Order Processing - A Detailed Study

With the ever-changing competition in the digital world, it is certainly not a surprise that e-commerce is one of the fastest-growing industries in modern times. Ensuring the best possible services to the ever-growing and ever-changing customer pool is the need of the hour in most scenarios. Setting up a benchmark in the industry requires a company to understand, analyze and optimize its business operations to keep up with the demand and provide the best possible service.

Order processing is one of the many crucial links in a supply chain process which can either make or break a business. Without an efficient order processing strategy, there’s a high chance your company can take a lot of time to reach its intended point of success. Right from the order placing to delivery, order processing is a complex network that demands to be seen and improved.

Let us explore what order processing is and how you can leverage it for your company’s success.

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Order processing in e-commerce

What Is Order Processing?

Order processing is one of the critical elements of order fulfillment in the supply chain process. Order processing involves all the required steps and operations from when the customer places an order to when the packed order is shipped to its destination. Being a crucial part of the supply chain process, order processing is a workflow that ensures the accuracy of order fulfillment.

Order processing includes vital steps of inventory management relating to order sorting, picking, packing, and shipping. Generally carried out in warehouses or distribution centers, order processing can be manual and a tech-driven operation. Efficient order processing helps the company to curb the unnecessary time it takes to fulfill orders and increases accuracy.

Order processing in e-commerce

Order Processing Explained

Order processing is the series of operations that takes place when a customer places an order until the order is delivered to the customer. Order processing includes basic inventory operations like product sorting, picking or batch picking, packing, handling, shipping, and product tracking. To explain the phenomenon, let us look into the three main ways of order processing.

Internal warehouse fulfillment

Companies with an in-house order fulfillment process tend to practice this particular order processing mode. Here, the order processing operations are usually carried out by in-house employees directly from the company warehouse to the final customer. The working business controls internal warehouse management, and the company takes full responsibility for any discrepancies and control over financial coverage.


Dropshipping allows a business to sell its products through designated e-commerce websites. However, companies following dropshipping methods don’t have their own warehouse and usually fulfill the order through order suppliers responsible for carrying out the order processing steps and shipping the product to the recipient. New businesses primarily use this method as it helps cut overhead costs and increases the sales curve.


This order processing method involves an external service provider carrying out the order fulfillment. Unlike dropshipping, here, the business owns the inventory and the orders are processed via a third-party vendor. The third-party service provider is responsible for handling, processing, and delivering the order. Businesses lacking storage spaces tend to practice this particular order processing method.

Order processing in e-commerce

Steps in Order Processing Workflow

The order processing includes six main steps, from order placement by a customer until the order is delivered. The order processing can also extend if there’s a possibility of a return of any products. A detailed breakdown of the order processing workflow is given below :

Order Received

After receiving a customer order, a business immediately sends the order details to the order management system. The order management system automatically determines the specific elements, including warehouse location, product availability, and delivery address. An efficient order management system helps the companies lower transit times, reduce shipping and delivery expenses and ensure faster delivery.

Order Processing

The order management system ensures order processing and helps the business integrate required steps and processes before order fulfillment.

Order Picking

The process of moving and collecting the required items from the warehouse to complete the order fulfillment is called order picking. Order picking is a crucial step that directly impacts order fulfillment. Efficient order picking strategies include batch picking, zone picking, piece picking, etc. The sooner the orders are picked accurately, the sooner they can move up to the fulfillment chain. Order picking can either be a manual process with manual sorting, packing slips, and spreadsheets or can be completed automatically with scanners, barcodes, and software systems.

Sorting Orders

This step involves separating the picked items according to the order and destination. Sorting is a crucial step in ensuring accuracy and improving customer satisfaction.

Order Packing

Order packing involves packing the products into appropriate packages. Packing also includes weighing the packages and labeling for the final step.


Shipping orders involve direct dispatch to the customers or shipping the orders to separate distribution centers for further processing. Consolidated orders are transported in a bunch to fulfill multiple orders to the exact location.

