Why Order Management is so Daunting for Retailers

With the advent of the modern, always-online shopping era, it's become easier than ever before to place an order.

It sometimes feels as if anything you want is no further away than a click of a button. It's a simple matter to order food on your phone, get household supplies and groceries, or even to buy a large item like an appliance.

Customers have grown used to placing a food order and being able to pick up their meal or have it delivered to their doorstep within the hour.  Same-day delivery is getting more and more commonplace. Customers have grown used to being able to track their orders and the progress of its fulfilment in real time.

This is, of course, wonderfully convenient to the consumer. But it’s not so easy to manage behind the scenes. For most online retailers, keeping up with customer expectations with regards to the fulfilment of their orders is a daunting task.

Managing orders takes a lot of hard work, is extremely labour-intensive, and is fraught with risk. It is also prone to human error. Many retailers make more mistakes in their daily order fulfilment than they would be willing to admit.

It takes a high degree of coordination and planning to get order fulfilment right. Every order has to be managed and tracked to completion. On the back-end of things, retailers have to continuously coordinate their inventory management with their vendors and suppliers.

In this article, we'll explore the reasons why managing retail orders is such a daunting task—and give insights into how the order management system can be streamlined and optimised.

Problem 1: Managing High Volume and Complex Orders

Online retailers experienced a tremendous boost to their business in the last couple of years and had to adapt to processing high volumes of orders on a daily basis.

These orders are also received from multiple channels as disparate as social media platforms, online stores and marketplaces, as well as physical store locations.

The more orders you have to process, the more difficult it becomes to ship orders accurately and on time. How do you deliver as many orders as possible, as quickly as possible, and with the least amount of error as possible—all keys to achieve positive customer feedback? This is a problem that all retailers struggle to answer.

Furthermore, many orders have complex specifications, with customers requiring a whole range of products in different quantities to be shipped to different addresses—and processed through different payment methods. All of this added complexity makes it extremely difficult to accurately and efficiently fulfil all those orders.

The answer is to make the fulfilment workflows as smooth and effective as possible. Working out the kinks in your fulfilment process is a constant struggle.

Some companies are also exploring various creative ways of getting those orders out the door. For example they're building a network of fulfilment centres and taking a decentralised approach. The goal is to ship orders from fulfilment centres that are closer to the end customer. This will lower shipping times and costs—both factors that are important to customers.

Problem 2: Managing Multiple Sales Channels

The new buzzword in e-commerce is omnichannel retailing. Multichannel retail is when a company makes their goods and services available across different channels in the most seamless way possible.

But managing all of those sales channels in a coordinated fashion is challenging. When you sell the same products through a physical store, through a webstore, through other physical retail outlets, or other online marketplaces, it can get difficult to keep track of all the activity.

The goal is to make it as easy and convenient as possible for customers to buy something from you. Customers like the convenience of doing their shopping online or through your smartphone app. But they still want their order to be delivered to their door in a matter of days.

Other customers still prefer to physically browse through goods in a store. Many customers enjoy the personal service they get in a store, or making up their mind about what to buy by physically inspecting goods. They also have the added convenience of getting their product right away.

As a retailer, you want to make all of those options available to your customers in the most seamless way possible. Which means you need to learn how to manage your supply in such a way that all of these channels function to full capacity. You also want to minimise the risk of running out of inventory on popular goods, or overstocking on underperforming items.

Managing all of these different, conflicting interests is a formidable balancing act. This requires effective planning, implementing innovative and adaptable strategies—as well as a lot of hard work.

Problem 3: Managing Inventory

As a retailer, inventory management is one of the core functions of your business. If you don't have goods to sell your customers, you won't be able to survive as a retailer.

Effective inventory management is critical to your success. You need to have enough stock on hand to fulfil all the orders coming in through your various sales channels. At the same time, you want to avoid overstocking on items that aren't selling that well and running up your warehousing costs.

Your inventory management strategy will also have to be adapted based on the type of industry you're involved in, as well as your particular business model.

Poor inventory management can become a serious strain on company growth. When the inventory management is chaotic, order fulfilment is delayed, and cancelled and lost orders multiply. Which  can have a lasting negative impact on your company brand and profitability.

That is why you need to deploy an inventory management system that is able to adapt and grow with your business. For example, there are several cloud-based inventory solutions available on the market. The main benefit of these systems are that they are designed to expand and adapt as your business grows.

But not all of these systems are suited to the type of industry and market that you service. You have to ensure that the system is able to support your specific needs as a company and be able to adapt to any fluctuations in the market.

Problem 4: Managing the Fulfilment Process

Retail is changing and evolving at a breakneck pace. Which means that retailers have to be nimble and adaptable and able to change course at a moment's notice.

This introduces several challenges to the order fulfilment process. For one, retailers are expected to sell goods on an online platform, branded smartphone application, through online marketplaces, and through an e-store.

The result is that orders will come into the company from all across the nation—and potentially from all corners of the globe. Managing all these orders is a complex affair. It requires a high degree of coordination and integration between several business units. Several technology systems have to work together in perfect concert.

For example, the inventory management system has to be integrated with the ecommerce sales portal, communicate with the various shipping carriers around the world that handle courier duties for the company, all the while communicating with the order management system at the centre of the whole process.

All of these interactions must run seamlessly and effectively. When customers place an order, they would like their order to arrive at their doorstep in the shortest amount of time possible. Then they want to receive the correct items in excellent condition.

