What Is an Order Management System? A Buyer's Guide

For many businesses—especially high-growth merchants—the act of managing and fulfilling orders across multiple sales channels and fulfillment locations is tricky. Merchants need a solution that manages fulfillment complexity, consolidates order information, streamles multi-location fulfillment and shipping, while also supporting reverse supply chain, such as return management. From order placed to delivered stands an ocean of challenges:

• Managing and tracking inventory across multiple warehouse locations
• Managing and fulfilling a high volume of orders, all at once
• Routing orders to the best fulfillment location
• Consolidating orders from multiple sales channels, including retail stores, marketplaces, social media, etc. 
• Managing complex order profiles and shipping schedules
• Reducing shipping costs and shipping products quickly
• Order tracking and customer service
• Reporting, analytics, and evaluation
• Managing returns and exchanges effortlessly

One solution to solve these problems? An order management system (OMS), which tracks stock levels across warehouses, combines order data across multiple sales channels, streamlines the fulfillment, ships orders fast, manages returns and exchanges, and centralizes reporting. 

In this guide, we’ll cover a wide range of details, from which tasks an OMS should handle to the benefits of having a centralized dashboard to take, process, and fulfill customer orders. And we’ll help you evaluate the type of OMS your business needs.

Table of contents

• What is an order management system?
• What does an OMS do?
• The benefits of a good OMS
• Challenges of an OMS
• The best ecommerce OMS software and tools
• How to choose an OMS
• Order management system FAQ

What is an order management system?

An order management system (OMS) is a digital tool used in ecommerce to track sales, orders, inventory, and fulfillment. It streamlines the order processing cycle, from receipt of order to delivery, ensuring accuracy and efficiency. An OMS is crucial for maintaining customer satisfaction and operational effectiveness.

Today, order management requires a multidimensional system that touches nearly every facet of how your business operates, including:

• Customers
• Sale channels
• Product information
• Inventory levels and location
• Customer service
• Order routing
• Order fulfillment—picking, packing, and processing
• Shipping
• Order tracking
• Returns, refunds, and exchanges printing, picking, packing, processing, and shipping

Now that we've covered the basics, let’s take a look at the most important features, capabilities, and tasks that an OMS can help ecommerce businesses with.

What does an OMS do?

An OMS tracks inventory levels by channel, automates the order fulfillment process, handles reverse logistics, manages customer information, and merges order and financial data. It, in short, gets the customer what they ordered after they purchased it, and lets both you and the customer know what was ordered, arrived.

Track inventory levels by channel 

The beauty of modern-day business is that brands can reach customers through a variety of channels. Customers can purchase items in-store through point-of-sale (POS) software, self-serve through a brand’s direct-to-consumer ecommerce store, online marketplaces, or social media channels and even combine online and offline activity with delivery options like buy online, pick up in-store (BOPIS).

An OMS helps retailers manage and synchronize inventory across the multiple locations they’re fulfilling items from, whether that’s from a physical retail store or a fulfillment center or warehouse for online orders. It’s a tool designed to help ecommerce brands that plan to invest in their inventory management process over the next two years. 

With one, you can:

• Update inventory levels across all retail stores and fulfillment locations
• Transfer inventory between retail stores and fulfillment locations
• Automatically be notified when SKUs are low in stock and restock accordingly 
• Understand which SKUs sell best by region or sales channel

Automate the order fulfillment process

The modern OMS treats the complete supply chain as an interconnected ecosystem, allowing merchants to automate their internal processes from order through to fulfillment. 

To push orders through the processing, picking, and shipping process in as little time possible, ecommerce merchants can rely on an OMS to:

• Accept payments regardless of shipping destination or order currency
• Route orders through to the best fulfillment location, including merchant-managed warehouses, retail locations, or 3PL
• Automatically print shipping labels and packing slips if you’re fulfilling orders in-house 
• Track order fulfillment and delivery status with connected shipping providers

An OMS should route orders to the best location. This doesn’t just apply to customer orders within close proximity to your warehouse, it can also be based on prioritizing orders within the same destination market, minimizing split fulfillments, or ranking priority locations.

Handle reverse logistics

We all know the importance of getting an order picked, packed, and shipped in as little time possible. Yet many brands dismiss the reverse logistics process—having a customer post an item back to your warehouse and process a refund, exchange, or credit note. 

