Chapter 2. Order Management Terms and Basic Concepts

Welcome to Chapter 2 of our order management guide. Now that we know what order management is, this chapter will cover a long list of terms (don’t worry, there’s no test!) and basic practices you must understand.

What Are Common Order Management Terms You Must Know?

Let’s do a quick crash course in order management terms. Some of them overlap with other areas of ecommerce you may already know. No need to try to remember them all—we will revisit many of them in later chapters of this guide. Plus, you can always come back here anytime to refresh your memory.

• Alerts—Alerts can notify you when an action needs to be taken or if something in the fulfillment process is behind schedule.
• Appeasement—The act of offering something to an unsatisfied customer, typically when there is a problem with their order.
• Appeasement refund—When you refund an unsatisfied customer to appease them.
• B2B—In a ‘Business-to-Business’ model, your order management process may differ slightly as you sell to other businesses. Orders will probably be larger.
• B2C—‘Business to Consumer,’ most ecommerce sellers who sell on marketplaces are considered B2C businesses.
• Backorder—An order can be considered a ‘backorder’ when it cannot be fulfilled because the items are not in stock.
• Bill of lading—A list of goods received when a business receives an order from a vendor or manufacturer. It can be used as a receipt, showing the item’s price and quantities.
• BOM—Stands for ‘Bill of Materials,’ which is used when a product or a kit needs to be constructed of components before it can be sent to the customer.
• Bundle—When several products are offered together as a packaged product. The products usually have some relation to each other.
• COGS—‘Cost Of Goods Sold’ is the total cost of the materials and labor to produce a product. It is often used to price a product.
• Cross-docking—A fulfillment method where the vendor sends the goods to the seller, who immediately ships them to the customer. Products do not stay in the warehouse.
• Customer service—The personnel who deal with customer inquiries, complaints, order changes, and anything else related to the customer.
• Dashboard—A condensed section with statistics and the most important details on your OMS.
• Dropshipping—A fulfillment method where goods are delivered straight from the manufacturer or vendor to the customer, bypassing the seller. The seller only fulfills the transaction.
• ETA—Stands for ‘Estimated Time of Arrival,’ which is when the customer can expect their goods to arrive at their destination.
• Exchange—An exchange is when you swap a product for another to appease a customer.
• FBA—Stands for ‘Fulfillment By Amazon,’ a service by Amazon where they handle inventory and the fulfillment of customer orders.
• FC—Short for ‘Fulfillment Center,’ a location, usually a warehouse, where goods are stored, prepared for shipment, and sent to customers.
• FBM—An acronym for ‘Fulfillment By Merchant,’ which is where merchants fulfill their own Amazon orders.
• Fulfillment—When an order is ‘fulfilled,’ it can be considered complete. Fulfilling orders is the act of completing them. Fulfillment services are companies that offer this as a service.
• Integrations—Different service connections to your OMS to complete actions necessary to fulfill orders.
• Inventory management—The process of storing and handling a business’s inventory (its products).
• JIT—Stands for ‘Just-In-Time,’ a method of fulfilling orders where the vendor sends over the components needed before they are needed to minimize storage.
• Kit—Also known as a bundle, a kit is where you sell items that are usually separate as one combined product with its own SKU.
• Marketplace—A marketplace is where your goods are sold online. Amazon and eBay are top examples.
• Merge orders—This is where you combine multiple orders destined for the same customer into a single order.
• Multichannel—Where you use multiple channels to make sales to customers, such as different marketplaces.
• Omnichannel—The same as multichannel, but there is communication between channels; for example, customer information can be shared between channels.
• OMS—Stands for ‘Order Management Software’ or ‘Order Management System.’ This is the program that you use to manage orders.
• Order confirmation—This is sent to the customer to confirm that their order has been accepted and confirm their payment.
• Order Status—An order can have a range of statuses as it is created, prepared for shipping, and sent to a customer. The status indicates where it is in the order process.
• PO—Stands for ‘Purchase Order,’ a document created by a buyer and sent to the seller.
• Pre-order—When a customer pays for a product before it is available for shipping.
• Proof of Delivery—A document used to prove that a courier has completed the delivery of a shipment. It can be shortened to ‘POD.’
• Refunds—When you must receive an order back from a customer and send them their money.
• Reporting—Reports are useful for tracking your performance.
• Returns—Orders sent back to the merchant, often for a refund or to be replaced if there is an issue.
• RMA—‘Return Merchandise Authorization,’ a slip with a code that, when provided to the customer, can be attached to a return and tracked back to the warehouse.
• ROM—Stands for ‘Retail Order Management,’ which is an order management system that is designed specifically for retailers.
• Rush Orders—Orders that must be prioritized and shipped to the customer as quickly as possible.
• SKU—Commonly referred to as ‘Stock Keeping Unit,’ this is an alphanumeric string a seller uses to refer to a product and its variations.
• Shopping cart—The list of products a customer intends to order while browsing your website before paying. You may also know this as a ‘basket.’
• Shipment—The process of preparing and sending out an order.
• SLA—A ‘Service Level Agreement,’ is an agreement that specifies and quantifies the number of orders you should handle and how long orders should take to handle.
• Third-Party Logistics—Also commonly referred to as ‘3PL,’ an outsourcing service typically for fulfilling orders, though some also handle warehousing and inventory management.
• WFS—The acronym for ‘Walmart Fulfillment Services,’ which is Walmart’s equivalent to FBA.
• Warehouse management—The process of running and keeping a warehouse organized to enable daily operations.
• WMS—A commonly used acronym for ‘Warehouse Management System,’ software used to keep on top of warehouse operations.