And if something goes wrong or they need to return a product or make an exchange, they expect your customer service department to already know their order details, and handle their inquiry swiftly and without any fuss.

Problem 5: Managing Fluctuations in Demand

Handling the day to day order fulfilment duties is already a challenge for most companies. Unfortunately, the sales of certain items aren't uniform throughout the year. Certain products and ranges experience seasonal peaks—for example during the Christmas season or other holidays throughout the year.

Some products suddenly become popular when it’s featured on a prominent TV program, or is endorsed by a celebrity. Which means that retailers have to scramble to meet the sudden surge in demand. What's more, the normal challenges involved with order fulfilment is only exacerbated during these peak seasons.

One solution is to implement predictive software that will be able to preempt any surge in demand. The longer notice a business has to prepare for these busy times, the better they are able to cope with demand fluctuations.

A key to handling peak times is to build strong relationships and excellent communication channels with suppliers and vendors.

If something goes wrong or you suddenly need a few extra shipments of a popular product, you will be able to contact these suppliers for assistance. It's much easier to make these types of demands if you've already built a strong relationship with your vendors.

If you show vendors a willingness to help them when they experience a problem, they will be much more amenable to come to your aid when you experience a surge in demand.

Problem 6: Managing the Shipment Process

There are many facets involved with fulfilling orders. Once an order is processed by your ecommerce platform, the order details are sent through to the fulfilment department and the warehouse managers.

From there the correct items are picked from the shelves, packed in appropriate shipping material, and then finally shipped out to the customer.

The problem is that customers have grown used to getting their orders fulfilled in extremely short timeframes. This often means that you have to be flexible in the type of delivery service you use to ship the order out to the customer.

Nowadays, products can be shipped internationally by boat, plane, rail, and truck. The different shipping options have different cost and shipping time implications. And when you send products internationally, you have to be knowledgeable of the best shipping methods in each country and region.

But the challenges around shipping isn't always to do with keeping costs as low as possible. Recently, the United States experienced extreme problems in finding reliable truck drivers and courier services that were both dependable and affordable.

Any time goods arrive in a broken condition at a customer, your company takes the blame and will absorb the cost. If the courier lets you down, your company suffers. If an order arrives late at a customer's house, it's your company's image that is tarnished.

That's why you have to be flexible in the type of transport and shipping options you make available to your customers.

Sometimes it's worthwhile outsourcing the most crucial of your shipping duties, if it means that you will be able to provide superior, hassle-free service to your customers—even if it comes at a slightly higher cost.

Problem 7: Managing Returns and Exchanges

The final problem that retailers have to solve to manage their orders is how they handle exchanges and product returns.

If you run a retail operation, you will probably have to deal with returns and exchanges on a regular basis. This is a service that customers have come to expect from retailers. In fact, most customers indicate that they would be less inclined to shop at a store if they're unable to return goods.

Returns are on the increase. Recent research has shown that in the period from 2020-2021 in the U.S., returns have skyrocketed by up to 30%.

What’s more, after peak shoppings seasons the number of returns tends to spike. For example, returns in January regularly experience a sharp increase of up to 150% compared to the other months of the year.

Returns are expensive. The annual cost to retailers for handling all those returns run in the hundreds of billions of dollars.This is a tremendous cost to retailers that customers just expect them to absorb.

Which means the goal should always be to keep return numbers as low as possible.

The solution is to have an easy to understand returns policy that is clearly communicated to your customers. You want to make the returns process as straightforward and quick as possible. The more barriers you can remove for customers to return and exchange goods, the better. It is a competitive advantage after all.

These two goals are in conflict with each other. On the one hand, you want to keep the total volume of returns as low as possible. On the other, you want to make it as easy as possible for customers to return goods.

The answer is to make your returns process as efficient as possible, while ensuring that customers are completely satisfied with the condition and working of their original product.

This means that you have to improve the level of service and product quality you provide across the entire store—a daunting challenge indeed.

Conclusion

Handling order fulfilment effectively is challenging for any retailer, whatever the size of their operations, or the market sector that they service.

What's more, customers expect more and more from their retailers. They expect their orders to be fulfilled accurately and in record time. And they're willing to shift their loyalties and take their businesses that are able to meet their high expectations.

The problem with facing all these challenges, is that retailers often don't have the right technology tools to manage the order fulfilment process.

As a retailer, you need the right technology and processes to simplify and streamline your order fulfilment process. You should seriously consider shifting your business to an Order Management System (OMS).

This technology is a business tool aimed at collecting orders from all your sales channels and then coordinating order fulfilment from one centralised hub. The goal is to serve customers to a high degree of excellence, while keeping costs low.

Here are some of the benefits that come from using such as system:

• Orders are processed quicker and more accurately.
• The added efficiency results in real-world cost reductions.
• The system is able to automate the most common order fulfilment processes.
• Since orders are processed more efficiently and accurately, you will be able to achieve much higher customer satisfaction numbers.
• You will have a much better control of your business data. Up to date, accurate business information is available at the click of a button
• This simplifies data analysis.

Getting the order fulfilment formula right isn't easy for any retailer. It's a complex and challenging affair—one which demands efficient management, meticulous attention to detail, and experience and knowledge of the inner workings of the retail industry.

But with good planning, efficient management, and the right technology tools to handle the order fulfilment process from one centralised control hub, you will be able to meet and exceed customers' experience. The result is a boost in the efficiency and profitability of your business operations, an improvement of your bottom line, and ultimately business growth.