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Order processing: definition & all steps simply explained
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Order processing: all core processes of an order in a company
Order processing covers the process from the customer's order to delivery and receipt of payment from the supplier. Purchasing is essential for successful order processing, as the required materials must be available in sufficient quantities for production in order to guarantee smooth order processing. Successful order processing, and therefore also purchasing, have a direct influence on a company's delivery performance, process costs and customer satisfaction.
Contents
From incoming orders, material procurement and logistics to after-sales service
- Order receipt: First, the customer places an order with the supplier, which is then recorded and validated internally.
- Resource planning/inventory management: Material, financial and human resources are monitored and managed to avoid bottlenecks and guarantee smooth production. Ideally, the stocks required for current and future orders are evaluated on an ongoing basis.
- Procurement of materials: If there are shortages of required materials, the purchasing department is responsible for procuring them at optimal conditions.
- Production: Production comprises the planning, coordination and final provision of the ordered product.
- Performance acceptance: The products are checked for functionality and completeness.
- Customer communication: The customer is informed about the completion of the production or the shipment and the expected delivery date. General: communication with the customer should take place at all stages of order processing.
- Logistics / Shipping: Transport is organized and the finished products are delivered to the customer.
- Checking receipt of payment: Finally, invoicing takes place, which describes the creation of the invoice for the services provided and the checking of the receipt of payments.
Optional:
- Target/actual comparison: Following order processing, it is possible to evaluate what the order processing plan looked like and how processing actually took place.
- After-sales service: For certain products and industries, customer support may still be required after order processing. This includes, for example, the processing of quality defects or returns management.
Good order processing makes customers happy, reduces costs and shortens delivery times
What makes for good order processing? Successful order processing avoids errors, misunderstandings and delays. Clearly defined processes, clear delineation of tasks and areas of responsibility, good communication and planned organization are key elements in ensuring that the complex order processing procedure runs without errors. Errors, misunderstandings and delays lead to follow-up costs due to increased workload or direct financial penalties. In addition, order processing is essential for maintaining positive relationships with customers and the general public image. Continuous, error-prone order processing leads to a decline in orders and the loss of important profit opportunities.
On the other hand, consistently successful order processing promotes customer relationships, public image and the future order situation. Structured order processing reduces delivery times, process costs and contractual penalties.
Order processing is therefore of central importance for manufacturing industries and should be continuously evaluated and improved.
Guide: Optimizing your order processing for greater efficiency and customer satisfaction
Significance for purchasing
Order processing is of central importance for purchasing, as it communicates the need for materials to the purchasing department. Efficient order processing enables Purchasing to plan current and future requirements precisely, determine optimal order quantities and thus strengthen supplier relationship management.
But purchasing also plays a major role in order processing the other way around. If the required stocks are missing, production and ultimately delivery to the customer is delayed. In addition, covering requirements at short notice often results in higher costs. Well-planned purchasing in order processing can reduce costs and improve delivery performance.
- Demand accuracy: Precise determination of demand to avoid excess stock and shortages
- Cost reduction: Efficient processes reduce operating costs and planned purchasing achieves better conditions
- Supplier management: Improved collaboration through transparent processes and communication
Order processing: from manual processes to digital transformation
Order processing is the key to any company that offers products or services. Theory and practice show that successful order processing reduces costs and delivery times, which increases customer satisfaction and the company's success. Delivery times are reduced, which increases customer satisfaction and the company's success. In view of increasing demands, greater complexity and greater competition, there is an urgent need to rethink traditional processes and modernize them through digitalization.
Traditional approach: Manual order processing
In traditional order processing, orders are usually received manually - by telephone, fax or e-mail. Clerks enter the data manually in various systems, which is time-consuming and prone to errors. In the worst cases, orders are received incorrectly or very late. This not only leads to a loss of turnover, but also to contractual penalties and a poorer image for the company in the long term.
Inventory checking is often done through physical checks or in separate Excel spreadsheets, and communication between departments was heavily paper-based. Delays and loss of information are commonplace. Delayed and incomplete information to purchasing and production, in particular, causes major delays and additional costs. These manual processes lead to longer lead times, increased costs and reduced flexibility, limiting the ability to respond quickly to customer requirements.
New and digital: Automated order processing
Modern companies rely on automated systems to optimize order processing. An order management system (OMS) integrates all steps of the process into a central platform. Orders are received electronically and automatically transferred to the ERP system. Real-time data enables the purchasing department to carry out immediate stock checks and resource planning. The use of artificial intelligence improves forecasts and identifies bottlenecks at an early stage. Automated workflows coordinate procurement, production and logistics efficiently. The implementation of an OMS leads to a significant reduction in errors, faster response times and increased transparency across the entire process. In particular, the lower manual effort reduces human errors, as well as the time and effort required for manual activities and the costs for clerks.
Practical example: Digital transformation in a medium-sized mechanical engineering company
A medium-sized mechanical engineering company with 280 employees implemented an automated order processing system in 2023. Previously, the 1,200 annual customer orders with a total value of 45 million euros were processed manually, with each order taking an average of 4 hours to process from entry to production release.
Automation fundamentally transformed the process: the processing time per order was reduced to 45 minutes, as the system automatically carries out feasibility checks, resource planning and scheduling. With 1,200 orders per year, this meant a saving of 4,500 working hours. With average personnel costs of 50 euros per hour, this resulted in annual cost savings of 225,000 euros through process efficiency alone.
The quality improvements were even more significant: the error rate for order entry fell from 8% to 0.5%, which reduced the number of reworked orders from 96 to 6 per year. The on-time delivery rate increased from 76% to 95%, as the system automatically checks capacities and promises realistic delivery dates. The average lead time from order placement to delivery was reduced from 45 to 32 days, which significantly increased customer satisfaction.
Thesystem also brought internal benefits: Stock accuracy increased from 85% to 98%, as material requirements are now automatically calculated and transmitted to the ERP system. This enabled the purchasing department to optimize its scheduling processes, which improved material availability and reduced unplanned production interruptions by 65%. The improved planning quality led to an 18% reduction in average stock levels, which lowered inventory costs by 280,000 euros per year and noticeably increased the company's overall profitability.
Conclusion on order processing
Order processing covers all processes from incoming orders, purchasing and production through to delivery and receipt of payment. This makes order processing a complex but crucial process for a company's success. By integrating modern technologies, efficient process flows and close coordination between all departments involved, companies can increase their competitiveness and maximize customer satisfaction. Well-structured order management not only enables cost savings, but also creates the basis for sustainable growth and digital transformation.
