What Is Order Processing? (With Definition, Types And Steps)

By Indeed Editorial Team

Published 17 July 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Order processing is an essential part of the operational processes of many businesses. These include e-commerce, food delivery and instant grocery delivery businesses. If you are looking for a career option that requires knowledge of order processing, then it is important that you understand its basics and how you may improve an order processing workflow. In this article, we answer the question 'What is order processing?', explore the various steps in an order processing workflow, learn about the different types of order processing systems and look at a few tips that can help improve order processing efficiency.

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What Is Order Processing?

The answer to the question 'What is order processing?' is that it is a workflow that organisations often implement to prepare and deliver customer orders properly, accurately and on time. Order processing may involve large teams, smaller teams, a few individuals or even a single individual, depending upon the size of the operations of an organisation. This workflow involves five well-defined steps that help organisations in managing everything from the moment a customer places an order until they deliver that order to the said customer.

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Order Processing Workflow

Below are the various steps in an order processing workflow:

Order placement

The first step is order placement, where businesses receive an order from a customer. In this step, an order management system (OMS) receives order details like the name of the items, the quantity of each item, shipping details and the address for delivery. Based on the delivery address and the availability of items, the OMS then selects the appropriate warehouse or fulfilment centre for the order.

This is done with the objective of minimising delivery cost and transit time. There may be instances where all the items in an order are not available at a single warehouse or fulfilment centre. In such cases, the OMS may select more than one warehouse for fulfilling the order.

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Picking inventory

This step involves picking the right items in the right quantity from the inventory as per the order details. It is very important that the pickers perform the picking process correctly to ensure timely packaging and shipping of orders to the customers. Smaller organisations may do this manually, while larger organisations may use barcode scanners to automate the process. The different picking strategies that organisations use are:

  • Piece picking: In this strategy, each individual picker picks the necessary items for a single order at a time.

  • Zone picking: In zone picking, the organisations split each warehouse into different zones, and each individual picker collects items from their designated zones only.

  • Batch picking: In this strategy, each picker picks items for many different orders simultaneously.

Related: What Is An Inventory Manager? (Plus How To Become One)

Sorting

In this step, separation of picked items takes place. This separation happens based on the delivery addresses of the items. This step is essential when the picking takes place using either the zone or the batch picking strategy. After picking using these strategies, it is important that the staff then separate these items, adhering to the different orders. This step is very important to ensure customers receive the items they ordered in proper condition and quantity.

Packing

After sorting the items as per the different orders, the next step is to pack them. In this step, the assigned professionals pack the items properly to protect them from any damage during transit. They pack the items in appropriate boxes, weigh them and label them properly with the destination address and other contact details of the recipient. In this step, it is important that the packaging chosen is appropriate as per the dimensions of the items to make the entire process as cost-effective as possible.

Shipping

In this step, the shipping of orders to their destinations takes place. There are two different ways in which organisations may ship the orders. They may ship each individual order directly to the customer or they may ship several orders together whose final destination addresses are nearby. This helps them in reducing the total number of shipments and hence the overall cost of shipping. In this step, it is very important that the organisations use a reliable shipping partner that provides a trustworthy tracking system. This helps both the organisation and their customers in tracking the orders and improves overall customer satisfaction.

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Types Of Order Processing Systems

Below are the two different types of order processing systems:

Traditional order processing systems

Traditional order processing systems make use of handwritten documents and manual labour. In such order processing systems, a single person or a small team manually carries out all the steps involved in order processing, like writing order slips, packaging orders and dropping off the orders to the courier company. These individuals also work on monitoring the data on all orders and inventory.

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Modern order processing systems

Modern order processing systems rely a lot more on technology. In these order processing systems, specialised software systems maintain all the data related to orders, inventory, tasks and customer profiles. Since most of the processes in these systems make use of technology, this reduces the chances of errors because of human mistakes and improves the overall operational efficiency.

Tips For Improving Order Processing

Here are a few tips you may use for improving order processing in your organisation:

Use automation

Using automation can help you in optimising processes like sorting, picking items, packaging and shipping. In shipping, automation can be helpful in selecting the cheapest options based on factors like destination address and the weight and size of the package. In picking, you may use automation in barcodes to make the picking process easier for your staff.

Related: What Is Automation Engineering? Definition And Career Advice

Work on improving efficiency

It is important to work on improving the workflows continuously. Keep monitoring the different workflows to identify areas of improvement. Optimise communication and decision-making to improve the overall efficiency and accuracy.

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Maintain accurate stock levels

Maintaining stock levels accurately helps in ensuring that you can fulfil the customer orders accurately and on time. When customers place an order and you have the items that they require in the inventory, you can pack and ship the items immediately. If you are unable to maintain stock levels accurately, then the items that customers order may not be available in the inventory and this may lead to longer fulfilment times, which may affect customer satisfaction.

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Communicate with your customers

During the entire order processing workflow, it is very important to keep communicating with your customers. If you keep the customers informed about the status of their orders, like when their order gets packed and when it gets shipped, then they feel comfortable about the fulfilment of their order. After shipping and delivering the orders, another important step is to ask customers for feedback about their overall experience. You can then improve your order processing workflow according to the feedback you get.

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Use demand forecasting

Demand forecasting is predicting the demand for any particular items that may arise in the near future. If you can forecast demand for the various items, then you may stock those items accordingly. This means that your customers can purchase these items immediately. This also means that you stock more of those items that are going to have immediate demand and helps you save space in your warehouses by avoiding stocking those items that are unlikely to have immediate demand.

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