That’s an expensive mistake to make considering 16.5% of ecommerce items are returned. And, it can impact your future bottom line, as 57% of consumers will abandon a brand entirely after a negative post-purchase experience. Your OMS can help you avoid upsetting your customers and provide a fuss-free returns experience for everyone involved.

It can automatically print return labels in case a customer needs to send items back. The return address will differ from parcel to parcel depending on the customer’s location, letting you receive and process refunds in as little time as possible. Customers can also gain insight into the status of their return with online tracking information. 

Not only that, but customer service teams get immediate information on the product(s) a customer has shipped for return. Everyone gets the same level of service regardless of what, how, or where they bought a product.

Manage customer information

An OMS can act as a customer relationship management (CRM) platform. With one, merchants can access all information they have on a customer, including previous orders, lifetime value, and their location. 

Because an OMS gives merchants insight into customer data, they have the ability to hyper-personalize any marketing messages they send to customers when trying to secure another sale. 

For example, an ecommerce brand can pull data from their OMS to create the following customer segments: 

• Customers located in Europe
• High-value customers with an AOV of more than $50 
• People who’ve bought one item and not yet returned to the website

Each customer segment then has its own marketing strategy. Those located in Europe won’t get the same generic marketing emails as your US audience. Expensive items are recommended to customers with a high AOV—those more likely to buy. Bestsellers are put front and center of your emails to one-time customers. 

Email personalization that acknowledges what was previously purchased and is value-added has been proven to yield 10% to 15% higher conversion rates—and it’s made easy with customer reports automatically generated inside an OMS.

Merge order and financial data

It’s all well and good to see order data inside one central location. But an essential part of running an ecommerce business is judging whether you’re actually turning a profit—and if so, where and how, so you can zone in on making more.

Most OMSs have the ability to integrate with other back-office functions—particularly your finance software. The platform can pull information from your accounting software to merge inventory and sales data. You’ll be able to gain insight on accounts payable and receivable, as well as automate invoice and purchase order creation. No manual data entry required.

The benefits of a good OMS 

Improve order accuracy

Fulfilling orders without an OMS is risky business. Processing orders manually using spreadsheets makes you prone to human error. 

Not only does this ruin customer experiences (particularly if you ship the wrong product to the wrong customer), but it creates logistical nightmares. The number of returns you’ll need to process skyrockets, as does the money you spend correcting inaccurate orders. 

The same concept applies to manual data entry cross-platform. Relying on an OMS to automate, however, prevents the back-and-forth communication between your brand and a vendor when the manually created purchase order is incorrect.

Pick, pack, and ship faster

While cost of delivery is still of paramount importance to modern shoppers, the speed in which a product goes from ordered to delivered is critical.

“When it comes to fulfilling orders, time is of importance,” says Tanner Arnold, president and CEO of Revelation Machinery. “The longer it takes to process orders and assign them to a facility, the longer it will take for them to arrive. An OMS automates the process of selecting the most expedient fulfillment method, resulting in faster delivery and more customer satisfaction.”

An OMS streamlines the picking and packing process by checking stock across multiple warehouses. It identifies the best fulfillment center for that order with available inventory. It sends order information directly to that center for the product to get picked, packed, and shipped in as little time as possible. 

“An OMS automates the process of selecting the most expedient fulfillment method, resulting in faster delivery and more customer satisfaction.”

—Tanner Arnold, President and CEO, Revelation Machinery 

Reduce shipping costs

Some order management systems will also integrate directly with the top shipping carriers around the globe, allowing you to purchase and print shipping labels directly from the OMS. Not only that, OMS solutions will pre-negotiate discounted shipping rates with those carriers on your behalf, so you can save time and money when it comes to choosing the best shipping service for your business.  

Centralize channel management

A multichannel OMS consolidates orders from all channels into one central location, providing a unified dashboard for tracking order statuses and generating reports. This system reduces errors, minimizes missed or duplicate orders, and improves customer service response times. What’s more, a multichannel OMS synchronizes inventory across sales channels and fulfillment locations, automating inventory management and cross-channel reconciliation. This helps to eliminate manual tasks and prevents overselling.

Meet customer expectations

It’s clear that shipping is a touchy subject for modern consumers. But it’s not just the timing of your order fulfillment process that customers value. Consumers abandon an online shopping session because of slow or delayed deliveries.

An OMS helps merchants meet shipping expectations that let the customer know when to expect their orders. Most platforms have built-in tracking pages to give customers an update on their order (or return) when requested. 

