Winshuttle perfect order-whitepaper-en


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Winshuttle perfect order-whitepaper-en

  1. 1. The Quest for the Perfect Order: Optimizing SAP® for Order-to-Cash ProcessingExecutive SummaryWith the challenges of the current economic climate, companies areincreasingly looking for ways to streamline productivity and decreaseexpenditure. Optimizing the Order-to-Cash (O2C) process, defined as thecomplete set of operations necessary to turn a sale into financial gain, providescompanies with an opportunity to improve operational efficiency and sales,thus reducing costs and raising revenue.Establishing the capability for the Perfect Order, an order processed throughthe entire O2C pipeline in a way that meets customer expectations and deliversthe desired results for the company, allows organizations to reap tangiblebusiness benefits in the form of lower overhead costs, increased workingcapital efficiency, and higher customer satisfaction.Companies that use SAP® for O2C processing face specific challenges in theireffort to achieve the Perfect Order. This paper discusses the requirements andbenefits of the Perfect Order and examines how Winshuttle solutions can helpSAP® customers optimize their O2C processing.©2011 Winshuttle, LLC. All rights reserved. 9/11
  2. 2. IntroductionThe concept of “the Perfect Order” originally evolved to describe an order that delivered exactly what thecustomer wanted—products delivered in full, on time, and to specification. However, there is much more toexecuting an order than just delivering a product.Modern companies define the Order-to-Cash (O2C) process as the complete set of operations necessaryto turn a sale into tangible financial gain (see Figure 1). From this perspective, the Perfect Order must notonly meet the customer’s expectations, but also deliver the desired results for the company. Figure 1: The Order to Cash CycleMost companies use Enterprise Resource Planning (ERP) software such as SAP® as the basis for anintegrated, end-to-end O2C system. Redefining the Perfect Order to include every step of the O2Cprocess is useful for evaluating the efficiency and effectiveness of SAP® implementation.The capability for perfection is a sign that that the company’s systems are functioning at a high level, evenif not every order turns out to be perfect in operation.Part 1 of this paper defines the requirements for delivering the Perfect Order and the benefits of meetingthose requirements. Part 2 discusses how to optimize SAP® to achieve the capability for perfection.Part 1: The Perfect OrderDefining PerfectionThe O2C pipeline encompasses every process from the initial entry of an order to the collection of finalpayment. Each step involves different functional units of the organization and numerous subprocesses.Companies can and should examine each major step in detail and define benchmarks for optimalperformance.At a high level, the Perfect Order can be defined as one that: • moves seamlessly through the O2C pipeline, • is error free, and • is processed and reconciled in a timely fashion.While a simplification, this definition provides a powerful perspective for evaluating an organization’s O2Csystem. Its three requirements are further explored below.Moves seamlessly through the O2C pipeline: This is the starting point of the quest for perfection, thebaseline requirement for an effective O2C system. A Perfect Order is only possible if an organization hasa highly integrated O2C system that moves data between functional units in a highly automated fashion.A company must be able to identify and repair process leaks that prevent an order and all of its relatedinformation from flowing from one step to the next.Is error-free: Like all data-intensive processes, O2C is vulnerable to errors resulting from improperdata entry and out-of-date or otherwise inaccurate information. As in all integrated processes, errorsintroduced in one functional area are compounded as they pass through the system. Any organizationstriving for the Perfect Order must have processes in place to reliably prevent errors and to rapidly detectand repair any errors that do occur.Is processed and reconciled in a timely fashion: O2C is the process of converting a successful sale into atangible financial gain for the company. The amount of time it takes for that conversion to occur directly The Quest for the Perfect Order 2
  3. 3. impacts the company’s cash flow. Any company on the quest for the Perfect Order must use the rightmetrics to measure the performance and efficiency of its O2C system and look for ways to eliminateunnecessary steps and speed up processing at every point in the pipeline.The above requirements can serve as an effective roadmap to guide organizations in optimizing theirO2C processes. Companies that meet these requirements are operating at a high level of efficiency.Valuing PerfectionThe ability to deliver the Perfect Order has tangible, measurable business benefits. While companiesdon’t have the luxury of pursuing perfection at any cost, they should not engage in shortsighted cost-cutting that impairs their ability to deliver results.O2C is an unusual business process in that it is simultaneously viewed as a cost center and as a criticalfunction. Improving O2C processing with an eye toward increasing efficiency and efficacy can yieldpositive results on both sides of the ledger.Specifically, improving O2C processing can result in: • lower overhead costs • improved working capital efficiency • higher customer satisfactionEach of these is a desirable outcome, and even more so in the current economic climate, as discussedbelow.Lower overhead costs: In a 2011 survey, Aberdeen Group found