In an increasingly digital world, it’s only natural that ecommerce is one of thefastest-growing industries. To keep up with that demand, companies need to improve theirorder processing workflow — the journey from when an order is placed to when it isshipped —to ensure customer satisfaction and, consequently, loyalty.
What Is Order Processing?
A critical element of order fulfillment, orderprocessing is the workflow that ensures customer orders are properly prepared and deliveredto the right place. Depending on the scale of a business’s operations, orderprocessing canhappen in a distribution center or warehouse where pickers, sorters and packers work in synctoward order fulfillment, or it can be done by a single person or small group.
What Is Order Processing Software?
While order processing can be conducted manually with pen and paper, as a company grows, sodoes its complexity and the viability of that method declines. That’s where order processing software showcases its value — it canminimize human error and ensure customer satisfaction, regardless of how large an operationis.
Order processing software stores and shares data on orders, checks stock availability andtracks order delivery, all of which can help ensure orders are filled accurately and ontime. This is important because accuracy and reliability increase customer satisfaction, andcustomer satisfaction leads to more sales. An order management system (OMS) can beintegrated with other software, like billing and accounting, to combine order processing andall related tasks in one centralized platform.
Key Takeaways
- Order processing is a key component of order fulfillment, and efficient order processingworkflows can help keep customers satisfied.
- This workflow includes picking inventory, sorting items, packing orders and shippingthem.
- Order processing software can provide major benefits for a company, because it helpsautomate warehouse processes, improves accuracy and decreases the time it takes tofulfill orders.
Order Processing Explained
As the name implies, order processing is the process or workflow that happens after acustomer places an order. This starts with confirming the products are in stock, thenpicking the items from inventory and sending them to asorting area. Next, each individual order is compiled, carefully packed, labeled and shippedto the customer’s address, either directly (for businesses with smaller shippingvolumes) orthrough order consolidation (for businesses with higher shipping volumes).
5 Steps in Order Processing Workflow
Order processing includes five main steps from order placement to delivery — andsometimescontinues on if a customer starts a return process. But what is actually happening while anorder is processing? Here’s a breakdown of the typical workflow:
1. Order placement: When the business receives a customer order, orderdetails (including items, item quantities, shipping details and delivery addresses) aretypically sent to an order management system. If the company has several fulfillment centersor warehouse locations, the OMS will automatically determine the appropriate warehouselocation to ship from, based on the delivery address and item availability. This helpsreduce transit times and delivery costs. In some instances, one order with multiple itemsmay be fulfilled from several warehouse locations to ensure faster delivery. For example, ifone fulfillment center does not stock a certain item or that item is out of stock, thecustomer may receive two shipments from two different locations so they do not have to waitfor items to be re-stocked.
2. Picking inventory: The process of collecting a specified quantity ofitems from inventory to satisfy customer orders. Order picking must be a highly controlledprocess because it directly influences the productivity of the overall order processingworkflow — the sooner orders are accurately picked, the sooner they can be packed andshipped. To efficiently pick orders, organizations generally employ different pickingstrategies, including but not limited to:
- Piece picking, where each picker collects the necessary products for one order at atime.
- Zone picking, where each picker is responsible for picking items within a zone of thewarehouse. All items are collated in the end.
- Batch picking, where order pickers collect products for several orders simultaneously,in batches.
Picking can be done manually by using picking slips and spreadsheets, or automatically usingbarcodes and scanners, or even picking robots or machines.
3. Sorting: This is when picked items are separated according to theirdestination. If zone or batch picking strategies are used, for instance, each item must besorted into its respective order before it can be packed and shipped. Sorting is anessential step toward accuracy and customer satisfaction because it’s the perfect timeforworkers to ensure all ordered items are present and in good condition for shipping.
4. Packing: The process of protectively packing items into appropriateshipping boxes. The packing process also includes weighing the packages and labeling themwith recipients’ addresses and any necessary delivery instructions. Whether items arepackedin custom packaging or plain corrugated shipping boxes, it’s important to prioritizedimensions and weights that can be easily handled and are cost-effective.
5. Shipping: The process of transporting orders to theirfinal destination. Orders can either be shipped directly to the customer, or they mightfirst be consolidated with other orders going to nearby locations to cut costs and minimizethe total number of shipments. If orders are consolidated, multiple orders are usuallyshipped with the same carrier and then forwarded to specific locales as necessary. Whenshipping, it’s important to use a reliable tracking system so you — and yourcustomers — canmonitor orders.
Once items are delivered, businesses often follow up with customers to ensure satisfaction oranswer any questions regarding the product purchased. If the order processing steps arecarried out effectively — meaning all items are delivered accurately, timely andsafely —customers are more likely to be satisfied.
