A guide to order management

What is an order management system?

Order management includes every stage of the order lifecycle, from order placement and stock checks to shipping, delivery, and returns. An order management system (OMS) is the technology and set of procedures that facilitate this process.

A modern OMS integrates with various departments and systems—such as sales, stock, commerce, store operations, distribution centres, marketplaces, third-party logistics (3PL) companies, accounting, marketing, and customer service—to ensure orders are processed accurately and efficiently. For large businesses, the stakes of effective order management are particularly high. Here’s why:

1. Customer expectations: Today’s customers demand fast, accurate, and transparent product availability and fulfilment. Delays or errors can lead to dissatisfaction and lost loyalty.
2. Operational efficiency: Automating and optimising order workflows reduces labour, inventory carrying, and shipping costs, minimises human error, and improves cycle times.
3. Scalability: As businesses grow, their ability to handle higher order volumes and more complex fulfilment networks becomes a competitive advantage.
4. Omnichannel complexity:  Enterprises selling through multiple channels, including marketplaces, need centralised visibility and coordination.
5. Regulatory compliance:  Accurate recordkeeping and traceability support compliance with industry standards and regulations.

How does an order management system work?

Understanding order management requires a closer look at the order lifecycle. While the specific steps may vary by industry and business model, these are the core phases:

1. Order placement:  Customers place orders through online platforms, in-store systems, mobile apps, or telephone calls. The OMS captures and validates the order details.
2. Order processing:  The system checks stock levels, applies pricing and discount rules, and confirms payment. If items are out of stock, the system may initiate backordering or suggest alternatives.
3. Fulfilment:  Orders are routed to appropriate warehouses, distribution centres, shops, marketplaces, or 3PL companies. Picking, packing, and shipping are executed based on predefined logistics workflows.
4. Shipping and delivery:  The order is despatched, tracked in real time, and delivered to the customer. Notifications are often sent to keep customers informed.
5. Returns and after-sales support:  A good OMS also manages returns, refunds, and customer service enquiries, helping enhance long-term customer relationships.

Types of order management systems

Order management systems come in various types, each designed to meet different business needs, operational complexities, and levels of technological sophistication. Here’s a breakdown of order management system examples:

• Manual: Traditional and paper-based, these systems involve spreadsheets, phone orders, email chains, and manual data entry.
• Standalone:  These are dedicated OMS applications that handle order intake, processing, and fulfilment but operate separately from other enterprise systems.
• ERP-based: Many enterprise platforms offer order management capabilities as part of a larger suite.
• E-commerce platform: Popular e-commerce platforms offer built-in or add-on order management features.
• Distributed:  These advanced systems are built to handle omnichannel and dispersed fulfilment across complex networks.
• Cloud-based:  Cloud-native or cloud-hosted order management systems are accessible via the web and offer high scalability and flexibility.
• Custom-built: Some large enterprises develop proprietary OMS platforms tailored to their specific processes and legacy systems.

The right order management system for an organisation will vary, given its size, complexity, channel strategy, and growth goals.

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Discover how SAP Order Management Services, connected to SAP ERP data, can provide a foundation for sustainable growth and competitive advantage.

Benefits of an order management system

A solid OMS streamlines and automates the entire order lifecycle across sales channels and fulfilment locations. Investing in OMS yields both immediate and long-term benefits, such as:

• Improved customer satisfaction: Transparent stock availability and faster, more reliable deliveries lead to better customer experiences.
• Reduced operational costs: Automation and process optimisation help reduce waste, transportation costs, and labour expenses.
• Better decision-making: Real-time data and analytics support strategic planning.
• Increased revenue: Better inventory visibility and omnichannel coordination enable faster, more accurate order fulfilment and maximise sales opportunities.
• Agility and resilience: A flexible OMS can adapt quickly to market changes and supply chain disruptions.

Overall, an OMS helps businesses reduce operational costs, prevent stock issues, and deliver faster, more reliable customer experiences.

