Order Processing: Steps, Example & Software


Ordering a product and getting it delivered has become commonplace. While order processing seems to work fast and without issue, a lot is going on in the background to ensure the seamless management of placement, picking, sorting, packing and shipping.

That’s only an overview of order processing and there’s a lot more to it, which we’ll get to in greater detail. Along the way, we’ll explore why order processing is important for businesses and the challenges they face. Plus, we’ll throw in some free templates to help streamline order processing.

What Is Order Processing?

Order processing, which includes sales order processing and purchase order processing, is the managing and fulfillment of customer orders. This process includes verifying customer information, authoring payment, preparing goods for shipment and tracking the order once it has been shipped. There’s also the tracking of inventory levels, stock availability and order status involved in order processing.

Customer data is collected and stored securely during order processing to make sure that all the pertinent information is being accurately tracked so that the customer’s order is correctly fulfilled. But the data can also help to understand a customer’s purchasing patterns, improve the company’s marketing strategies and streamline its product development. Effective ordering processing can improve a company’s service and help them be more competitive in the marketplace.

Project management software can make order processing more efficient and achieve those advantages. ProjectManager is award-winning project and portfolio management software with powerful kanban boards that can manage order fulfillment activities. Set up customizable kanban board columns to mimic the stages of order processing and capture customer and resource information information on kanban cards. Throughout the project, track the order to ensure it’s delivered on time and monitor costs and planned versus actual progress to stay on schedule. Get started with ProjectManager today for free.

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ProjectManager’s powerful kanban boards manage order fulfillment activities. Learn more

Why Is Order Processing Important for Businesses?

Order processing is important for many reasons. The more effective a company’s order processing, the less likely they’ll have to carry more stock, which adds to warehouse costs. Equally, there won’t be a lack of stock. Order processing can help accurately track and forecast demand to ensure that what customers want is always on hand. This saves a company money by reducing excess stock and holding costs as well as low sales that come with stockouts.

Outside of inventory issues, ordering processing improves a company’s fulfillment. It makes order fulfillment faster and more accurate by reducing mistakes. This, in turn, leads to greater customer satisfaction and brand loyalty. Also, since the order fulfillment process is working more efficiently, teams can focus on other tasks that can help a company handle more orders without increasing their labor costs.

In general, having accurate and timely data on order history and trends allows companies to make more informed decisions about inventory levels, staffing needs and other operational matters. Effective order processing can also improve turnaround times and provide better overall service, which gives companies a competitive advantage.

Order Processing Steps

To reap those benefits requires understanding the order processing steps. Follow the below five steps in order processing to eliminate errors and improve the order management process.

1. Order Placement

Order processing begins with the customer making a purchase order. This is called order placement and involves the receiving and accepting of orders from customers. There are various ways that a business can accept order placement, from online sales through an e-commerce website, over the phone, etc.

Once the order is placed the next step is checking to make sure the customer has sent all the necessary information. This is called receiving the order. Once you’ve verified the customer order, you should determine whether you have the production capacity to begin working on it. If so, you should send a sales order back to the customer confirming the order and specifying details such as a description of the products to be manufactured, scheduled delivery date, quantity, total cost and more.

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Sales Order Template

Use this free Sales Order Template for Excel to manage your projects better.


2. Order Picking

Once the order has been placed and received, it’s ready to be picked. This is when the company determines which product is needed to fulfill the order. This means ensuring that the product is in stock and, if it is, knowing where in the inventory the product is and getting it. There are different picking strategies, there’s piece picking, in which a picker collects products one at a time, zone picking where each picker is responsible for a zone in the warehouse and batch picking where pickers get products for several orders at once.

3. Order Sorting

When the order has been picked, it’s then sorted. This means that products are separated into groups before getting packed and shipped. This organizes the items according to the number of delivery locations. There are different ways to sort orders, which can add efficiency when one order contains multiple items. Orders also must be inspected to ensure they’re in good condition.

4. Order Packing

After the order is sorted, it’s packed. This involves placing the item in the appropriate container before it’s shipped to the customer. The goal is to use the most efficient, easy-to-handle and cost-effective packing materials possible. The package is then labeled and sealed.

5. Order Shipping

The product is now ready to be shipped and delivered to the customer, which can be done either directly by the manufacurer, or through a third-party logistics management firm. These orders can be shipped directly to customers or one order can be shipped with many others going to the same general location, which can reduce costs by reducing the total number of shipments. When shipping products, it’s important to track them to ensure they’re being delivered to customers on time and correctly.