Order Processing Factors
There is no “one-size-fits-all” approach to processing orders. Methods andpriorities differacross businesses, distribution centers and carriers, and often depend on factors such as:
- The nature of the products. Perishable items such as food or flowers,for example, generally need to be shipped in temperature and/or humidity-controlledenvironments to uphold quality, whereas clothing may not.
- The number of items. Items ordered in bulk are packed and handleddifferently than small orders. Small orders might be sent directly to a customer’saddress via the postal service, whereas bulk items might be freight shipped to adistribution center.
- Shipping packaging. Not all items can be shipped in the same packages,and the size of packaging containers can affect how they’re handled. For example,avinegar producer that carefully boxes bottles and gallon containers for retail must takea different packaging approach to commercial 55-gallon drums and 275-gallon totes, whichmust be packaged and palletized according to their larger sizes.
- Productivity of workforce. Whether a workforce can keep up with orderprocessing needs can be a key element in deciding whether to incorporate automation.
- Seasonality. Busy shopping seasons (around the holidays, for example)can put stress on the entire order processing workflow. Workers have more orders topick, sort, pack and ship, meaning the process often takes longer than usual andcustomers may receive orders later than they’re used to.
Types of Order Processing Systems
Order processing systems exist to help make order fulfillment more efficient and moreaccurate. To do so, they capture and store all order-related data — everything fromavailable inventory to shipment tracking — in a central database. This makes it easyforrelevant business departments to access real-time order information at any given moment. Forexample, the shipping department can use the system to determine which orders need to beshipped and where.
There are two main types of order processing systems:
- Traditional order processing systems rely on handwritten files andmanual labor. From writing order slips to dropping off hand-packaged orders to thecarrier company, all order processing is done by hand, usually by one person or a smallteam. This person or team is also responsible for tracking all order and inventory data,which can be a tall task in and of itself.
- Modern order processing systems are technology-centric. All data,including inventory, customer profiles and tasks related to order processing, is fedinto specialized software. This minimizes the possibility of human error while expandinga business’s capabilities and growth opportunities. For example, a North Americanretailer could seamlessly accept European orders online and coordinate shipping with alocal fulfillment center.
Order System Advantages
Order processing systems can be a boon for businesses and enhance the customer experience.For example, order systems make it easier to keep track of orders in progress, from pickingto shipping. This can help improve picking, sorting and packing accuracy. Order systems alsomake it easier to prevent lost or misplaced orders. In turn, this can provide a morereliable shopping experience for the customer, which can subsequently lead to recurringbusiness and positive recommendations that help draw in new clients.
Order System Disadvantages
Though order systems are generally beneficial when implemented effectively, they’re notwithout some disadvantages. Highly technological or overly complex systems might requireadditional specialized personnel to ensure functionality, making implementation costly.On-premises order management software also brings significant upkeep costs that may includeadding to your IT team. If an error does occur, it can be hard to track down given thatorder processing data is automatically captured by a software program, not manually enteredby a warehouse worker who could retrace their steps.
10 Tips to Improve Order Processing
Although any company’s order processing procedures are unique to its business andcustomerneeds, maximizing accuracy, cost efficiency and productivity remains a common goal for allbusinesses. Here are some tips to improve order processing and realize these goals:
1. Workflow efficiency: Businesses work better when all the moving parts arein sync. Make sure to continuously trackworkflows to determine where they can be refined. Wherever possible, simplifycommunication to speed up decision-making — without sacrificing accuracy.
2. Automation: Automation can save businesses time and money, make lifeeasier for workers and benefit the customer experience. For example, automation can improveshipping functions, as well as other general order fulfillment processes.
- Shipping: Automation can help to select the cheapest shipping optionbased on factors like available inventory, destination, package weight and size.Automated shipping systems can also automatically send customer notifications fortracking and order delivery confirmation.
- Processes: Both picking inventory and sorting can become far easier andsimpler with automated systems. What’s more, having an automated communicationchannelmay drastically improve the way information passes through all the vital employees inthe order processing workflow. For example, automation can help trigger task lists forpickers, sorters and packers. On a smaller scale, automated processes are not only lessprone to mishaps, but they can also prevent employee burnout.
3. Demand forecasting: By analyzing customer profiles and past buyingtrends, it becomes possible to estimate future demand andmore effectively plan, budget and set order processing goals. For example, demandforecasting can help a business determine when it needs to hire additional seasonal help.
4. Stock level accuracy: Maintaining well-organized and accurate inventorydata can directly improve the efficiency of order processing and therefore ensure customersreceive orders quickly and accurately. Outdated or manual processes can slow downoperations. While it’s possible to implement and maintain a manual organization systemthatgroups, labels and counts items by hand, automated inventory trackingsystems can speed up the process while virtually eliminating room for error.
