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What is the Best eCommerce Order Management Software?

What is the Best eCommerce Order Management Software?Photo from Unsplash

Originally Posted On: https://www.esenshi.com/what-is-the-best-ecommerce-order-management-software

 

When it comes to ecommerce order management, there is no silver bullet solution. It’s more helpful to ask, “What is the best ecommerce order management software for my business?”

It’s an important distinction because sales channels and fulfillment methods vary so much between ecommerce businesses. In this article, we will provide some basic information about order management, the benefits that can be achieved by using software, and important KPIs to track.

Most importantly, we have done extensive research comparing 30+ different ecommerce order management software. You can find a summarized version of this information below, or sign up here to receive a full copy of this data in an excel file.

Order Management Software Research

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What is eCommerce Order Management?

Order management is a component operations management which includes the systems and procedures in place to manage the process of receiving and fulfilling orders.

This process begins with a customer placing an online order. Once the order is placed, the customer should receive a receipt via email and/or through an online portal. Next, the ecommerce business begins the process of picking and packing the order for shipment. This is where accuracy and timeliness are key. Finally, the customer receives the order and is either satisfied or unsatisfied, depending on the previous steps in the process.

This entire process is completed after any potential returns are processed or the returns period expires.

Why is eCommerce Order Management Important?

When a customer places an order online, they expect to receive the order they placed in a timely manner. If you cannot deliver what your buyer ordered within the expected timeframe, you may lose any potential lifetime customer value and/or receive negative feedback that can impact your future sales.

On the other hand, if the buyer experiences a pleasant order process and receives their items as ordered, on time, they will be more willing to share the experience and positive feedback. With feedback being publicly available, this “word of mouth” is arguably more important to eCommerce businesses than other industries.

A well-established set of policies and procedures and the right software enable an eCommerce business to increase its bottom line via increased lifetime customer value and “word of mouth” publicity. This makes it one of the most important aspects of operations management.

To capitalize on efficient and effective order management, companies should implement the right software to centralize sales through different sales channels and marketplaces, assist in communication with buyers, and streamline the order fulfillment process.

Benefits of Multi-Channel Order Management Software (OMS)

Centralized Order Management

Many eCommerce businesses operate in multiple marketplaces and sales channels. This multi-channel strategy can become complex, with numerous user accounts across numerous platforms. This complexity can cause important information, orders, and communications to fall through the cracks. Order management software centralizes orders for ease of fulfillment and streamlined operations.

Improved order accuracy

The use of barcode scanners, pick and pack lists, and automated shipping label generation reduces human error by standardizing the fulfillment procedure.

Reduced labor costs

Properly implemented software automates repeatable order management tasks and streamlines customer communication to reduce the labor required for each order.

Improved customer lifetime value

Optimized order processing, communication, and delivery times improve the customer experience, resulting in increased repeat purchase rates, better customer reviews, and overall higher customer lifetime values.

Simplified multi-fulfillment methods

Many large eCommerce companies use various methods of fulfillment, such as drop-shipping, Fulfillment by Amazon (FBA), and multi-warehouse fulfillment. An order management system enables efficient handling of all SKUs in an order with the appropriate fulfillment method for each.

What should you Consider when Choosing Order Management Software?

Price

Price is always important, of course. However, it is equally important to understand the full extent of a software’s features and how those features will increase productivity and reduce costs.

Features

All order management software will aid in the basic workflows involving order fulfillment. Where they vary is in more advanced features, such as multi-fulfillment tracking, returns and exchanges management, forecasting ability, etc

Some specific features to consider:

  • Automated order processing: Automatically route orders to the correct drop shipper, 3PL, or warehouse, and create invoices for sales orders using customizable workflow automation.
  • Editing functionality: Customers sometimes request changes to their orders, so it is important to be able to edit order details from within the order management system. This could include address, payment, item details, and order notes.
  • Reporting functionality: With an order management system, you can quickly view, filter, and export data for individual or grouped orders. Each order, product, or shipment report should have a variety of filter options to help you export the data you need.
  • Allocate back orders: In the case of back orders the Order Management Software may be able to automatically allocate received inventory to the backorder.
  • Returns/exchange management: The ability to generate a new order and shipping label for an exchange or refund is important. Order management systems with additional inventory management functionality may allow you to choose whether to restock or write off the inventory in the return.
  • Shipping integrations: The ability to integrate with popular shipping management software, such as UPS, FedEx, DHL, and print shipping labels from various carriers is important.
  • Additional functionality: There are many similarities and shared functionalities between listing management, inventory management, and order management software. It is important to understand the extent of your business needs and whether a multi-purpose software is an appropriate solution for you.