Order Processing Example

To better understand what ordering processing is, let’s create an order processing example to illustrate the process in practical terms. It starts with the customer purchasing a component that they need as a component for manufacturing the assemblage of a widget.

ABC Manufacturing sends a purchase order to Acme Widgets to place the order, which includes quantity, delivery information and date. Acme Widgets will then send ABC Manufacturing a sales order to verify the details and confirm the purchase. They’ll then pick the proper widget from its warehouse and pack it. A label is adhered and the package is shipped to ABC Manufacturing.

Sales Order Template

Once the seller receives the purchase order, they create a sales order to confirm the information. The free sales order template for Excel has all the information needed to ensure that the order is correct and can be processed.

sales order template for Excel


Order Processing Templates

Order processing is best managed with project management software, but not everyone is ready to upgrade and will try to control the process with spreadsheets. Many free project management templates for Excel and Word can help in this process. Below are a few order processing templates, some of the over 100 free templates available for immediate download on our site.

Purchase Order Template

Use this free purchase order template for Excel when a buyer and seller are initiating their transaction. It captures all the pertinent information necessary to pick, pack and ship the item being purchased and includes payment terms.

Inventory Template

Order processing and inventory management go hand in hand. Use this free inventory template for Excel to record the level of stock and track turnover to ensure there is always product on hand, but not so much as to cost more for warehousing.

Order Processing Challenges

Order processing is part of the larger logistics management and seeks to efficiently and accurately receive orders and deliver goods to customers. That’s the goal, but there are always obstacles on that path that must be overcome. Here are some of them.

Inventory Management

Order processing requires managing warehouse inventory to ensure that there’s enough stock to cover the orders, but not too much that will incur undue costs. Several aspects of inventory management must be considered.

  • Stock Management: The process of managing the goods that are being sold, such as acquiring, storing, organizing and tracking inventory
  • Equipment Inventory: Lists all the assets of an organization for auditing, insurance and deciding on resupply or the purchase of new equipment
  • Production Inventory: The raw materials used in the manufacturing process

Production Planning

The production plan describes how an organization’s products and services are manufactured. This includes production targets, what resources will be used, processes and schedules.

Supply Chain Management

When talking about order processing, supply chain management is used to track, capture, fulfill and manage customer orders. It is used to manage the flow of goods and services to and from a business most efficiently and cost-effectively.

Resource Capacity Planning

This process helps organizations understand the amount of resources that are needed to complete the tasks and projects they do to maximize the return on investment. It tries to accurately predict future demand and ensure that there are the necessary resources to satisfy that.

Project Intake Process

This is where an organization collects information about a project from various stakeholders. This will inform the feasibility of the project under consideration and help decide if it’s worth pursuing.

Minimizing Costs

Reducing costs is always paramount in the minds of order processing management. There are many approaches to achieve this goal from automating workflows to streamlining policies and procedures. Training the order processing staff is also recommended in monitoring processes and measuring performance. Implementing continuous improvement initiatives and best practices will also help minimize costs.

How ProjectManager Helps With Order Processing

Of course, one of the best ways to reduce costs and improve processes and customer satisfaction is using project management software. ProjectManager is award-winning project and portfolio management software that manages the order fulfillment process with kanban boards. There are also other project views, such as Gantt charts, sheet, task and calendar views that help plan and features that can monitor and track performance in real time.

Plan, Schedule and Track Each Step of the Production Process

To ensure that there’s always enough stock to meet customer demand requires demand forecasting and planning. Scheduling the tasks for a production process is more efficient with robust Gantt charts, which can organize tasks, assign work to teams and provide detailed direction. But these Gantt charts go further, linking all four types of task dependencies to avoid costly delays, filtering for the critical path to identify essential tasks and setting a baseline to track progress and costs in real time.

ProjectManager's Gantt chart
Monitor Progress, Resource Utilization & Costs

Once a baseline is set on the Gantt chart, progress can be monitored across the software. Real-time dashboards automatically collect live data and display it on easy-to-read graphs and charts that show cost, time, workload and more. Use the team page or workload chart to get an overview of the team’s assignments. If some are over- or underallocated, balance their workload and keep everyone working at capacity to stay productive.

ProjectManager's dashboard
Related Content

Want to read more about the other processes that order processing touches? To find more information on kanban inventory management, production scheduling, purchase management, logistics management and production orders, follow the links below.

ProjectManager is online project and portfolio management software that connects everybody from managers in the office to employees in warehouses and on the factory floor. They can share files, comment at the task level and stay updated with email and in-app notifications. Join teams at Avis, Nestle and Siemens who use our software to deliver successful projects. Get started with ProjectManager today for free.