Understanding Order Management Systems and ERP Integration

As supply chains become more complex and customer expectations rise, manufacturers must not only keep pace but also anticipate and react quickly to changing demands.

The right order routing system can coordinate the complexities of each type of order, making your manufacturing business operate like a well-oiled machine. 

Let’s explore the specifics of order management and how to choose a solution for your business.

What Is an Order Management System?

An order management system (OMS) is a software system designed to track the lifecycle of different types of orders throughout a manufacturing business. It streamlines and automates various phases of the order process, including receiving, processing, fulfilling, and servicing orders.

The primary goal of an OMS is to ensure that each component of every order is handled efficiently and accurately from the moment the order enters the system until it is delivered.

Order Management System vs. ERP

There’s some overlap between order management systems and enterprise resource planning (ERPs) systems. OMS can be a standalone platform that integrates with ERP. In many cases, ERP will include order management functions so that manufacturers do not need two separate (yet integrated) systems.

OMS is specifically designed to manage an order’s life cycle. It handles everything from order entry and processing to order fulfillment and shipping. It tracks each order throughout its stages and gives companies a bird-eye view of its status.

By contrast, an ERP system integrates multiple business departments and processes, including planning, purchasing, inventory, sales, marketing, and finance. The goal is to provide organizations with visibility into their resources and how they are being used. Order management is one part of an ERP system.

Both systems aim to improve efficiency, but the choice largely depends on the manufacturer’s needs. OMS is typically less complex and less costly than ERP, making it suitable for businesses that want to enhance their order management without implementing an enterprise-wide system.

However, the broader benefits of an ERP may provide greater insights and control, allowing manufacturers to find more value in an ERP system.

How Order Management Works in Manufacturing

Effective order management is crucial in manufacturing, where precision and coordination are key. An Order Management System (OMS) integrates and streamlines the handling of various orders, ensuring meticulous tracking from entry to delivery. This approach optimizes production schedules, maintains inventory levels, and enhances customer service. 

Here’s a concise look at how order management operates in manufacturing:

Order Entry

The order management process begins with order entry. Customers (e.g., distributors, channel partners) or sales reps will initiate the order and enter it into the system. The order will include details like customer information, product specifications, quantities, and delivery requirements. 

Order Processing

Once a customer places an order, the system validates it before it goes into production. During this phase, the system cross-checks the order details against the current inventory to see if a product needs to be manufactured. It will also validate payments or customer credit limits, verify delivery addresses, and generate estimated delivery timelines.

Production Planning

If items are unavailable in inventory and need to be produced, the order management system will generate work orders for production. These include detailed instructions about manufacturing processes, the materials required, and production timelines. 

Inventory control and warehouse management also play a role in production planning. This ensures the correct number of goods are produced and space is available to store them until they ship to the customer.

Fulfillment

Once the items have been produced, they’ll be prepared for order fulfillment. The order management and fulfillment process includes picking items from the production floor or the warehouse, packing them according to your shipping guidelines, and scheduling pick-up and delivery. The OMS can also arrange logistics, generate shipping documentation, and update systems with tracking information and delivery status.

After-Sales Service

Sometimes, items may need to be returned, exchanged, or serviced after the sale. Order management systems can continue to play a role in after-sales service by accepting returns, managing exchanges, and tracking inventory serviced and returned to the customer.

Key OMS Features

An order management system prioritizes order processing and fulfillment, whether generating a manufacturing order for a new customer, tapping into inventory reserves, or servicing a product you’ve already sold. Regardless of the order type, a good order management process includes the following key features.

Multichannel Order Processing

Depending on the type of order, manufacturers may receive orders from multiple channels. For instance, a field sales rep might enter a customer order via sales software. Distributors might self-service via online portals. End-user customers might request repairs or refunds via online channels or customer service teams.

Whatever you’re using for order management, your system should be able to accommodate customer orders from multiple sales channels. It helps to map out the different types of orders you receive, where each order type comes from (e.g., salespeople, websites, online portals), and the information you need to collect for each type.

Inventory Management

Inventory management features should give you real-time updates of inventory levels as sales are made and goods are produced. You should also be able to manage inventory across multiple warehouses and manufacturing facilities. This allows you to optimize stock levels based on customer demand and location.

Customer Relationship Management

Manufacturing businesses typically work with distributors, retailers, and other businesses. Your OMS should include a profile of each business customer and the contact person at each company. Customer profiles should be easily updated since the contact person might change over time.

Also, self-service features help reduce the demand on internal staff without sacrificing customer satisfaction and service. Features like customer portals allow customers to access order information and sales history, handle returns and exchanges, and communicate with sales reps.

Order Tracking

Customers and internal teams should be able to track orders throughout the entire order lifecycle. Different ERPs and order management systems may offer varying levels of granularity in the order tracking. For example, some may offer estimated turnaround times, while others will show the basic stages of production and the order fulfillment process. Checking order status on demand can instill customer confidence while giving you better visibility into your manufacturing business.