It’s the type of transparency that prevents customers from plastering negative reviews across the web. Most negative TrustPilot reviews happen because of poor communication from a brand post-purchase.

Prevent stockouts and forecast inventory 

A lack of insight into inventory levels often results in two big problems:

• Overstocking: Large quantities of unsold inventory means you have cash tied up—both in terms of the stock itself and the storage fees you’re paying to hold it. 
• Stockouts: Not having enough inventory to fulfill demand costs retailers $1 trillion each year. You’ll have to turn customers away, convincing them to return when stock has been replenished. 

An OMS with inventory control helps retailers combat both problems. With an OMS, Gerrid Smith, chief marketing officer at Joy Organics, says, “Retailers will be able to obtain complete information outlining high- and low-selling seasons, popular products, and consumer buying trends.” 

That data can be used to forecast how much stock individual warehouses will need, putting each in the sweet spot: not having too much (or too little) inventory. 

“Accurate reports and forecasts allow you to properly manage your inventory so that you are not overselling, or under-ordering, or going overboard with stock replenishing,” adds Patrick Crane, CEO of Love Sew. “As a result, your order management process becomes more efficient and highly optimized.”

Sell internationally 

“We live in the 21st century, where globalization is increasing at a rapid rate,” says Erin LaCkore, founder of LaCkore Couture. “Many brands are selling products around the globe.” 

It’s true: the global ecommerce market is worth an estimated $6.3 trillion. Ecommerce brands have the ability to reach customers all over the world. Order management software helps these ecommerce businesses ramp up their international presence. Prior to an OMS, their only limitation was the processes needed to take and fulfill international orders. 

With one, retailers can:

• Take payment for international orders in different currencies 
• Automatically send order details toward 3PL partners in each country 
• Route orders to the warehouse closest to the end customer

Challenges of an OMS

Despite all its advantages, an order management system also has its drawbacks. Here are three common problems retailers face:

Integration with existing systems

An OMS must be integrated with other systems like ERP, CRM, or supply chain management tools to ensure seamless data flow. But it’s often complex for a retail company using a legacy ERP system to integrate a new OMS. As a result, customer information, inventory levels, and order status might not be synchronized, causing delays and errors.

Scalability and flexibility 

An OMS that isn’t scalable and flexible can become a bottleneck for businesses as they grow. Ecommerce startups might initially manage with a basic OMS. However, as they expand into new markets and add product lines, a more robust system that can handle increased order volumes, multi-currency transactions, and international shipping is necessary.

Customization

It can be challenging to adapt the OMS to specific business processes and make it user-friendly. Systems that are hard to use can decrease efficiency.

A bespoke furniture manufacturer needs an OMS that handles custom orders with multiple variables (like size, material, design). If the system isn’t designed to handle such complexities, it can lead to errors in order processing and a disconnect between sales and production.

The best ecommerce OMS software and tools

Whether you’re searching for a new OMS or looking to replace your existing one, here are five great options to consider if you’re ready to implement an order management system for your business. 

Shopify

Shopify is an all-in-one ecommerce platform for scaling brands. Our platform comes with a built-in order management system, where businesses can process orders in-store, from their online store, or other sales channels and marketplaces. They can also track, manage, and fulfill orders from one central dashboard. Shopify will also automatically route orders to the best fulfillment location based on a set of order routing rules set and ranked by the merchant.

Businesses can also track, move, and manage inventory across as many as 1,000 fulfillment locations and warehouses, ensuring there’s always enough inventory to meet order volume. As those orders come in, Shopify can streamline the fulfillment process with the ability to purchase and print up to 100 shipping labels in bulk from the top shipping carriers across the globe. Plus, businesses get direct access to the lowest shipping rates on the market, saving up to 88% with USPS, 83% with UPS, 80% with DHL Express, and 58% with Canada Post. Shopify automatically recommends the best shipping service and packaging for every order, saving businesses significant time during the fulfillment stage. Businesses can even print manifests and schedule pickups with select shipping carriers directly in Shopify.

And by installing Shopify Flow for free, businesses can automate any part of the order management and fulfillment process even further. 

Finally, our OMS will also integrate with third-party logistics solutions, where order and inventory details are shared between Shopify and the 3PL’s warehouse management system. We’re also here to help post-purchase, whether that’s through package tracking, return reports, self-serve returns for customers, and more.

“Shopify streamlined order management for us. It’s one hundred times better than what we had,” says TJ Moretto, director of engineering at Babylist. “The standard order data model accounts for all of the nuances of payments, refunds, gift cards, and discounts, making it much easier to build customizations.”

