driving out cost and improving accuracy across the order to cash process
TRANSCRIPT
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Driving out cost and improving accuracy across the Order to Cash process
Bob Godfrey COO, OmPrompt
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The Berlin airlift
Credited as the conceptual beginning of EDI
Solving the B2B communication problem
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Topics
• Order-to-cash and diversity
• Customer service – what do they really do?
• Process automation and results
• O2C maturity
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Order-to-cash process
Customer presence
Order entry
Order fulfilment
Distribution
Invoicing
Customer payments / collection
Cash Application
Deductions
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Order to cash process
Customer presence
Order entry
Order fulfilment
Distribution
Invoicing
Customer payments / collection
Cash Application
Deductions
Customer
Service
Supply
Chain
Finance
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Procure to Pay vs Order to Cash
“Customers are in Control!”
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Procure-to-pay vs Order-to-cash
Suppliers Customers
Drive standardisation Accommodate diversity
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Diversity in the customer supply chain
Customers
in control
Diverse range of business processes
and formats
Deployment of manual
processes to cope with diversity
Process inefficiency
Compromised cycle times, costs and accuracy
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Diversity in the customer supply chain
Customer control
Diverse range of business processes
and formats
Deployment of manual
processes to cope with diversity
Process inefficiency
Compromised cycle times, costs and accuracy
Message formats - orders, ASNs, GRNs, claims, complaints
Business processes - VMI, consignment stock, delivery slots, lead
times, receipt, invoicing processes, claims, complaints
Master data - product descriptions, price files, addresses
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Back-to-front
office
Back to the
front office
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Whenever systems are unable to
accommodate diversity, gaps appear…
…and the only way
to close them is to fill them with people
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Best practice in customer service
CASH COLLECTION FULFILMENT ORDER PROCESSING
SEAMLESS PROCESSES
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Value Added Interactions
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What actually happens
CASH COLLECTION FULFILMENT ORDER PROCESSING
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Value Added Interactions
Fragmented processes
SEAMLESS PROCESSES
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Driving behaviour
The challenge: How to be proactive with customers when entering orders, fighting fires…..
URGENT NOT URGENT
IM
PO
RTA
NT
NO
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PO
RTA
NT
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Perception is reality
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Customer service teams
PERCEPTION
Where Customer Service Teams spend their time
ADDING VALUE
EXECUTING PROCESSES
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Customer service teams
PERCEPTION REALITY
Where Customer Service Teams spend their time
ADDING VALUE
EXECUTING PROCESSES
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Customer service teams
35%
29%
22%
14%
Developing customer
relationships
Profiling & upselling
Promotion
activity
Dealing with
customer
enquiries
How people think customer service
representatives spend their time
6.3% 3.6%
7.8%
31.2%
12.8%
9.4%
8.5%
6.6%
5.7% 4.2% 3.9%
Developing the
customer relationship
Profiling & upselling
Dealing with
customer enquiries
Processing
customer
orders
Resolving order
errors
Dealing with
delivery
discrepancies
Chasing late
& missing
deliveries
Managing availability
Demand planning
& forecasting
Improving
OTIF
performance
Managing
customer
inventory
How customer service representatives
actually spend their time
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Process automation to reduce costs and improve accuracy
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Customers
Vo
lum
e o
f o
rde
rs
(pe
r an
nu
m)
Segmentation of customers by order volume
A B C
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Customers
Vo
lum
e o
f O
rde
rs
(pe
r an
nu
m)
Manually intensive processes
Segmentation of customers by order volume
A B C
High degree of automation
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Customers
Vo
lum
e o
f O
rde
rs
(pe
r an
nu
m)
Manually intensive processes
Segmentation of customers by order volume
A B C
High degree of automation
Automation potential Validated rekeying
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Typical Pareto curve
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
% V
olu
me
The “80/20” rule
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Increased value-added
Customer services
Removal of manual tasks to allow
more time for value added tasks
i.e. up-selling, cross-selling
Revenue
Improved Customer
responsiveness
Reduction in cycle time to accept
and acknowledge Customer
Orders
Business Proactive identification of
Customer order issues
Impact
Reduced labour
costs
Reduced headcount through
process automation
Costs
Reduction in
operating cost
Reduced labour costs to
investigate and fix errors
Physical supply chain costs i.e.
returns, write-offs, premium freight
Reduction in DSOs Elimination of error causing
delayed payments
Value buckets across OTC
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Amplification effect
Investigation and
correction of errors.
