text: Order processing begins as soon as a customer completes a purchase. Without efficient order processing, a customer’s purchase may not get delivered in a prompt and satisfactory manner. Learn more about what factors can affect order processing and how to build a system that works.
  What is order processing?
  Order processing encompasses all the steps that occur from the moment a customer buys something online to the moment it arrives at their door. This series of steps includes payment processing, verifying customer information, preparing and shipping items, and tracking the order.
  Not all businesses handle order processing the same way. For example, a solopreneur with few orders may complete these steps on their own. Medium-size and large businesses may outsource this process or have an in-house team to manage and fulfill customer orders.
  Why does order processing matter?
  Efficient order processing moves from one stage to the next smoothly and accurately so that the right products end at their destination quickly. This can make a good impression on the order recipients, who can become repeat customers. Proper order processing also prevents overstocking, or holding excess inventory that incurs storage costs and is hard to sell.
  Order processing is not something merchants should approach haphazardly. Without the right management system, businesses may end up losing money and alienating customers. Inefficient order picking means workers spend too much time finding products and packing orders, which can lead to increased labor costs.
  For example, when olive oil brand Graza increased sales during the 2022 holiday season, it struggled to keep up with orders. “People were waiting three weeks to get their products,” founder Andrew Benin tells Shopify Masters. Knowing its customers deserved answers, Graza sent an email explaining the behind-the-scenes circumstances—a strategy that some believed would backfire. Instead, the company’s honesty got them positive press and messages from customers. “The responses were magnificent,” Andrew adds.
  Establishing a carefully laid-out order processing structure can increase customer satisfaction and build trust. However, if orders are incorrect or take too long to arrive, customers may not buy from you again.
  How order processing works
  Although companies organize their order processing workflows differently, the general process includes:
  1. Order placement
  Order processing starts when a customer places an order. While smaller businesses may manually handle order placement, bigger or more established ones may automate or outsource these steps. An order management system can verify that the customer’s information is accurate, then trigger the creation of a packing list that is forwarded to the fulfillment team.
  Work with a third-party logistics provider to determine the optimal fulfillment location. This is usually the fulfillment center closest to the customer that has the item in stock.
  Workers complete the step of picking items from shelves. An inventory management system helps pickers track items so that they can easily locate them in the fulfillment facility.
  Depending on your fulfillment strategy and warehouse setup, you might choose batch picking (collecting items for several orders at once), piece picking (focusing on one order at a time), or zone picking (finding items within a zone, like electronics or home goods).
  After picking, separate the products by destination. This is especially important for batch or zone picking, because these strategies involve gathering several items from multiple orders at once. This is also an opportune time to ascertain order accuracy and that the items do not look damaged.
  Securely pad items, weigh and label packages, and seal them so they are ready for shipping. At this stage, customers receive notice that their order is packed and ready to ship.
  5. Shipping and delivery
  This last step in the pick, pack, and ship process is when you hand packages over to a carrier such as USPS or FedEx. Once a carrier has the package, customers receive an updated status on their order that includes an estimated arrival time. When orders arrive, seek customer feedback or offer any help with their orders.
  Factors that affect order processing
  There are a few factors to consider to when trying to manage order processing:
  The kind of products you sell impacts the entire order-processing workflow. For example, if you sell ready-made meals, then you have to account for keeping foods cold so they don’t spoil during shipping. A merchant that sells non-perishable products like makeup, on the other hand, won’t have the same concerns.
  A lot depends on whether you are dealing with big or small items. If you are selling goods that fit in a small box, like a set of silverware, you likely don’t need to take any special measures to process an order. However, if you ship furniture, delivering a three-seat sectional to someone’s living room is not as casual as dropping off a box at a shipping service.
  Costs influence everything from the order processing software you use to the size of your fulfillment team to how often you prepare items for shipping. Before setting up order processing systems, have a clear picture of the cost of running your business. Consider where you can devote more resources and where you’ll need other solutions.
  Efficient order processing saves your business time and money. For example, a team that uses a warehouse management system can pick an item quicker than a team that does not.
  If your products are more popular at a particular time of the year, seasonality can affect your order processing. You may need to take on more fulfillment workers during peak months or you may change your picking and shipping strategies based on your customers’ shopping activity.
  Like Graza’s founder explained, it’s hard to change your order processing in the middle of an unexpected spike in sales, like during the holiday season. “In our early pitch decks, we had pitched, you know, Graza’s not for gifting,” Andrew says. “Graza’s for everyday use. And then I think Q4 brought us to our senses. We were like, ‘Holy moly, people are really gifting this product like crazy.’ Our order volumes were a lot higher than we had anticipated. It’s really hard to scale up a warehouse in the moment during the most difficult and volume-driven time of the year.”
  Tips for efficient order processing
  - Opt for automation
  - Choose your shipping company wisely
  - Be transparent with customers
  - Use demand forecasting
  - Revise your workflow
  Follow these tips to make order processing smoother for your business:
  Opt for automation
  Modern order processing systems employ technology to prepare, ship, and deliver orders, whereas traditional systems rely on manual processes. Automating your inventory management system can be more efficient and reduce human error.
  Choose your shipping company wisely
  Shipping plays a big part in order processing, so it’s worth investing time to find the right shipping carrier for you. Not only are you looking for a reliable partner that can deliver orders on time, but you also want to find one that is cost-effective and can help customers if an issue arises.
  Be transparent with customers
  Communicating often—such as with order updates or offering support—can help improve customer satisfaction. If you have any issue with an order, you can instill trust by giving your customers the reason and explaining what steps you are taking to remedy the situation.
  Use demand forecasting
  A demand forecasting tool can prepare you for periods of high and low activity. You’ll know when you need to increase inventory levels and hire more staff and when you don’t need as much support. This ensures that your customers can get their orders quickly—even when demand peaks.
  Revise your workflow
  What works for you one year might not work the next. Revise your order processing workflow regularly to maximize efficiency. Check if your inventory management software is up to date or if your shipping carrier is still delivering items on time to give your customers the best experience as your business grows.
  Order processing FAQ
  What is an example of order processing?
  An example of order processing is a customer ordering hair gel, conditioner, and shampoo from an online retailer. The brand will verify the customer’s information and order before a fulfillment team locates, packs, and ships the products. Order processing ends once the customer receives their haircare products.
  What comes after order processing?
  After order processing, companies might contact customers to seek feedback or offer support with returns.
  What are the stages of order processing?
  Although companies handle order processing differently, the steps generally include order placement, picking, sorting, packing, and shipping.