5. Warehouse management: A warehouse management system(WMS) can play a critical role in increasing productivity and decreasing costs. For example,a WMS can manage all warehouse-related tasks,including order fulfillment and shipment, in one centralized location. A WMS is typicallyused alongside specific inventory and other supply chain software, further streamlining theorder fulfillment process to increase the level of service while reducing costs.
6. Partial order processing: Sometimes it might not be possible to fulfillan entire customer order in one shipment. For example, a pencil manufacturer low on stockmay be able to send only half of an order for 1,000 pencils to an office supply store. Themanufacturer can process a partial order now so the office supply store can have items tosell, and will send the other half when it’s available. Partial order processing canalso beused to improve shipping efficiency. Sometimes it may be faster to split an order intoseveral shipments if part of the order is coming from your warehouse and the other part froma nearby fulfillment center, for example. Having the flexibility to partially ship orderscan improve customer satisfaction.
7. Customer communication: Communicating and assessing customer satisfactionis vital throughout the entire order processing workflow. Letting your customers know theirorders are underway can give them a sense of control and make them feel more involved in theprocess.
8. Inventory control: Along with demand forecasting, inventory control helpsprevent instances of having too much — or too little — stock available. Properinventory managementcontrols can save money by ensuring the company purchase only the volume andselection of products it can sell. Efficient inventory control incorporates data from recentpurchases, reorder rates, customer satisfaction and turnover, for instance.
9. ERP integration: An enterprise resource planning (ERP) system helps automatebusiness processes by using a central database that collects key business information fromall departments, from warehousing and shipping to accounting and human resources.Integrating order management modules with the broader ERP system can help monitorand prioritize customer orders as they come in, then track their progress. This can helpimprove order processing speed and thereby improve customer experience.
10. Mobile picking and barcode scanning: Pickers can use mobile devices toscan barcodes on items each time they’re picked for an order. These scanners cannotifyteams whenever an incorrect item barcode is scanned, which can decrease picking errors.
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Optimize Order Processing With NetSuite
Earning loyal customers no longer relies solely on having a great product. That helps, ofcourse, but in today’s fast-paced commerce environment, order processing workflows canmakeor break a company because they have a major impact on the customer experience. An ordermanagement solution such as NetSuite Order Management canoptimize order processing and better manage inventory throughout the order life cycle bycoordinating and organizing all of the moving parts of order fulfillment, including theentire order processing workflow. This type of software also provides insightful analytics,such as KPIs and other metrics, that tell you what you’re doing well and wherethere’s roomfor improvement. Your OMS should also be integrated with inventory managementsoftware to ensure you have the necessary items in stock and that order volume is insync with the inventory purchased.
Additionally, NetSuite WMS automates processes andcoordinates a warehouse’s many moving parts, including order processing. WMS helpswarehousemanagers identify which orders to release based on criteria including priority customers,expected ship date and ship method; devise strategies for determining the proper binlocation based on such concepts as first-expired-first-out (FEFO); and recognize clusteringopportunities for multi-order picking.
Order processing is a critical element of order fulfillment. It refers to the workflow thatoccurs in a warehouse to ensure customer orders are properly prepared and delivered to theright place. While it’s possible to improve order processing on manual systems, thetechnology available today makes this process much easier and more affordable so it’savailable to companies of all sizes. Accuracy and reliability are other key benefits becausethey boost customer satisfaction, and customer satisfaction leads to moresales.
Order Processing FAQs
How do you improve order processing?
You can improve order processing by implementing systems, manual or automated, that helpensure accuracy, timeliness and smooth customer relations. Technology-centric systems canvirtually eliminate human error while simplifying processes. This can help customers receiveaccurate orders quicker, thereby improving customer satisfaction.
What does it mean when the order is processing?
After an order is placed, it will appear as “processing.” This means the order isin theprocess of being picked, packed and prepared for shipment. Some order processing systemswill notify customers during each step of the process, from order placement to delivery.
What are the six steps in the order fulfillment process?
The order fulfillment process involves these six key steps:
- Receiving: Accepting incoming inventory from a manufacturer orsupplier.
- Inventory storage: Storing and organizing stock, usually in a way thataims to facilitate the picking process and keep the warehouse organized.
- Picking: Finding and collecting ordered items to prepare them forshipping.
- Packing: Putting orders in packaging with sufficient protection, eitherin custom-branded or standard shipping boxes.
- Shipping: Sending the finished packages either directly to customers orto third-party carriers for delivery.
- Customer support: Ensuring that the customer is satisfied and, if not,processing returns and/or refunds as necessary.
How do you effectively manage order processing?
Order processing begins by first picking the correct inventory from a warehouse after theorder is placed. Items are then sorted and compiled with their respective orders. Next,orders are packaged and shipped to the customer.