Credit/Debit notes
Incorrect information at
Order capture results
in returns, put-away
costs, disposals, fines
Investigation and
correction of errors.
Credit/Debit notes
Impact on DSOs
Cost of claims
Service level and
Impact on revenue
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Amplification effect
€500 to €1500
The further down the O2C process that
error is identified and corrected, the higher
the cost to the business.
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Benefits of bridging process gaps
Cost Reduction of order
capture
Global FMCG Paper Products
Company
• Automated entry of 120,000 fax
and pdf orders
• Business rules and master data
validation at order entry to eliminate
errors
• Cost saving of £540k per annum
(18 FTE)
• Increased time for remaining FTEs
to spend on value-added customer
interactions
The Perfect Order Division of Global Drinks
Company
• Identification and resolution of
errors at Order Entry – pricing,
product details, delivery addresses
etc.
• £612K total impact across 60k
orders per year (98% to 99.7%)
• Intangible benefits on customer
service by moving to the Perfect
Order
Reduction in Logistics
Claims UK Division of Dairy Products
Company
• Automated the updating of delivery
documents to a single platform
• Audit trail and visibility across all
stages to challenge any delivery
disputes
• Reduction in good-will write-offs by
£5.4M pa
• Reduction in annual effort by
£720k
17 FTE 35 FTE Staff Costs
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Benefits of bridging process gaps
Cost Reduction of Order
Capture
Global FMCG Paper Products
Company
• Automated entry of 120,000 fax
and pdf orders
• Business rules and master data
validation at order entry to eliminate
errors
• Cost saving of £540k per annum
(18 FTE)
• Increased time for remaining FTE’s
to spend on value added customer
interaction
The Perfect Order UK Division of Global Drinks
Company
• Identification and resolution of
errors at Order Entry – pricing,
product details, delivery addresses
etc.
• £612K total impact across 60k
orders per year
• Intangible benefit on customer
service by moving to the Perfect
Order
Reduction in Logistics
Claims
UK Division of Dairy Products
Company
• Automate the updating of delivery
documents to a single platform
• Audit trail and visibility across all
stages to challenge any disputes of
delivery
• Reduction in good-will write-offs by
£5.4M pa
• Reduction in annual effort by £720k
99.7% 98% Order Accuracy
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Benefits of bridging process gaps
Cost Reduction of Order
Capture
Global FMCG Paper Products
Company
• Automated entry of 120,000 fax
and pdf orders
• Business rules and master data
validation at order entry to eliminate
errors
• Cost saving of £540k per annum
(18 FTE)
• Increased time for remaining FTE’s
to spend on value added customer
interaction
The Perfect Order
UK Division of Global Drinks
Company
• Identification and resolution of
errors at Order Entry – pricing,
product details, delivery addresses
etc.
• £612K total impact across 60k
orders per year (98% to 99.7%)
• Intangible benefits on customer
service by moving to the Perfect
Order
Reduction in Logistics
Claims
UK Division of Dairy Products
Company
• Automate the updating of delivery
documents to a single platform
• Audit trail and visibility across all
stages to challenge any disputes of
delivery
• Reduction in good-will write-offs by
£5.4M pa
• Reduction in annual effort by
£720k
€12.6M pa €18M pa Write offs
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High level justification
• Number of FTEs capturing orders = 50
• FTE cost = €30,000
• Cost of order capture = €1,5M
• Orders per year = 400,000
• Cost per order = €3.75
• Error rate = 1%
• Average cost per error = €500
• Cost of errors = €2M
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Options to reduce cost and improve accuracy
• Continuous process improvement
• Applications
• BPO
• SSC
• Automation
BPO
Automation
Applications
BPaaS
SSC
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Process maturity
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O2C Maturity Model
Reactive
Disciplined
Optimised
Integrated
Unified
Inefficient
processes.
No differentiation
between value
added and non
value added
tasks
Separation of
value added
and non value
added tasks.
Cost
optimisation of
processes and
human capital.
Reduction in
errors
Visibility and
control across
the E2E OTC
process
Focus on E2E
performance.
Setting of Best
in Class
metrics
Level 1
Level 2
Level 3
Level 4
Level 5
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Summary
• Customers create diversity
• Manual processes are required to fill the gaps
• Significant opportunity to plug efficiency leaks across the process
• End-to-end view required – amplification
• Maturity and priority of the O2C process should determine your strategy
