Is your Order to Cash process lean?

[lionelberger]

Introduction

As an Executive Architect from the Inspire team at ServiceNow, I regularly meet with executives who are struggling with their Order to Cash (O2C) process. As a matter of fact, most of the large enterprises are either considering or in the process of revising their O2C process to further simplify and standardize it . When the O2C End-to-End (E2E) Value Chain activities happen as expected, there are no real problems as most of the activities take place within the ERP system. It is however in case of process exceptions that the situation gets more complicated. Those exceptions are generally handled on an ad-hoc basis and as such they may require involvement of various teams and departments, which may not be as responsive or willing as expected.

The opportunity

There is a huge opportunity for simplification, standardization and consolidation for O2C process exception activities. Many of these exceptions are handled with manual or ad-hoc procedures, with the effect of slowing down the O2C End-to-End, increasing its cost of execution and affecting the customer satisfaction and user experience. Here are a couple of examples that are commonly seen across the enterprises landscape:

• Sales Order is being processed in the ERP, some consistency checks will require someone from a given department to verify the data or correct a mistake.
• Sales Representative needs some support from the Legal department to review and approve a special contract that was required for his Customer.
• Customer sent an order via EDI. A few days later, will contact the Sales Rep or Customer Service to request a change to the Order to get it delivered earlier than planned. They will need to be charged an additional fee.
• Customer data is incomplete; some actions are required to get the missing information.
• Customer received an Invoice that does not match their actual order. They will contact their Sales Representative or Customer Service to report the issue.
• Customer is not able to send an order via EDI due to some unknown reasons. They will contact the Customer Service team to request some help.

Every company around the world is initiating process simplification initiatives to avoid exceptions where possible, and streamline the process of handling and resolving them where they cannot be avoided.

Take action

How would you reduce the number of exceptions that are occurring?

Step 1 — You can only control what you measure

Identify the top recurring exceptions that generate the most workload. There are many data sources that can be used. As they are not structured, it might be difficult to mine the data, so assigning someone to focus on this task may be a good approach. Some ideas on the possible sources of information:

• Group Mailboxes: Asking the Exchange administration team to identify the top 50 Group Mailboxes that have the most volume/transactions is an effective way to find useful information. Getting then an extract of those mailboxes will allow some data mining.
• SharePoint Lists: There's been a proliferation of SharePoint sites in the past decade, to try and manage requests, tasks, activities, etc. This is often a useful source of information for the data mining.
• Excel Tracking files: Some activities tracking files may be used by team leads, coordinators, dispatchers.
• Surveys: Send a short and easy survey to the relevant people to gather the information you are looking for
• Interviews: Gather the information directly from the relevant people through some short interviews
• Workshops: Organizing workshops with the people taking care of those exceptions is an effective way to gather the needed information. A Value Stream Mapping exercise may be the appropriate method to extract the needed information.

Step 2 — Deliver iterations of quick & impactful wins

First focus on the "big fish" exceptions that don't require a significant effort to resolve, to bring greater value in a shorter time. Using pareto charts, identify the recurring exceptions that generate the biggest operational workload and/or O2C processing delays. Starting with the most impactful, try to identify the root cause before looking for fixes. Why are those exceptions triggered, why are those consistency checks failing, why is the data missing or incorrect, why is the customer always asking that question, etc. Using some Problem-Solving techniques such as the "5 why's", the "Ishikawa Fishbone" or running more formal DMAIC projects, try to eliminate issue occurrence where possible.

Not every exception can be eliminated though. For those that can't, it is essential that a predefined, repeatable and measurable process is used to increase speed, quality and experience. Such a process would typically be triggered by an event (manually by someone or automatically by a system), and would need to be processed by one or multiple actors as part of an E2E workflow. While many hundreds of people from different departments need to be involved to resolve financial, supply chain, legal, sales issues and more, there is a need to utilize a common platform to dispatch, orchestrate and measure that work from an E2E perspective, and link it to the original sales order, customer complaint or customer request.