that 67% of respondents cited loweringoverall costs as the number one business driver to improve O2C performance—up from 48% in the 2007survey, the last one prior to the current downturn. Integration and automation of O2C componentsyields real efficiency benefits that can lower cost per transaction. For example, Aberdeen reported thatcompanies that had invested in baseline integration across order entry, credit, billing, and collections—the minimum level necessary to execute a Perfect Order—were able to process 41% more invoices perFTE than those that had not1.Improved working capital efficiency: With companies facing greater pressure to seek internal sourcesof financing, better cash flow management may be one of the most lucrative opportunities available tothem. Days Sales Outstanding (DSO) is a useful metric for measuring overall O2C efficiency. An analysisby Citibank revealed that its top 3,000 global customers each had an average of $1.3 billion in trappedworking capital that could be released if they simply reached their industry-average DSO benchmarks(see Figure 2).2 By defining the DSO benchmark for a Perfect Order and continually working toward it,companies of all sizes can reduce borrowing costs and improve cash flow. Figure 2: Median DSO by Industry (source: Citibank) The Quest for the Perfect Order 3
  4. 4. Higher customer satisfaction: While much of the O2C process is focused on internal systems and financialtransactions, the customer-centric component should not be ignored. Reducing order error rates anddecreasing order fulfillment times not only saves money, but also makes customers happier. In a competitiveenvironment where price and quality are near parity, this is often the difference between making and losing asale. A 2007 study by AMR showed that on average only 80% of orders met the customers’ expectations foraccurate, on-time fulfillment and suggested that companies establish 95% as the minimum score to ensurecustomer satisfaction.3The quest for the Perfect Order is not just an exercise in optimization for its own sake. It has tangible businessbenefits that can directly contribute to the organization’s bottom line.Part 2: SAP® and the Perfect OrderPursuing PerfectionSAP® is an excellent platform for building an integrated O2C system capable of delivering the Perfect Order.The combination of function-specific modules within a unified enterprise architecture maps well to the cross-functional nature of O2C. Nevertheless, SAP® has its limitations, and companies pursuing the Perfect Ordermust deal with the system’s shortcomings that can cause leaks and inefficiencies in the O2C pipeline.A useful way to plan an optimization strategy for SAP® Order-to-Cash processing is to look at the threePerfect Order requirements defined in Part 1 and consider how to meet the challenges posed by SAP®’slimitations. Table 1 identifies key challenges faced by SAP® customers and provides recommendations formeeting those challenges.Table 1: Challenges to achieving the Perfect Order with SAPRequirement: Orders move seamlessly through the O2C pipelineChallenge: Integrating external data and processes. Recommendation: Ideally, data from outsideDespite SAP®’s extensive functionality, some aspects systems comes into SAP® via EDI or some other fullyof the O2C process happen outside the SAP® system automated, fully electronic system. Companies thatin most companies. For example, orders taken over have not invested in EDI must find ways to optimizethe Web may need to be consolidated and input their existing IT infrastructure to standardize andinto the system manually or via a batch update, or automate external data inputs to SAP® and minimizeanalysts may use external software to score accounts manual data entry and processing.receivable. Customer remittance information alsogenerally comes in from outside banking or paymentservices. All of this information must get into SAP®accurately and on time for the O2C pipeline tofunction properly.Challenge: Capturing ad hoc information. Recommendation: Organizations face a constantSAP® is designed to represent business processes dilemma between eliminating and accommodatingin a structured, formal manner. In the real world, ad hoc processes. Complete elimination may not beemployees often use ad hoc processes to achievable and risks stifling employees’ innovation. Asupplement the strict definition of a task imposed better strategy is to look for ways to bring the resultsby SAP®. In O2C, this can manifest as notes or of these ad hoc processes into SAP® in the same waymemos attached to a sales order or “rule of thumb” that other external data is entered into the system.calculations of a customer’s credit rating. The Quest for the Perfect Order 4
  5. 5. Requirement: Orders are error-free.Challenge: Eliminating data entry errors. Recommendation: Minimizing the need for manualThe mundane task of entering data into SAP® is data entry is the surest way to cut down on errors.a major source of errors, which is exacerbated by This means not only automating processes butSAP®’s well-documented usability shortcomings. literally minimizing the number of fields and formsEven in a highly automated O2C system, humans a user must interact with when entering data.have to enter data manually at times. Simple data- Streamlining overloaded SAP® data-entry interfacesentry mistakes can result in misquotes, shipping and enabling record-based, rather than form-based,errors, invoice errors, and other blunders that hurt entry can dramatically reduce errors.the customer experience and increase processingcosts.Challenge: Performing maintenance on open orders. Recommendation: SAP® users must have easy,A discovery of an error or changes to sale