were never designed to handle ecommerce alongside multi-channel and multi-location sales.

To help, this article walks through:

What Is an Order Management System (OMS)?

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

In principle, order management hasn’t changed in decades. What has changed, however, are buyer expectations and the sales landscape.

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

Whether you operate a B2C, wholesale, or a hybrid model …

According to the Retail Systems Research survey of more than 500 logistics firms, suppliers and retailers worldwide, legacy systems are one of the top factors obstructing omnichannel execution, with 29% of firms naming legacy systems as their top challenge in 2017.

Hindering omnichannel strategy and execution

Why?

Because while each new channel gives your company access to new buyers and increased discoverability, keeping track of the volume and velocity of those orders will bottleneck your business if you haven’t set the right foundations for scalable growth.

The downstream impact of these bottlenecks affects both your employees and your customers.

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

  • Accept orders and payments regardless of channel origin or currency
  • Route orders from warehouses based on proximity to destination
  • Update inventory levels across systems and sales channels
  • Provide order details to warehouses or 3PLs for fulfillment
  • Track order for both customers and customer service teams
  • Surface and forecast stock levels in order to avoid stock-outs
  • Integrate with back-office functions like accounts receivable, accounts payable, and ledger to generate invoices and accepts payments

“I have been using TradeGecko for about 6 months now,” says Stevan Buckman, National Sales Manager, Oobi, “and part of the reason was that we were already using Xero and the integration between the two platforms had huge appeal to me. The Xero-TradeGecko integration setup was super easy and has made our bookkeeper a lot happier now that invoices and bills between the two systems happen seamlessly.”

Oobi

As proficient spreadsheet Olympians, you know this is a lot of information to keep track of and funnel through your organization under your old order management paradigm.

Hiring additional bodies will help you manage increased sales volumes, but this won’t do anything to address manual errors, which will continue to multiply as your business grows.

How to Choose the Right OMS: Questions & Checklist

1. Define your system objectives and priorities of each.

By doing so and discussing with your internal stakeholders, you’ll clearly understand features that are “absolute requirements” vs. ones that are “nice to have.” Don’t forget to factor in scalability and future thinking.

2. Draft a request for proposal (RFP).

This will help your team get organized and both you and the vendor(s) understand the technical requirements and limitations of the system you’re hoping to implement. Don’t forget to include order volumes, number of SKUs, current vendor landscape, existing software, hardware, and networks, a timeline for the systems acquisition process, and details on training & enablement.

3. Research systems options.

It’s unlikely that you’ll find an ideal fit for your business with your first contact (but how amazing would that be), so compile a list of 4-6 vendors to evaluate and reach out to for demos or trails. We’ll cover the leading OMS options below.

4. Wait for and evaluate all responses.

You should have a method to score each of the responses based on your objectives set about in step 1 in order to pick the top 2-3 finalists.

5. Review trade-offs.

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

“Before TradeGecko,” says Tony Gale, Supply Manager at Maui and Sons Europe, “we had a team of 5 people in the office and the left hand never knew what the right hand was doing. We would go into high-end shops, sell a bunch of stock, only to come back to the office and find out that inventory had just been sold by someone else.”

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▢ Do they allow you to eliminate manual processes through automation?

▢ Do they allow you to manage sales across multiple channels, currencies, and geographies?

▢ Do they support multiple warehouse locations?

▢ Do they provide reporting & forecasting that allows you to better identify problems, 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?

Order Management Systems for Ecommerce Growth

Ecommerce has become the great equalizer.

Unfortunately, alongside this opportunity has come the mammoth task of managing more orders in multiple currencies across multiple channels causing many heads to spin thinking about the resulting operational complexity.

To help you in your decision, we’ve put together a list Shopify Plus’ OMS Partners. Remember that no two platforms are identical, with each having different strengths, weaknesses and unique features.

What’s important to focus on is whether or not the platform you choose will support the current and future needs of your growing business.

TradeGecko

Order Management System (OMS) sample dashboard via TradeGecko

TradeGecko is a powerful, cloud-based commerce system enabling ecommerce businesses and wholesale distributors to manage customers, inventory, orders and their broader supply chain ecosystem from a single, integrated platform.

Built for growing businesses, TradeGecko integrates natively with a variety of applications like QuickBooks Online, Xero, and various fulfillment providers like ShipStation and Amazon FBA, enabling you to email quotes, create purchase orders, and send your customers a link to invoices in multiple currencies with integrated credit card payments.

Over the years, TradeGecko has continued to expand the platform, provided access to their API and streamlined order processing for a variety of brands across several verticals. For instance, specialty coffee brand Pilot Coffee Roasters was able to make its order process faster and save time managing orders using TradeGecko.

Stitch Labs

Order Management System (OMS) sample dashboard via Stitch Labs

Stitch Labs offers an order and inventory management system that centralizes sales, purchasing, inventory, and fulfillment to give you greater efficiency, insight, visibility, and control across your business.

With the functionality of Stitch’s cloud-based solution, you can more easily maximize revenue, reduce costs, and intelligently scale your multi-channel operations to meet customers’ demand.

The tool integrates with the top marketplaces of ecommerce — such as eBay, Amazon, and Etsy — as well as a wide spectrum of third-party apps. Retailers can also bring in external solutions like PayPal and Xero for payment, accounting, and more into the platform. You can read more about Stitch’s multi-channel order management here on the Shopify Plus blog.

Orderbot

Order Management System (OMS) sample dashboard via 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.

Freestyle

Order Management System (OMS) sample dashboard via Freestyle

Freestyle Solutions offers a feature-rich order management system. You’ll find everything you need to process and ship orders, manage inventory, track performance and issue purchase orders in one dynamic place. Its capabilities can expand as your back office needs increase over time, so you can scale your company more productively.

The tool comes with all the operational benefits of a cloud software, including frequent feature upgrades, on-demand scalability, and open APIs that enable seamless integration with third-party apps, without the burden of managing backend hardware.

OMS: Cautious but Hopeful

Choosing the right order management system is a lot like choosing the right spouse or life partner. And may be your first (or second) step to digitally transforming your business operations and supply chain.

There are a lot of factors that you should consider when reaching a decision and looking for the best fit to ensure the long-term success of your business.

Understand your present and future needs. Understand the scope and limitations of the choices available to you and you’ll be well on your way to making the right decision to position your business for growth.

Common Questions About Order Management System (OMS)

What does OMS mean in retail?

OMS in the context of retail stands for “order management system” and it refers to the tools that help brands track their sales, orders, inventory, and fulfillment. Some retail OMSs also help brands monitor their people, processes, and partnerships as well.

How do you improve order management?

Brands can improve order management with an OMS that’s set up correctly and that all the necessary employees are trained on.

Why is an order management system important?

An order management system is important because, like with 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.