We will come across plenty more in this guide, but having a good understanding of this list will help you as you progress.

Important Things to Know About Order Management (Early On)

So, now we know more about the different terms we will encounter in order management, let’s look at some important things you need to know about order management. We’ll touch on them now and go into greater detail as the guide progresses and gets more technical. Knowing these early on will be advantageous later on as we reach more complex and technical topics.

Keep Customers Happy

The objective of order management is to get a customer’s order to them without issue, and if there are issues, solve them in the best way possible. Unhappy customers will not return. According to survey data from Statista, 38% of respondents said they were very unlikely to re-engage with a brand after a poor returns experience, and a further 24% said they were somewhat unlikely.

Furthermore, they can spread the news that they are unhappy with your service, and others will avoid your business. Sometimes, we need to appease customers after an issue, whether or not it was your fault, and you must always be understanding and professional when engaging with customers.

Order Management Doesn’t Stop When the Shipment Arrives at the Customer

Don’t automatically assume an order is complete because it has left the warehouse and is on its way to the customer, or even when the customer receives it. Complaints, refunds, appeasements, post-sales—there are many things you still need to do before you consider an order fully completed. Sometimes, when things go really wrong, these orders can drag out and be a real pain to deal with.

Please, Please, Please Use an OMS!

If you haven’t worked in order management before and many of the concepts still seem alien to you, using a system like an OMS can be a little intimidating. Using an OMS is so common in today’s ecommerce environment that, arguably, we should just assume that you are using one for the rest of the guide. If you want to run a competitive business, you really must use one.

Work with Inventory Management

People working in order management must work closely with those in inventory management. Many inventory management terms and practices will pop up in this guide, as there is a significant overlap between the two areas. Inventory management handles the inventory, and you handle the orders. Communication should be clear so orders can flow smoothly. Ideally, use the same system to ensure information is properly shared and acted on.

Tracking Orders is Vital

Orders have a lifecycle and must be monitored as they follow this process. Sure, many will have different trajectories, take longer to complete, or follow different steps, but the whole journey must be monitored.

When you don’t track orders (which you should do with an OMS), surprise, surprise, you lose them. When that happens, you might not even know there are problems to solve if orders are completed, and customers can also make claims (like they did not receive their order) that you cannot check.

Sort Your Orders

Not all orders are equal. There are regular orders, and then there are rush orders, which must be prioritized and come before regular orders. Businesses must figure out how they will handle rush orders and non-rush orders. Prioritizing urgent orders will save you a lot of time and problems later.

Verify High-Value Orders

It could be an order made up of one expensive item or a large order of numerous items. Whatever the case, when a customer makes a high-value order, contact them to confirm. It’s important to confirm the order to ensure it wasn’t a mistake and confirm the order’s details. The customer may have made an expensive mistake, and fulfilling that order could be an extension of that mistake. If it were a mistake, the customer would not be happy, and you would put inventory at risk.

Merge Your Orders (When Possible)

Why pay for shipping multiple times when once is enough? For example, if you’re sending three orders to the same customer, combine those orders into one single delivery. This is more practical for order tracking and will save your business money on shipping and packaging materials. Furthermore, it is more convenient for the customer to receive one delivery instead of multiple deliveries that could arrive at different times or even on different days.

Follow Up after an Order Has Been Delivered

Following up with a customer after a shipment is always a great idea. It ensures all is well and confirms that you can consider the order complete. It’s not always possible to follow up on every order, and many businesses don’t, but it’s a great way to find out if there were any mistakes you didn’t know about, and customers appreciate the thought.

Key Points From Chapter 2

You’re now well-versed in order management terms and basic concepts. Remember these key points.

• You will encounter a wealth of terms, abbreviations, and acronyms when working in order management. It will take a while to get used to them all (we’ve only covered a fraction of them).
• Never immediately assume that an order is complete just because it’s been shipped. A million things could happen before it reaches the customer (and then after).
• You really should use an OMS (Order Management Software) to manage and monitor your orders; this is commonplace in many businesses and simplifies much of the work.
• Tracking orders is an absolute must in order management. Without order tracking, you can’t be certain where orders are and if they have been fulfilled, which could lead to bigger problems.
• Always prioritize rush orders, merge orders to be shipped to the same customer, and verify high-value orders before preparing to fulfill them.