conditions, flexible tools for searching through open orders usingsuch as pricing, inventory availability, etc., may a variety of available criteria, in order to be able tonecessitate a change to an open order. SAP®s native make changes with the confidence that they are onlytools for finding and changing specific fields in open affecting the intended records. This includes findingorders are slow and inflexible, which increases the and extracting specific records grouped under alikelihood of persisting errors and inaccuracies. single header.Requirement: Orders are processed and reconciled in a timely manner.Challenge: Speeding up data operations. Recommendation: Streamlining data entry bySAP® usability issues can turn core O2C activities eliminating unnecessary fields and enabling batchlike entering sales orders and processing invoices updates can have a dramatic impact on the timeinto bottlenecks. The accumulated time spent on it takes to perform common SAP® operations.relatively simple, common tasks can have a material Empowering business unit developers to createimpact on an organization’s DSO performance. simple automation routines is another strategy for speeding up data-intensive operations.Challenge: Enabling rapid exception handling. Recommendation: Giving users workflow tools thatSAP® workflow tools are optimized for capturing are easy to use and flexible enough to handle aintended processes and actions, not for dealing with variety of scenarios can prevent isolated exceptionsthe unexpected. Common O2C exceptions, such as from slowing down the overall extension or discounting, need rapid resolutionto keep customers happy and the sales pipeline full.By focusing on the requirements for delivering the Perfect Order, companies will gain a useful structure forevaluating the effectiveness of their O2C process and targeting limitations in their SAP® systems.The Winshuttle SolutionAs a leader in SAP® usability optimization, Winshuttle provides practical solutions to help companies get themost out of their SAP® installation. Winshuttle tools directly address the challenges SAP® customers facewhen pursuing the Perfect Order, as summarized in Table 2. The Quest for the Perfect Order 5
  6. 6. Table 2: Winshuttle solutions for achieving the Perfect Order Perfect Order Challenge Winshuttle Solution Integrating external data and processes Winshuttle Transaction allows customers to use familiar tools like Microsoft Excel and Microsoft Access to facilitate data integration and migration from external systems into SAP®. Capturing ad hoc information Winshuttle Query and Transaction makes round tripping of information from Excel to SAP efficient and secure. Winshuttle Forms helps organizations gather semi- structured and unstructured data for input into SAP. Eliminating data entry errors Winshuttle Transaction gives users a simplified interface for entering data. Winshuttle Workflow allows business unit developers to design data entry forms tailored to their groups’ specific needs. Performing maintenance on open orders Winshuttle Query allows users to quickly find open orders meeting specific criteria. Winshuttle Transaction makes updating open orders fast and secure. Speeding up data operations Winshuttle Server allows batch processing of data operations. Winshuttle Direct supports a full range of BAPI processes without writing code. Enabling rapid exception handling Winshuttle Workflow provides simple tools for creating custom workflows without writing code.ConclusionHaving consistent Perfect Order capability allows companies to gain a significant competitive advantage intoday’s marketplace. SAP® provides a solid foundation for developing an integrated Order-to-Cash pipelinecapable of delivering the Perfect Order. However, companies on the quest for the Perfect Order must investin process optimization to overcome the system’s limitations. Winshuttle’s proven solutions can help SAP®users realize the ideal potential of their SAP® investment, leading to higher customer satisfaction, increasedproductivity, and improved bottom line.For more information about how Winshuttle can help your company on its quest for the Perfect Order, go or email Scott Pezza, The Order-to-Cash Cycle: Enhancing Performance with Process Automation, The Aberdeen Group, 2011.2 “Receivables Management: The Untapped Frontier,” Treasury Today, April 2010.3 Jane Barrett & Stephen Hochman, DDSN for Discreet Organizations, AMR Research, March 2007. The Quest for the Perfect Order 6
  7. 7. Winshuttle is the ERP Usability Company, providing software products that enable businessusers to work with SAP directly from Excel, Web forms and other interfaces without anyprogramming. Winshuttle focuses on a simple fact – when using SAP applications, time ismoney. Winshuttle’s usability solutions radically accelerate SAP user transactions, savingand redirecting millions of dollars for SAP’s customers every day. These financial benefits areachieved by significantly reducing employee and contractor costs and increasing resources toaddress more strategic priorities. Thousands of customers use Winshuttle to make their SAPlives easier.Headquartered in Bothell, Washington, Winshuttle has offices in the United Kingdom, France,Germany, and India. For more information, visit Corporate Headquarters United Kingdom Germany Bothell, WA London, U.K. Bremerhaven, Germany Tel + 1 (800) 711-9798 Tel +44 (0) 208 704 4170 Tel +49 (0) 471 140840 Fax + 1 (425) 527-6666 Fax +44 (0) 208 711 2665 Fax +49 (0)471 140849 France India Maisons-Alfort, France Research & Development Tel +33 (0) 148 937 171 Chandigarh, India Fax +33 (0) 143 683 768 Tel +91 (0) 172 663 9800 www.winshuttle.inThe Quest for the Perfect Order 7