ShipHero

ShipHero is another order management solution for growing ecommerce brands. Built in the cloud, this platform is designed to help businesses more easily manage their inventory, streamline fulfillment processes, cut down on errors, and boost their overall operational efficiency. 

It’s also known for its user-friendly interface, which allows ecommerce businesses of any size to easily work with the tool and customize workflows to their unique needs. Plus, ShipHero offers a robust suite of tools for managing multiple sales channels, optimizing order routing, and automating tasks—freeing up time and resources for businesses to spend on other projects.

ChannelApe IOMS

ChannelApe IOMS is a powerful platform for strategic inventory operations, helping businesses unite their sales, fulfillment, finance, and customer service. It’s touted as a company’s “mission control for operations,” and offers a streamlined approach with helpful dashboards to consolidate metrics in real time for a comprehensive look at how a business is performing. 

Specifically, ChannelApe can help businesses get better visibility into their supply chain, which in turn can help them scale operations and reduce mistakes. Plus, companies can tap into advanced tools for inventory and order management, including rules like holds, routing, edits, fraud, and more.

Manhattan Associates

Manhattan Associates is a supply chain and omnichannel commerce software provider. They offer solutions that help businesses get the most out of their supply chain operations, inventory management, and order fulfillment processes. 

They are especially keen on the idea of unified commerce, and their cloud-based solutions are geared toward helping businesses succeed across several areas of commerce: workforce retention, cloud technology transformation, fulfillment through storefronts, transportation and distribution, profitable fulfillment, and inventory forecasting. They are known for their expertise in supply chain technology, and they are able to provide tailored solutions to meet a business’s specific needs.

How to choose an OMS 

Choosing the right order management system is a lot like choosing the right spouse. There are a lot of factors that you should consider when reaching a decision, both in terms of the workflows it can automate and the existing platforms it integrates with.

Here’s a step-by-step process for choosing an OMS, including the features to look for in the platforms that make your shortlist.

1. Define your objectives and priorities 

Much like an investment in any new type of software, the first stage of finding an OMS is to understand what you need it for. Hold a meeting with your internal stakeholders to understand features that are absolute requirements versus ones that are nice to have. 

Throughout these conversations, don’t forget to factor in scalability and future thinking. Your plans to scale the business play an important role in your decision making. Ideally, you want an OMS that will grow as the business does. 

2. Draft a request for proposal (RFP)

Order management solution vendors will submit proposals that help make your decision. The goal of these proposals is to get both you and the vendor(s) on the same page in terms of the technical requirements and limitations of the system you’re hoping to implement. 

In your RFP, don’t forget to include details on how you expect the OMS to function. Provide vendors with the following information so they can tailor-make the proposal for your business:

• Order volumes
• Number of SKUs
• Any existing software or hardware you use
• A timeline for the systems acquisition process
• Details on training and enablement

Learn more: Free Ecommerce RFP Template + Top Migration Questions (2024)

3. Evaluate your options

It’s unlikely that you’ll find an ideal fit for your business with your first contact. So compile a list of four to six potential vendors to evaluate. Reach out to each supplier to arrange a demo or trial of their product. 

Through this process, run each OMS vendor through the following checklist to confirm you’re making the right decision:

• Do they allow you to eliminate manual processes—like creating purchase orders—through workflow automation?
• Do they allow you to manage sales across multiple channels, currencies, and geographies?
• Do they support multiple warehouse locations?
• Do they provide real-time inventory updates?
• Do they provide reporting and forecasting that allows you to better identify problems and 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?

“The right OMS for you is one that eliminates as many manual processes as possible from your order management process, saving you precious time and effort. Determine which tasks you need automated and invest in an OMS that can efficiently automate these features, and much more,” says Crane.

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

Feature and 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? 

The right OMS for your business ticks as many of those boxes as possible.

Find the right OMS for your business

Choosing a new OMS isn’t a decision to take lightly. The right one has the potential to save time, cut costs, and deliver better experiences to your customers—those that convince shoppers to return time and time again.

Put together your shortlist, evaluate whether your options have the essential features your entire team needs, and ask vendors for guidance on implementing an OMS. 

It might take some time to get into the swing of things. But you’ll soon see the positive impact of storing all order-related data, automatically fulfilling orders, and providing customers with real-time shipping updates within one centralized platform.