Wednesday 13th Dec 2017 - Logistics Manager

Cashing in on the chain

The tight financial constraints of the last two years have pressed most companies to examine the whole process of turning an order into cash. To quickly and efficiently effect this, processes need to be seamlessly integrated across a business – orders should be picked accurately and dispatched quickly, inconsistencies between orders and invoices need to be eradicated, and payment should be pursued swiftly. As every financial director knows, the lifeblood of a company is its cash flow.

According to a report produced by research organisation Aberdeen Group in 2007, best in class companies are 77 per cent more likely to use automated workflows to initiate steps such as converting quotes to orders, credit checking, releasing orders to production or fulfilment, scheduling shipments, invoicing and cash collection. In addition, 97 per cent offered complete and on-time shipments and 37 per cent are able to invoice within one day of completed orders. But perhaps one of the most impressive findings was that best in class companies are five times more likely to collect cash within 30 days – a dramatic difference in the ability to control cash flow.

It is hardly surprising that information technology lies at the heart of linking these various processes, as Aberdeen Group’s report points out – “Best in breed companies are 43 per cent more likely to take full advantage of Enterprise Resource Planning (ERP) to integrate order management, procurement, planning, and production (or fulfilment), as well as finance into a fully integrated business process.”

“ERP is one way to ensure that all areas of the business are working together with very little cash – whether that’s stock or a surplus of staff – being lost in the system,” says Richard Pascoe, director of enterprise solutions consulting, Wincor Nixdorf. “However, there is no point dropping an ERP system into a business and expecting it to solve all problems. Most businesses are built up through a mixture of organic growth and mergers and acquisitions. Although these strategies have enabled growth and increased profits, they have also left companies with inconsistent business processes and separate, complex IT systems.

“If opting for ERP, organisations must ensure that they align the system closely to the business and its needs. It’s as simple as ensuring you know exactly what it is you’ll be getting from the system – whether that’s fast access to supply and demand figures; or improved co-ordination between different areas of the business. It’s easy to get sucked into installing ERP as an IT system without ensuring it becomes a useful business tool.”

Anthony Bourne, global industry director for supply chain at IFS, highlights one of the greatest barriers to having a fast order-to-cash cycle. “A lot of companies have problems with visibility of data and being able to pass data between systems. We offer an integrated system that allows a set of process flows between sites and helps inter-site trading,” he says. “It removes the need to pass paper work around – the reduction in paper work can be unbelievable.”

 Bourne believes that although EDI has been available for a long time, “a great number of companies are still not using this technology as much as they could do,” he says. “When you look at both the order intake side and sending orders out to suppliers, EDI has proved hugely beneficial – there’s still a lot of mileage in increasing the use of EDI, which would improve process flow.”

Bourne says paperless authorisation is an example of where efficiencies can be gained. “For instance, if a supplier invoice needs to be approved before you generate the final customer invoice, rather than sending that piece of paper out, you can scan the document in, view it online and approve it online or make comments – as it’s online you can gain access from any location.”

Inventory optimisation in conjunction with demand forecasting plays an important part in minimising cost and the time taken from order to payment. “You want to take orders and fulfil them as fast as possible, but you can only do that if you’ve got the stock…getting the correct level of inventory to respond quickly is vital,” he says.

Bourne offers the example of BSkyB, “they placed our modules into their landscape to improve visibility on inventory. Having this visibility has meant that they can use stock in a number of locations. By having access to that inventory at the press of a button, as opposed to ringing someone up or sending an email, they have compressed the time-cycle of fulfilling an order.”

Matching an invoice to a purchase order and checking against goods actually received creates a tricky three-way matching and approval process that can result in a delay in payment due to inconsistencies, errors and poor communications. Accuracy and consistency are essential to getting paid quickly.<br />

Pre-invoice matching can now be achieved using intelligent EDI technology that is able to look at the data inside each message carried between buyer and supplier. So spotting errors in invoicing can become an automated process that brings direct cash benefits.<br />

“If invoices were to be pre-checked against purchase orders and delivery notes prior to sending to the customer, potential problems and mismatches could be identified and addressed in advance, so reducing hold-ups in payment and speeding cash-flow,” says David Grosvenor, managing director of Wesupply.<br />

“It may be that, say, 100 items were ordered by a buyer but under their terms and conditions it was acceptable for the supplier to ship up to a maximum of 110,” he says. “However, the invoice might fail if there were a discrepancy between the purchase order and shipping notice. Action in advance could allow for the invoice to be adapted accordingly or for a buyer to be notified.”

Grosvenor goes on to highlight another example of where pre-emptive action can speed payment. “If one line item in an invoice containing, say, 80 line items fails the whole invoice may well be halted. An alert would enable a supplier to pull out that one item and generate an invoice for 79 items instead, so ensuring fast payment of the majority of the order,” he says.

A further area where intelligent B2B integration can be successfully deployed to create cash efficiencies is in the This allows the customer to have a very tight delivery slot given to them and offers the retailer far greater control over the whole order-to-cash cycle.area of supplier performance. As next generation systems are capable of looking at the content of the messages, and can apply intelligence to the data carried, analysis of supplier KPIs can be used to reveal the most reliable suppliers. By knowing that you can rely on a supplier that has a 98 per cent performance rating enables you to reduce safety stock or may allow you to move to a vendor managed inventory arrangement or Direct Ship.

Direct ship allows retailers to expand their product ranges without the need to tie up cash in inventory or expose themselves to the risk of carrying unsold stock.

According to Grosvenor, the problem for retailers is that they lose visibility and control putting the order out to suppliers for direct delivery. “Although most retailers have pretty slick internal systems for the whole order-to-cash cycle, they revert to antiquated techniques, such as faxes, when it comes to working outside the four walls of the enterprise,” he says. “But, an online platform enables the live exchange of information between retailer and supplier, which also links into the carrier to give real-time updates on scheduling.”

“The great thing is, this allows the customer to have a very tight delivery slot given to them and offers the retailer far greater control over the whole order-to-cash cycle for direct ship operations,” says Grosvenor. Jewson, the retail building supplies company, has used Wesupply to co-ordinate direct ship activities across multiple suppliers for consolidated deliveries to customers.

Jane Fazzalari, retail director at JDA, highlights the need for modern retail supply chains to plan and anticipate demand, but emphasises too, the vital necessity for them to be agile. “The days of a rigid structure where we stick to the plan to be a success have long gone,” she says. “Now it’s all about reaction – the plan is important, but it must be flexible.”

“Technology that lets you adapt to quick changes in demand is a huge asset for the future. It means the retailer is poised to take advantage of a sudden surge of interest in a certain line or item,” she says.

Clear visibility and the fast exchange of accurate information across a supply network offers the capability to control inventory, costs and supply chain performance – all important aspects of the order-to-cash cycle. It becomes obvious that, next to cash, information is king.