2012 asug aberd o2 c final
DESCRIPTION
Hot for 2012!End to End Quote/Order to Cash Process.TRANSCRIPT
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COREY PEARSON[ASUG INSTALLATION MEMBER MEMBER SINCE: 2008
CHAVONE JACOBS[ASUG INSTALLATION MEMBER MEMBER SINCE: 2003
ALLAN FISHER[ASUG INSTALLATION MEMBER MEMBER SINCE: 2008
Quote / Order To Cash (O2C)A Brief Overview
John Choate – National ChairProgram Management &
Maintenance Strategies (PMMS) SIG
Scott Pezza – Research AnalystAberdeen Group
Real Experience. Real Advantage.
[ What is Order To Cash ?
Order to Cash normally refers to the Enterprise Resource Planning (ERP) process in which taking customer sales (direct from the customer ) orders via different sales channels, such as email, internet, sales person, fax or by some other means like EDI, and then fulfilling the order, shipping, logistic and then generating an invoice and collecting payment for that invoice and then receipt.
CASH IS KING ! It is also the lifeblood of any company and it flows
through the order-to-cash cycle.
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Real Experience. Real Advantage.
[ Pressures Driving a Focus on O2C
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19%
19%
21%
29%
29%
67%
0% 10% 20% 30% 40% 50% 60% 70%
Percentage of Respondents, n = 140
Customer pressure to extend payment terms
Rising cost of servicing major customers
Inability to accurately forecast cash flows
Customer demand to improve service levels
Risk of customer non-payment or default
Pressure to reduce overall costs
Source: Aberdeen Group, The Order-to-Cash Cycle: Enhancing Performance with Process Automation (July 2011)
Real Experience. Real Advantage.
[ Objectives of Order to Cash Improvement
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30%
34%
35%
36%
42%
54%
0% 10% 20% 30% 40% 50% 60%
Percentage of Respondents, n = 140
Manage credit risk, losses from bad debt, and
collections expense
Improve transaction efficiency
Reduce 'customer-to-cash' or 'order-to-cash'
cycle
Reduce receivables processing cost/time
Improve cash flow forecasting/guidance
Reduce Days Sales Outstanding (DSO)
Source: Aberdeen Group, The Order-to-Cash Cycle: Enhancing Performance with Process Automation (July 2011)
Real Experience. Real Advantage.
[ TYPICAL AREAS AFFECTED BY OTC CYCLE
An “Integrated “ End to End Process
Customers Sales and Marketing Customer Service - Order Entry Finance and Accounting Operations Distribution Customers (Cash)
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Real Experience. Real Advantage.
[ Order To Cash Process
1. Request for Quotation (RFQ)
2. Sales Order with quotation reference Product Allocation (ATP/gATP) Credit Limit Check Service charges Bill of Material (BOM)
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Real Experience. Real Advantage.
[ Order To Cash Process
3. Delivery Picking with automatic transfer
order creation and confirmation Picking with manual transfer order
creation Confirmation Packing Posting goods issue
4. Invoice
5. Payment by Customer (Cash)
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Real Experience. Real Advantage.
[ Simple Business View – Order to Cash
FINANCE (FI) SALES (SD) WAREHOUSE (WMS)
Quotation
Sales Order with Ref.
to Quote
Credit Limit Check Availability Check and Allocation
Unlock Sales Order
Delivery Approved
Pick
Pack
Post Goods
Ship
Bill
Payment
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Real Experience. Real Advantage.
[ Symptoms of BROKEN Order To Cash Process
High order-taking error rates
High order-fulfillment error rates
High DSO (Days Sales Outstanding) rates
High cost of dispute resolutions
Inefficient/ineffective collection processes
Long-term losses due to customers going to better managed companies for product/services
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Real Experience. Real Advantage.
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• Pressures: External forces that impact an organization’s market position, competitiveness, or business operations (e.g., economic, regulatory, technology, competitive, etc.)
• Actions: The strategic approaches that an organization takes in response to industry pressures (e.g. product/service strategy, target markets, go-to-market, and sales strategy)
• Capabilities: The business process competencies required to execute corporate strategy (e.g., skilled people, brand, market positioning, viable products/services, financing, etc.)
• Enablers: The key technology/solutions required to sup-port the organization’s business practices (e.g. development platform, applications, connectivity, user interface, training and support, etc.)
Note: Aberdeen utilizes a proprietary research framework called PACE to systematically and objectively develop its research findings.
10
Real Experience. Real Advantage.
[PACE Framework Applied To Order To Cash
Pressures (P): Reduce overall costs
Actions (A):
Streamline front and back office administrative processes to remove non-value steps.
Automate process flows with electronic workflow technologies.