In the past years, we have seen our customers adopting Service Management concepts for the Enterprise. This consists of building a catalog of Enterprise Services that can be requested for the identified exceptions and predefined processes, with automatic dispatching of the work to the appropriate team(s). A powerful workflow engine allows the definition of more advanced processes that may need to orchestrate multiple tasks based on specific conditions and sequencing. And predefined Service Level Agreements (SLAs) will set expectations for the requestors, so they know upfront when the exception will be handled or the service delivered.

Some examples from our customers:

• Due to customers' specific request, the sales person needs a specific contract to be written, reviewed and approved internally before being proposed to the customer for signature.
  • A Service Catalog entry allows sales people to request the "Special contract creation" E2E Service. It will orchestrate the required Creation, Review, Validation and Sign-off Tasks, with associated SLAs for each of them to ensure a timely completion of the E2E Service. The sales person will know upfront how long this will take, and will be able to manage the customer expectations.
• There's a consistency check in the ERP that requires someone to validate or review some controls (e.g. sales person to validate something with customer, logistics/transportation team to review shipping/delivery details, etc.).
  • Instead of relying on emails, phone calls or instant messaging, a Service Catalog entry allows the relevant person to request the "Check information with customer" or "Review shipping/delivery information" Service, that will automatically assign a Task (or a set of Tasks) to the relevant teams/people (e.g. based on Sales Order details) to take the action and respond as per the expected timelines.
  • A further automation step that mature customers take is to automate some of these actions thanks to a two-ways integration with the ERP, while the human interaction is only retained for approvals, when needed.
• The customer has submitted an order via EDI or phone call, and a few days later he needs to change some of the details (e.g. quantities or required delivery timeframe).
  • Instead of giving a phone call to Customer Services, they access a Customer Service Portal that provides information about all their Orders (retrieved from the ERP). A Catalog of Services is attached to the Order, allowing them to submit typical Requests such as "I need to modify my order", "I need an early delivery", "I've still not received the goods", "I did not receive what I ordered", "The invoice is wrong", etc. While customers have a single entry point for all their queries, the Services will trigger different Tasks to the appropriate teams (Finance, Sales, Customer Service, etc.) based on the requested Service.
  • A further automation step that mature customers take is to automate some of these actions thanks to a two-ways integration with the ERP, while the human interaction is only retained for approvals, when needed.

Step 3 — Measure and share your success

With this iterative process, the process automation opportunities need to be continuously identified through sustainable measures defined in Step 1. A monthly review of those highly recurring exceptions that are manually handled will help achieve long-term savings while delivering short-term concrete benefits.

Those benefits need to be measured too, so the investments can be justified and the return on investment recognized. This is something that is often overlooked and the consequence are that the key stakeholders will only see the amount of money injected in these initiatives without understanding their value. Continuously communicating about those initiatives and their success is a critical success factor for the simplification, standardization and automation of those processes.

Service Management for the Enterprise will not only simplify and standardize the processes, but will also provide a gold mine of data that can be exploited through Process Analytics. Measuring the O2C E2E Cycle time, the time wasted in a particular state, the top 10 exceptions causing delays or waste, etc. will not only provide insights for the Continual Service Improvement (CSI), but will also provide trends on the benefits of CSI initiatives.

Benefits

The aforementioned recommendations not only apply to Order to Cash, but also to all other Business Processes such as Source to Pay, Record to Report, Hire to Retire, Plan to Produce, etc. The following benefits would typically be realized through such initiatives:

1. Increase operating margin:
   1. By simplifying and standardizing repetitive activities
   2. By reducing administrative overhead and redundant data keying
   3. By eliminating human-based manual activities with system-automated actions
   4. By eliminating avoidable calls from customers through self-service
2. Increase Customer Net Promoter Score
   1. By reducing complexity and increasing speed to serve Customers
   2. By proactively providing information and self-service capabilities to customers
   3. By providing Customers with a modern way to digitally interact with your company
3. Increase Traceability & Compliance
   1. By tracking & tracing interactions between different parties
   2. By forcing and documenting review & approvals
   3. By proactively providing information to internal and external auditors
   4. By embedding Compliance Control Points within the predefined processes

Call to action

Share your experience on the Business Process simplification / standardization initiatives in your enterprise. What are you putting in place to streamline your processes? Are you considering Service Management for the Enterprise?