Financial Processing

Your OMS should integrate with payment gateways to process customer payments securely and using their preferred method. Many systems automatically generate invoices and receipts once an order is completed. In ERP systems this is integrated with other powerful finance features.

Returns and Refunds

Manufacturers experience returns and refunds for many reasons, and it’s not always their fault. An order management system should help you process returns and refunds and categorize the reason for them. This gives you insight into potential manufacturing errors, quality issues, or consumer shifts that may impact future production.

Workflow Automation

Modern order management software increasingly uses automation to reduce tedious manual tasks, free up employee time, and improve efficiency. For example, an OMS can send automated updates and alerts about order status, inventory levels, and other events. 

Manufacturers can customize workflow automation within the OMS. This allows them to automate tasks in ways that add value to the business and enhance the way they already work. ERP systems are beginning to leverage AI for automation features.

Integration Capabilities

Sometimes, a standalone OMS is the best option for manufacturers. In other cases, an order management system works best when integrated with an ERP, accounting software, or other tools. Integrations allow manufacturers to synchronize data across multiple warehouse locations, gaining a better view of business operations.

Reporting and Analytics

At a minimum, order management systems should offer reporting and analytics on sales, inventory management, fulfillment processes, shipping costs, and customer activity. Tracking insight in stock levels, recurring orders, sales volume, turnover rates, and fulfillment can help manufacturers identify their best customers and areas of opportunity.

Security and Compliance

While security and compliance should be standard operating procedures, they are still essential considerations when choosing any form of technology. Companies must protect sensitive customer data. Choose solutions that comply with industry standards like GDPR and PCI DSS.

Benefits of Order Management Systems 

Whether part of an ERP or as a standalone software, an OMS offers unique benefits for manufacturing companies, including:

• Higher order accuracy
• Streamlined order processing
• Improved inventory management
• Better production planning
• Reduced lead times
• Real-time order tracking
• Increased customer satisfaction
• Integrated shipping and fulfillment
• Cost reduction
• Scalability
• Data insights and reporting

Better order management can benefit manufacturing companies of all sizes. It is a key feature of the top manufacturing ERP systems.

Achieving efficiency in order management leads to reduced costs, higher customer satisfaction, and, ultimately, the ability to deliver a superior product to customers.

Top ERPs with Order Management Features

Manufacturers have unique needs from order management. Many ERP and OMS systems are geared toward retail, not manufacturing, so it’s essential to explore solutions with capabilities tailored to manufacturing. 

We’ve vetted these ERP systems for their sales and order management features and how they meet the specific needs of the manufacturing sector.

These selections give you a starting point for further evaluation. Consider your specific industry, customer base, and supply chain management needs to ensure your order management features align with your overall business objectives.

It’s essential to choose ERP systems that have robust sales and order management features. Creating a cohesive framework from order entry to after-sales service can help manufacturers optimize inventory, respond to market changes, and improve customer relationships.

Choosing the Right Order Management Solution for Your Business

Learning the benefits and uses of an order management system is just the beginning. Now, explore your options for ERP systems that include order management features to find the best solution for your manufacturing business.

Use our best-fit comparison tool to compare your options and find the top systems tailored to your industry. This tool allows you to filter and evaluate ERP systems based on your specific needs, helping you make an informed decision that aligns with your operational goals and requirements.

For those seeking more personalized assistance, our team offers expert selection help. We guide you in selecting an appropriate group of systems for evaluation, ensuring you choose the right system to meet your unique business needs. 

Frequently Asked Questions (FAQ)

Understanding order management systems (OMS) and their integration with ERP solutions is crucial for optimizing manufacturing operations. This FAQ section addresses the top questions about how OMS can help your business manage orders effectively.

How do Order Management Systems (OMS) improve efficiency in manufacturing?

OMS improves efficiency by automating order processing, reducing manual errors, and streamlining workflows. They handle order entry, processing, fulfillment, and after-sales service, ensuring each step is managed effectively.

What are OMS’s integration capabilities with other software?

OMS can integrate with ERP systems, accounting software, CRM tools, and other business applications, enabling seamless data flow and synchronization across various functions and improving overall operational visibility and coordination.

What are the benefits of integrating OMS with ERP systems?

Integrating OMS with ERP systems enhances data accuracy, reduces redundancy, and provides a comprehensive view of operations, helping manufacturers make informed decisions and improve overall efficiency.

What factors should manufacturers consider when choosing an OMS?

To ensure it meets their specific needs, manufacturers should consider integration capabilities, scalability, ease of use, cost, customization options, and support services.

How does OMS enhance customer relationship management (CRM)?

OMS enhances CRM by maintaining detailed customer profiles, facilitating communication, and providing self-service portals for customers to track orders, request returns, and access order history, thereby improving customer service and satisfaction.