11
Real Experience. Real Advantage.
[ PACE Framework
Capabilities (C):
Standardized enterprise-wide procedures through
quotation to order, order to delivery, and credit/cash
collection.
Up-to-date order, delivery, and billing information is
available in real time, on demand.
Manufacturing and/or service operations are integrated
and coordinated with customer service, logistics, and
delivery organizations.
Real time measurement of on-time delivery, inventory,
DSO, profitability, and cash position.
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Real Experience. Real Advantage.
[ PACE Framework
Enablers (E): ERP - integrated order entry, procurement,
production/resource planning and execution, and financial management
Event management (triggers and alerts)
Electronic interfaces to banks and customers
Web-based and electronic sales order management application
Credit management solution
Electronic Invoice Presentation and Payment solution
ERP features or extensions:
Customer Relationship Management (CRM)
Advanced Planning and Scheduling (APS)
Available to Promise (ATP)13
Real Experience. Real Advantage.
[ Key Metric’s For OTC Process
Quotation and Sales Order (SO) Management Aging
Order Fulfillment Period
On Time Delivery (OTD) - % Perfect Order
Finance/Accounting Invoice Payments Collections
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Real Experience. Real Advantage.
[ Performance Results: Best-in-Class (Top 20%)
31% improvement in order-to-fulfill cycle time
97% complete and on-time shipments
33.5 DSO
3.3% of AR past due
1.3 days for payments to clear the AR ledger
16.2% of invoices require manual intervention
2.6 days from completion of product/work to
invoicing15
Sources: Aberdeen Group, The Order-to-Cash Cycle: Enhancing Performance with Process Automation (July 2011);Aberdeen Group, The Order-to-Cash Cycle: Integrating Business Processes to Improve Operational Performance (March 2008)
Real Experience. Real Advantage.
[ Best-in-Class AR Technology Profile
16
50%47%
43% 43%
37% 37%33%
26%23% 23%
18%
12%
0%
10%
20%
30%
40%
50%
60%
IntegratedOrder-to-Cash
Systems
BI /Analytics
ElectronicWorkflow
PerformanceDashboards
EventManagement
CustomerPortal
Best-in-Class All Others
Source: Aberdeen Group, The Order-to-Cash Cycle: Enhancing Performance with Process Automation (July 2011)
Real Experience. Real Advantage.
[ Performance Results : Average (Middle 50%)
15% improvement in order-to-fulfill cycle time
88% complete and on-time shipments
48 DSO
8.6% of AR past due
4.1days for payments to clear the AR ledger
44.9% of invoices require manual intervention
3.9 days from completion of product/work to
invoicing17
Sources: Aberdeen Group, The Order-to-Cash Cycle: Enhancing Performance with Process Automation (July 2011);Aberdeen Group, The Order-to-Cash Cycle: Integrating Business Processes to Improve Operational Performance (March 2008)
Real Experience. Real Advantage.
[ Performance Results : Laggard (Bottom 30%)
9% improvement in order-to-fulfill cycle time
83% complete and on-time shipments
58 DSO
16.1% of AR past due
11.7 days for payments to clear the AR ledger
79.9% of invoices require manual intervention
6.1 days from completion of product/work to invoicing
Source: Aberdeen Group October 2010 18
Sources: Aberdeen Group, The Order-to-Cash Cycle: Enhancing Performance with Process Automation (July 2011);Aberdeen Group, The Order-to-Cash Cycle: Integrating Business Processes to Improve Operational Performance (March 2008)
Real Experience. Real Advantage.
[ Increasing Your Success on Order To Cash
Implement or expand automation of the order-to-cash cycle.
Standardize procedures for quotation and order
management.
Integrate order entry, credit, billing, and collections.
Investigate benefits of event management and automated
alerts.
Centralize customer risk information in a single location.
Keep up on regular scoring of the A/R portfolio.
Continue growing electronic volumes of POs, invoices, and
payments.19
Real Experience. Real Advantage.
[ Key Take Away Items on Order To Cash Process
Why is Order To CASH so important?
What functional organizations are key to the integrated
process?
What are symptoms of a broken process?
What is PACE?
Name 2 key metric’s for the O2C process.
Where does your company rank ?
Best-in-Class
Average
Laggard
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Real Experience. Real Advantage.
[ Key Financial Take Away Items
Improving efficiency addresses both the top pressure (cost) and the most-cited objective (DSO)
Improvement comes from streamlining internal processes and making it easier for customers to work with you
Understanding your current and prospective customers can help reduce non-payment risk and tailor collections strategies
Communication, between departments and with your customers, is key to efficiency and visibility into cash flows
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Real Experience. Real Advantage.
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] Thank you for participating PMMS SIG / Aberdeen Group