Medicating the Order-to-Cash Cycle

 

How manufacturers can accelerate cashflow by cutting out the paper trail.
by Jason Howard, sales director of ITESOFT

Ayn Rand stated that ‘money is made possible only by the men who produce’; yet if manufacturers fail to fulfil orders quickly and accurately, customers will soon take that money elsewhere. Conversely, if an order reaches its purchaser quickly and correctly, that customer is ripe for repeat business.

With this in mind, the vast majority of manufacturing organisations have streamlined their dispatch offices and factories to a point where they are more efficient than a low-energy lightbulb. Yet the technology behind the processing of order forms has lagged behind.

Most manufacturers receive purchase orders by fax or email, the details of which are then keyed manually into their order processing system. This process is permeated with problems. Not only is the keying of orders manually slow, but it can also lead to errors and misplaced forms, meaning that there is scope for severe delays. Customer Services staff are taken away from value-added tasks in an attempt to speed up the processing of order forms, leading to a loss of efficiency in other areas of the department.

Furthermore, order forms must be workflowed physically around offices and departments in order to deal with any discrepancies, leading to further slowdown. Even after the manufacturer has dispatched an order, the paper chain is still around their necks. Storage of each paper form is required for traceability and auditability, leading to more costs. As a result, the cost of processing a single order can be as high as £40.

Resolutions
Any solution which can deplete the deluge of paper descending daily on the Customer Services department, therefore, has the potential to impart a number of benefits. A high return on investment is probable, due to the sizeable cost-savings and the ability to speed up the order-to-cash cycle, leading to improved cashflow and customer service.

The clearest way to enable streamlining in this area is to do away with paper altogether. By reading incoming data directly from faxed and emailed order forms, and turning it into meta-data which is understandable by ERPs and financial systems, the above benefits can be achieved, without needing to change the way in which your customers order from you.

In order to delve deeper into this paper-chain escape act, we will take a look at an example of a pharmaceutical manufacturing company which cannot be named for the purposes of this article. We will refer to them as PharmaX. Running SAP, PharmaX had previously been keying their orders into the system, and are now running ITESOFT.FreeMind for Orders.

Loss reduction
PharmaX are a manufacturer of pharmaceutical goods, targeted at the private health sector. They receive over 300,000 orders per year from a variety of customers. Less than a year ago, they were hiring over a hundred staff, spending roughly 400 man-hours a day on processing order forms.

When an order was received by fax or email, it was printed off and its details were keyed into SAP system manually, immediately leading to long hours and the potential for keying errors. Any discrepancies on the order would lead to the paper form being sent to a manager, allowing him to deal with the problem. However, this led to more wasted time, particularly when order forms inevitably became lost.

To compound matters, there was no method to the processing of orders; it was simply first-come-first-serve. This led to important or urgent orders being delayed or typed in a rush at the close of the day, causing strained relations with key customers. When one of their top accounts left for a competitor as a result of a misplaced order too many, PharmaX decided to deploy a document capture and automatic processing solution to handle its incoming orders.

Profits matter
When an order comes in via fax or email, meta-data from the file is captured using a full text optical character recognition engine. Posted orders are scanned, and again the data is read via the same engine. Not only is the data read, but the image of the order form is stored in an archive, allowing it to be searched for at will through a variety of fields, and removing the need for costly storage of paper.

As well as reading data such as customer name, multiple addresses, account number, product codes and the overall value of the order, the solution can also pick up stop-words such as “urgent” or “express”, allowing important orders to be prioritised, and meaning that PharmaX will never again lose a client due to a poorly processed urgent order.

The solution itself sits within PharmaX’s SAP system, providing a number of benefits. The meta-data extracted is verified, both “internally” and “externally”. Internally, the data is checked mathematically against itself. External verification allows it to be checked against all of the current data in the SAP system, including the status of the customer’s account.

Any discrepancies found through either form of verification are flagged, which kicks off an electronic workflow. The rules of this workflow can be altered, allowing, for example, erroneous orders of a certain value to go to a supervisor, while others go to a director. Within SAP sits a dashboard which enables the user to view, at a glance, the status of all orders currently in the system for full visibility.

PharmaX has found a number of overall benefits. Reduced time spent keying in orders, and consequently reduced costs associated with this has been important, but not the be all and end all. Customers are far happier with the service that they receive, and there is no longer the fear of missing an urgent order from an important customer.

Reality Cheque
The example of PharmaX can be reflected in real world instances. Many users employing automated order processing solutions find a high return on interest. Pfizer report that for every hundred orders that they automate daily, they can re-deploy a member of staff in Customer Services to a more value-added activity. As orders are dispatched more quickly, cashflow improves, adding to the financial benefits. As already mentioned, less quantifiable benefits are also noticeable; customers enjoy better service, leading to repeat business.

The bottom line is simple. Automating the order-to-cash process extends the reach of ERP systems, allowing for a central system and knowledge base to deal with the entire procedure, improving efficiency vastly. Freeing business from the noose of the paper chain can lead to a far healthier bank balance.

www.itesoft.com 
 

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