Homespun wisdom isn’t always that wise. For instance, take the expression: “If it ain’t broke, don’t fix it.” If we lived by that maxim, I would at this moment be writing this article on a manual typewriter. There was nothing wrong with typewriters – they worked perfectly well. But that didn’t mean there was no room for improvement.
Clearly, there was. There almost always is.
Understanding the issue
That’s why last year, one of our clients decided to take a fresh look at its order-to-cash (O2C) processes across its operations in South-East Asia, with a view to enhancing their effectiveness and efficiency. As one of the world’s oldest multinational businesses, this global company owns and operates a large number of consumer brands, most of them household names, and it sells products in around 190 countries.
Over a period of two weeks – and with the active engagement of our client’s senior executives – we led a “deep dive” into current practices, working closely with internal teams to:
- Understand the current set-up of the O2C process
- Study the process design and assess its maturity
- Identify pain points for both process owners and customers
- Determine opportunities for improvement
- Document process flows, both before and after changes were implemented.
ESOAR in action
The opportunities for change were identified in the context of our ESOAR methodology, and what emerged was a plan to eliminate some processes, and standardize and automate others.
By re-engineering the master data management processes related to new launches, we were able to able to generate perfect orders, which in turn minimized the deductions arising out of price differences. We were able to digitize more than 80% of the physical documents received as part of the deduction management process. This helped to extract data and eliminate manual data entry, bringing in more efficiency and effectiveness.
Requests for credit notes were created manually and then carried around physically to obtain approvals. We standardized the process using digitized templates and used automated workflows to eliminate physical handling.
We also introduced robotics to validate claims based on the rule sets provided and to post the credit notes into customer accounts in ERP. This increased the visibility of the claims process and reduced its cycle time. To summarize on automation, we:
- Resolved issues in SAP Supplier Network Collaboration (SAP SNC) and deployed the SNC Portal to give distributors visibility into their order and to enable distributors to modify and approve their orders online. This eliminated effort spent on manual order entry and modifications, as well as to and fro communications on order confirmation
- Deployed robots to automate the end-to-end cash application process (matching of receipts with invoices and other open line items), from downloading bank statements to posting in the ERP. Other activities robotized included creating official receipts for customers, extracting data from remittance advices, and matching open line items based on pre-agreed rule sets
- Reviewed the end-to-end reporting process to eliminate duplicate and ad hoc reports. All report preparation and delivery was automated to ensure the minimum manual effort in reporting.
In short, we used every part of the ESOAR methodology to achieve significant and lasting improvements. Like the manual typewriter, it wasn’t exactly broken – but, we fixed it anyway, and the difference has been substantial.
Evolution – a new approach
Implementing our ESOAR methodology led to the development of an enhanced order management function that ensured the full capability of applications and processes was achieved, while reducing the need for human intervention and increasing overall efficiency.
We enhanced usage of the SAP SNC platform to generate “no-touch, perfect orders.” We also defined stock norms based on demand forecast to create predefined dispatch plans and to improve efficiency in order processing by aligning product linkages, prices, and discounts.
We implemented our Webcollect tool to improve efficiencies in collection and claims processing, eliminating deductions and claims by better integrating O2C master data for prices and promotions. By standardizing processes, we ensured that prices could be updated automatically, reducing customer issues on price mismatches.
Finally, we leveraged analytics to improve credit control, reduce business waste, and optimize stock return levels – for example, by increasing the accuracy of warehouse dispatches and resolving customer ordering issues.
The digitization of claims documents and standardization of request for credit notes, along with deployment of robots for claims validation and posting into SAP, has delivered a range of tangible outcomes, including:
- Increase in zero touch orders
- Elimination of pricing related deductions and disputes
- Creation of a new target operating model that can be replicated across the entire client engagement
- Enhanced efficiency including 30% reduction in claims turnaround and 20% reduction in effort
- Increased effectiveness through better controls coming from no manual interventions.
Suresh Krishnamurthy partners with our clients to transform their order-to-cash processes. He is a thought leader in finance and accounting, order management, and master data management with over 25 years of experience in transformation and value stream mapping for global clients.