Scalability

As your eCommerce business grows, it is important to consider what platforms your business may expand to in the future and evaluate whether the software is able to accommodate those channels. You may also want to think about more points of fulfillment in terms of multiple warehouses, third-party logistics, and drop shipping, so you should consider how and whether the order management software you’re evaluating will meet these future needs.

Important KPIs for Order Management

Tracking, calculating, and benchmarking key performance indicators (KPIs) related to order management is essential in generating and evaluating growth strategies. Without visibility into these metrics, businesses are left without valuable information to make decisions that will enable growth, reduce costs, improve customer satisfaction, and increase profit.

Average Order Value (AOV)

The average value of all orders in a specific period

Average order value formula = Total Revenue / Total Orders

Why is this important? Knowing your company’s AOV allows you to set goals and strategies, then evaluate the effectiveness of those strategies. Also, by comparing your total cost per order or marketing cost per order to the AOV, you are able to understand the profitability of your business.

Repeat Purchase Rate, aka, Repeat Customer Rate

Percent of returning customers vs total customers

Rate of return formula = # of returned orders / # of orders shipped

Why is this important? Many eCommerce businesses rely on customer acquisition while neglecting customer retention. Evaluating and implementing strategies to improve this rate can reduce marketing costs per order and increase revenue.

Fulfillment Cost Per Order, aka, Order Fulfillment Cost

The cost per order of all fulfillment-related expenses

Fulfillment cost per order formula = Inventory receiving and storage costs + fulfillment costs (picking, packing, shipping) + cost of returns / # of orders shipped.

Why is this important? This metric is important in evaluating the value and costs of different fulfillment methods or warehouses. For example, if you are evaluating whether to continue with in-house fulfillment or move to Fulfillment by Amazon, this metric will help you understand the costs of each option.

Marketing Cost Per Order

The cost per order of all marketing related expenses

Marketing Cost Per Order formula = Total marketing costs / # of Orders

Why is this important? Evaluating the marketing cost per order will allow you to understand the effectiveness of your marketing efforts.

Total cost per order

Total of all costs per order

  • Cost per order formula = Marketing cost per order + fulfillment cost per order + COGS / # of orders
  • Why is this important? This measurement is an effective way to measure an ecommerce businesses overall profitability. Evaluating which component is increasing this metric will enable you to create strategies to improve the bottom line.

Lead time

The amount of time between a customer placing and receiving their order

Lead time formula = order processing time + production lead time + delivery lead time

Why is this important? Reduced lead times improve customer satisfaction. Understanding which components of total lead time can be improved enables a business to make informed decisions to improve their lead times.

On-time shipping rate

The rate customers’ orders are shipped on time in a specific period

On-time shipments formula = # of on time shipments / # of shipped orders × 100

Why is this important? High on-time shipment rates will lead to positive customer reviews, improved rankings in online marketplaces, and higher customer lifetime values

Order Documentation Accuracy Rate

Percentage of orders that include the correct documentation. Documentation refers to shipping, payment, and compliance documents as required by the customer or governmental entities.

Order documentation accuracy rate formula = # of orders shipped with the correct documentation / # of shipped orders × 100

Why is this important? B2B customers will often rely on accurate pick/pack lists and commercial invoices. Further, a poor order documentation accuracy rate will lead to increased costs due to international compliance issues.

Fulfillment accuracy rate

The rate at which customers’ orders are fulfilled accurately in a specific period

Fulfillment accuracy rate formula = # of correctly fulfilled orders / # of shipped orders x 100

Why is this important? High accuracy rates lead to positive customer reviews and reduced return costs

Perfect order rate

The percentage of orders delivered without issues

Perfect order percentage formula = % of orders delivered on time × % of orders accurately fulfilled × % of orders without damage × % of orders with accurate documentation × 100

Why is this important? This metric is an effective way to measure an ecommerce business’s overall fulfillment performance.

eCommerce Return Rate

Rate of returns versus shipments in a specific period

Rate of return formula = # of returned orders / # of orders shipped

Why is this important? A high return rate is typically caused by poorly optimized product listings or issues with fulfillment. Knowing this rate, in combination with other fulfillment rates, can help a business understand what issues it should address.

Our Research

Because every business is different, with different inventory management and fulfillment needs, there’s no “one-size-fits-all” software solution for order management.

To make evaluating your choices a little easier, we’ve created a list of order management software and the important features of each, all in a clear and concise comparison table. Download your free copy now. We do not endorse any specific software, nor are we affiliated with any of these providers.

Your management team should consider your business goals and requirements to determine which is the best order management software for your company. We are always here to help our clients succeed and will do our best to help in this decision process when appropriate.

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