The Order Management Cycle in Business

Subject: Management
Pages: 5
Words: 1377
Reading time:
5 min
Study level: Bachelor

Order management is a process that helps companies to keep track of orders from clients and management steps involved to fulfill them. Researchers have realized that the process starts immediately after the customer places an order and that integration between departments is needed for it to be successful. The article “Staple Yourself to Order” talks about how an organization can meet the needs of its customers and steps in the order cycle and gaps, how to fix them, and the importance of fixing them. While the article shows how order management contributes to customer satisfaction, there are limitations related to gaps caused by departments.

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The article states that it is the order management cycle (OMC) containing ten steps that determine customer experience and that handling order is the same as handling the customer. To identify gaps in an OMC, managers should try stapling themselves to order and follow it through each stage (Shapiro et al., 2004). Tracking every step enables the company to find any horizontal gaps available, and these are related to process and communication between several departments within an organization. Orders move in a horizontal manner from one department to the next in the firm and are vulnerable to falling amid the cracks. An organization can also find vertical gaps, which are basically in terms of communication and knowledge. They can then be able to do selection and prioritization of orders by analyzing benefits, stakes and costs involved, and then order pricing can be done.

The authors of this article give a thorough explanation of handling orders by different departments and recommendations for fixing problems of an OMC. The OMC chart in the article enumerates all the departments successively and highlights how orders flow in the cycle (Shapiro et al., 2004). The first step in any company is that of planning, where production planners are required to make important decisions and outline the needs of customers. If there is tight integration in an organization, there would be more information available for planners from customer service representatives, marketing, and sales. Planners will have to work collaboratively with marketing to come up with predictions of production and sales. The next step involves order generation done by sales and marketing departments, and the gap between this stage and the previous one is minimized for the company to be efficient.

Cost estimation and pricing is the next step done by accountants who do the calculating and engineers who estimate costs, field salesforce who devise a price, and a headquarters group supervising pricing. Each group receives the goals, competence, and judgment of others through mutual integration and understanding. The buyer obtains the bid in time with maximum care. Customer representatives can be left to handle the next two stages in an environment that is well-coordinated and this involves order reception and entry then selection and prioritization. This is so they are in contact with customers daily and can know the best clients for the organization and things going on at the top management. This enables representatives to accept orders that are profitable and match the company’s strategy and reject bad ones.

Scheduling is the sixth step which is done after an order is placed into an operational sequence or actual production. Special changes required by order are closely examined then required changes are made to satisfy the order. This is from the understanding that the orders made are profitable are will be for the advantage of the company. Since the production personnel are well aware of the significance of orders, they would conduct the fulfillment stage as well and it is usually complicated. If any problems concerning the order are seen, they would know how to reach out to the customer and handle the issue. The finance department does the billing steps in accordance with customer requirements by checking on the notes prepared by the sales functions in order to create bills that are easily understood by clients. If these first eight steps are conducted as required, there would be fewer activities in the returns and claims stage to satisfy customers (Shapiro et al., 2004). Post-sales service is the final step where service representatives enter the customer’s organization. At this stage, the customer plays a key role in the profitability of the organization since they are greatly satisfied as a result of orders being done well.

In a well-integrated organization, its executives are involved in each step or are stapled to the order. Companies in the contemporary world use sophisticated computer systems to measure activities at every step. Information from these systems can then be used by the management to monitor any emerging gaps and take corrective action. The advantage is when departments integrate to reduce any possible gaps.

A horizontal gap occurs when process and communication gaps exist between various departments as the order flows from one function to the next in an organization. The vertical gap arises when individuals in trenches are unable to understand developed strategies or when the actions taken by functions are not in line with the company strategy. An example is in grocery chain stores where the marketing department does new campaigns each week with a few products on sale to attract buyers. The items being sold are usually normal staple items and more demand for them is created as a result of low promotional prices. The responsibility is on the marketing department to work in collaboration with the logistics and purchasing department (Shapiro et al., 2004). The purchasing function needs to have prior knowledge about promotions for ordering the right quantities and the logistics department also needs the same knowledge to ensure that the right quantities of promotional items are present in stores.

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A horizontal gap is created when items are brought in late and customers may be dissatisfied if they cannot purchase since the items available are less and when the purchasing department is uninformed of promotions. This might have an effect on the future profits, image, and reputation of the organization. Pricing connects customer needs with the capabilities of a company thus it is considered to be a crucial part of OMC. The organization needs to understand the effect of pricing and the opportunity. Order-based pricing is dependent on knowing the customer value created by every order, assessing charges for filling each order, and introducing a system that allows the organization to set prices for each order in accordance with its cost and value.

Controlling OMC makes managers able to exercise order-based pricing. This process has to be seamless for customers to get bids at the anticipated time and those involved in making pricing decisions need to be aware of how critical their decision is. The groups need to be united instead of questioning each other’s goals, competencies, and judgment pricing supported by the market. The management needs to let these departments know that their effort is towards achieving the overall goal of the company.

The authors discussed how order-based pricing relies on understanding the customer value created before setting prices (Shapiro et al., 2004). This approach could be useful to business owners as it enables them to easily enter the market, grasp higher price points, develop high-quality commodities, increase customer satisfaction, brand value, and promote customer loyalty. The writers however did not provide information on what it takes to use this pricing strategy and the flaws associated with it. This lack of detail would cause the strategy to be ineffective since in-depth customer research is needed for it to work accurately.

This article e focused on a key subject in order management as business executives need to identify ways of increasing customer satisfaction. One of the problems organizations faces is pricing so the order management cycle and information on fixing gaps helps reduce customer frustrations since purchases can be made and orders received at the expected time. Order-based pricing helps companies to satisfy customer needs while achieving higher profitability since it is based on evaluating cost and value (Shapiro et al., 2004). However, this article did not satisfactorily outline what is needed for the pricing strategy to be effective and accurate. Future research on the online management cycle with a thorough description of how to conduct research on customer value is necessary to provide information on pricing accurately for profitability.

Reference

Shapiro, B. P., Rangan, V. K., & Sviokla, J. J. (2004). Staple yourself to an order: Harvard Business Review, 70 (4), 113–122.