Order Returns

Often put out, order returns are a part of order processing. Any returned orders are inspected for damage or other discrepancies and returned to the inventory. Handling returns also includes customer service operations like keeping in touch with the customer to ensure the best possible service.

Order processing in e-commerce

Factors influencing Order Processing

Order processing methods tend to differ according to the needs and priorities of the operating businesses. Some of the factors upon which the order processing depends are:

Product nature

Product nature can be divided into two categories, perishable products, and non-perishable products. Perishable products like fresh food, meat and fish, flowers, medicines, and dairy products must be transported in a temperature and humidity-controlled environment. Non-perishable items like clothes, toys, etc. do not need any special handling.

Amount of products

Order handling also depends upon the number of items. Bulk orders are usually packed and processed separately from single-item orders. However, it also affects shipping. While single orders can be shipped directly to the customer, orders in bulk might take some time, given the distribution and freight shipping operations.


Product nature and order packaging plays a vital role in order processing. A company cannot ship products of various sizes or types together. For example, a beverage package cannot be packed with perishable items like biscuits. The size of packaging also affects order processing type.


Either manual or automation, the workforce is a critical factor in the order fulfillment process. Without manual labor, the business might need to set up an alternative via automated systems and software for order processing.

Seasonal needs

Businesses need to have flexible processing units according to seasonality. Busy shopping seasons like holidays demand more focus on order processing operations.

Order processing in e-commerce

What is an Order Processing System?

An order processing system includes documenting all the necessary resources, information, and data associated with order fulfillment. Order processing systems help a business make order fulfillment more accurate and efficient. The collected data helps the company assess real-time data for effective future reference.

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Types of Order Processing Systems

Order processing systems can either be manual or automated. However, due to the importance and accuracy, most order processing systems are technological. The two types of order processing systems are:


A traditional order processing system includes manual documentation and manual file systems. The whole process is handled by either a single person or a group of persons who, in turn, are in control of order processing. Handwritten order slips along with the product are sent to the following individual responsible for further order processing and delivering the product to the customer. However, the major setback in traditional order processing lies in the fact that this system is prone to human errors, which can sometimes harm business growth.


Modern order processing system is a technology-centric data-driven method widely used in e-commerce. An order, when placed, is automatically synchronized with dedicated order processing software, which determines and saves all the related information. This order processing method minimizes human error while allowing the business to focus on its growth and expand opportunities.

Order processing in e-commerce

Advantages and Disadvantages of Order Processing System


The order processing system allows a business to keep track of the order fulfillment process more cleanly and comprehensively. This helps improve order picking, sorting, and order packing accuracy and eliminates human errors. Order processing system provides a trustable and reliable customer shopping experience, leading to subsequent business growth.


The primary disadvantage lies in implementing a sustainable and efficient order processing system. Order processing systems are relatively complex systems requiring specialization to ensure effectiveness and functionality. The company also has to bear high implementation costs. Also, in case of any technical error, it becomes hard to retrace the path down to the point of error, and fixing it demands a lot of time and resources.

Order processing in e-commerce

What Is Order Processing Software?

With the company’s subsequent growth, manual order processing is overshadowed by automated systems to keep up with the complexities and liabilities. An efficient order processing software gathers and stores data and relevant information associated with the orders, inventory stock availability, and other relevant order fulfillment operations. This helps a company gather essential information on order fulfillment.

Order processing software allows a company to ensure timely and accurate order processing with increased customer satisfaction and reliability. Order processing software is usually integrated with other relevant software like accounting and billing and incorporated in an order management system to function in a centralized operating platform.

Order processing in e-commerce

Benefits of Order Processing software

Effective order processing software can help a business in several ways:

  • An order processing software provides a business with more visibility in order fulfillment operations, including incoming and outgoing orders, accurate data collection, etc. An automated order processing system eliminates errors and ensures lower operational costs.
  • Correctly used order processing software can also benefit a business by improving communication between the company and the customer. Customized information and suggestions from the customer’s end will enhance customer experience and increase brand recognition and loyalty.
Order processing in e-commerce

Best Practices for Effective Order Processing System

Implementing an order processing software

As discussed earlier, an order processing software is the most convenient way to automate manual order processing operations, eliminate human errors and improve customer experience.