Challenges with order management

Order management isn’t without its obstacles. It can be a complicated process, especially with disorganised and outdated systems. Some common challenges include:

• System silos: Disconnected systems can lead to duplicated efforts and data inconsistencies.
• Inventory discrepancies: Poor inventory accuracy across physical and digital channels can cause fulfilment errors and lost sales.
• Returns management:  Handling returns efficiently without eroding margins is a complex task.
• Demand forecasting: Inaccurate forecasts can lead to supply imbalances.
• Customisation needs:  Enterprises often require tailored workflows that out-of-the-box solutions may not support.

Addressing these challenges requires cross-functional collaboration, process alignment, and the right technology.

How to choose the right order management system

Order management isn’t without its obstacles. It can be a complicated process, especially with disorganised and outdated systems. Some common challenges include:

• System silos: Disconnected systems can lead to duplicated efforts and data inconsistencies.
• Inventory discrepancies: Poor inventory accuracy across physical and digital channels can cause fulfilment errors and lost sales.
• Returns management:  Handling returns efficiently without eroding margins is a complex task.
• Demand forecasting: Inaccurate forecasts can lead to supply imbalances.
• Customisation needs:  Enterprises often require tailored workflows that out-of-the-box solutions may not support.

Addressing these challenges requires cross-functional collaboration, process alignment, and the right technology.

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Learn how SAP Order Management Services can help businesses optimise processes and sales.

How to choose the right order management system

Choosing an OMS is a critical decision—especially for large companies where complex operations, omnichannel demands, and global supply chains must be synchronised for efficiency and growth. The right OMS can improve workflows, reduce costs, and enhance customer satisfaction. The wrong one can create operational bottlenecks, limit scalability, and foster customer distrust.

Business decision-makers should do the following when shopping for an OMS:

1. Define business objectives

Understand company objectives, such as growth targets and customer experience goals.

2. Map order lifecycle

Document how orders flow through the business—from capture to fulfilment to post-sale service—to identify gaps.

3. Prioritise core features

Evaluate an OMS based on key capabilities, including:

• Inventory visibility
• Order routing
• Customer communication
• Defining order decision criteria
• Sourcing and reservations accuracy

4. Ensure integration capabilities

A good OMS needs to integrate easily with an organisation’s ERP, warehouse management system, customer relationship management software, POS system, and other essential platforms.

5. Choose the right deployment model

Decide what type of OMS will work best based on the business’s needs, regulations, and agility.

6. Evaluate security, compliance, and reliability

Ensure the OMS meets enterprise-grade standards as customer data and payment information are involved.

7. Evaluate the supplier

Consider both the technology and the partner (Do they have good reviews and offer support?) to ensure a smooth OMS rollout.

8. Calculate the total cost of ownership

Consider fees, implementation costs, ongoing upgrades, and more.

9. Test the system

Before a full rollout, test the system in a controlled environment to reduce risk.

10. Involve the right stakeholders

Engage key players across departments when choosing an OMS to ensure that it meets cross-functional needs.

Order management use cases

Here are examples of companies that improved their order management with SAP solutions.

• Provide a consistent purchasing experience
  See how SAP Order Management Services helps retailer HORNBACH offer a seamless experience across multiple channels from online to in-store. Watch a video on HORNBACH's story.
• Meet evolving customer demands
  Explore how retailer Canac Corporation uses advanced analytics for agile decision-making with SAP solutions. Watch a video on Canac Corporation's story.

Explore order management solutions

Investing in modern, integrated order management solutions is essential to keep pace and lead in today's competitive marketplace. By centralising and automating the order lifecycle, businesses can improve efficiency, reduce costs, and deliver seamless customer experiences at scale.

The right OMS can provide a foundation for sustainable growth and competitive advantage. Learn how SAP Order Management Services, connected to SAP ERP data, enables organisations to use these solutions more reliably, efficiently and at a lower total cost of ownership.

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