2012 asug aberd o2 c final

]

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.

2


[ Pressures Driving a Focus on O2C

3

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)


[ Objectives of Order to Cash Improvement

4

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)



[ 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)

5


[ 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)

6


[ 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)

7


[ 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

8


[ 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

9


[

• 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


[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.

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[ 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.

12


[ 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


[ 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

14


[ 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)


[ 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



[ Performance Results : Average (Middle 50%)



48 DSO

8.6% of AR past due

4.1days for payments to clear the AR ledger


3.9 days from completion of product/work to

invoicing17



[ Performance Results : Laggard (Bottom 30%)



58 DSO

16.1% of AR past due

11.7 days for payments to clear the AR ledger


6.1 days from completion of product/work to invoicing

Source: Aberdeen Group October 2010 18



[ 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


[ 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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[ 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

21


[

22

] Thank you for participating PMMS SIG / Aberdeen Group

2012 asug aberd o2 c final

Documents

real advantage

customer cash real experience

quote order

uptodate order

objectives of order

process high order

cash cycle

customer sales