Using machineries

Relevant machinery like order pickers or pallet trucks helps the operator move bulk quantities or heavy packages quickly and faster.

Automated shelves

Automated shelves help an order picker locate and collect the required product without hassle. Automated shelves can either work on voice commands or light commands, depending upon the nature of automation.

Automated guided vehicles or AGV

Automated guided vehicles help to speed up the order processing system in more complex order fulfillment channels.

Automated rails

The entire warehouse is connected through automated rails that allow a better flow of goods down the supply chain.

Picking up an enterprise resource planning system (ERP)

An effective ERP system allows a business to optimize various business operations by providing due data and information across all the departments. Enterprise resource planning helps prioritize order needs, improves order processing, and increases customer engagement.

Warehouse Management System (WMS)

Lastly, an effective warehouse management system allows a company to manage every possible warehouse operation with a complex network of software systems. WMS optimizes order fulfillment flow with better service quality and low costs.

Order processing in e-commerce

Phases in Order Processing

The different phases related to order preparation depend upon the nature and type of product, method of order processing, and characterization. The main phases associated with order processing are:


Prior planning is the numero uno step in order management and task assigning. While a traditional order processing system depends upon manual management, warehouse management software does the task automatically.

Warehouse movements

A huge part of time and resources are gulped up by this phase, depending upon the criteria of order. However, an efficient inventory layout can do the trick if used correctly.

Extraction of products

This is the phase in the order processing chain that holds the maximum probability of human errors. However, the order picking process can be accurately completed with efficient automation.

Order verification and dispatch

The last order processing phase includes verification of the order picked and packed, and transferred to the shipping area.

Order processing in e-commerce

Documentation for Order Processing

Following is the list of the documents required by the order fulfillment unit for order processing:

Picking List

A list including all the required items waiting to be collected from an inventory. Picking list also contains the quantity, order number, and also picking location for the automated warehouse.

Packing List

The list designated for packing instructions


Waybill reflects the mode of transport and the delivery route of the shipment.

Delivery Note

This is one of the crucial documents that works as proof of delivery to the shipment company. The delivery note is essential for packages lost or damaged.

Tracking ID

The unique set of digits designated to each package for easy tracking


In the case of international shipments, the customs documents act as legal documents depending upon legislation and company policies.

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Mistakes and Accidents in Order Processing

The most common errors which need close attention in order processing are:

  • Inconsistency in inventory control
  • Wrong information in order to receipt
  • Wrong product picked
    Improper product handling
  • Incorrect order number
  • Wrong product packaging
  • Wrong package labeling
  • Delayed in shipping
  • Neglecting returns


Order processing is one of the most important order fulfillment operations that often goes unnoticed in the business world. Yet, a huge part of a business’s success lies in the simple order fulfillment process. The more efficient the process, the more natural is the moving of products from suppliers to customers. Yet only the ones inside the process are accustomed to the complexities of the order fulfillment process. ​

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Order processing is a set of order fulfillment tasks that include picking, packing, sorting, and shipping.

Any business associated with the physical management of items needs a designated area for basic order processing operations like picking, packing, sorting, and handling. Likewise, the designated spot for the order processing operations is known as an order processing area. The order processing area can vary depending upon the company.

An order processing system can be improved by using relevant tools, including both manual and technology, to optimize, automate and increase the potential of the order processing system. For example, using appropriate order processing systems and software, specially designed machines, etc. are some effective practices to eliminate human errors and simultaneously increase productivity.

Automation is the easiest and safest way to avoid unwanted human errors at any stage of the supply chain process. Since many errors are caused by human carelessness, eliminating any human intervention will result in clean and accurate order processing data.

Businesses primarily tend to choose between two types of order processing systems. They can either opt for a manual order processing system (a more traditional approach), or a modern order processing system (a tech-based and automated approach).

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