Hot for 2012! End to End Quote/Order to Cash Process.

1. Quote / Order To Cash (O2C)
A Brief Overview ]
John Choate – National Chair
Program Management &
Maintenance Strategies (PMMS) SIG
Scott Pezza – Research Analyst
Aberdeen Group
[ CHAVONE JACOBS
ASUG INSTALLATION MEMBER
MEMBER SINCE: 2003
[ COREY PEARSON
[ ALLAN FISHER ASUG INSTALLATION MEMBER
ASUG INSTALLATION MEMBER MEMBER SINCE: 2008
MEMBER SINCE: 2008

2. [ 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.
Real Experience. Real Advantage. 2

3. [ Pressures Driving a Focus on O2C
Pressure to reduce overall costs 67%
Risk of customer non-payment or default 29%
Customer demand to improve service levels 29%
Inability to accurately forecast cash flows 21%
Rising cost of servicing major customers 19%
Customer pressure to extend payment terms 19%
0% 10% 20% 30% 40% 50% 60% 70%
Percentage of Respondents, n = 140
Source: Aberdeen Group, The Order-to-Cash Cycle: Enhancing Performance with Process Automation (July 2011)
Real Experience. Real Advantage. 3

4. [ Objectives of Order to Cash Improvement
Reduce Days Sales Outstanding (DSO) 54%
Improve cash flow forecasting/guidance 42%
Reduce receivables processing cost/time 36%
Reduce 'customer-to-cash' or 'order-to-cash' 35%
cycle
Improve transaction efficiency 34%
Manage credit risk, losses from bad debt, and 30%
collections expense
0% 10% 20% 30% 40% 50% 60%
Percentage of Respondents, n = 140
Source: Aberdeen Group, The Order-to-Cash Cycle: Enhancing Performance with Process Automation (July 2011)
Real Experience. Real Advantage. 4

5. [ 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)
Real Experience. Real Advantage. 5

6. [ Order To Cash Process
1. Request for Quotation (RFQ)
 Sales Order with quotation reference
 Product Allocation (ATP/gATP)
 Credit Limit Check
 Service charges
 Bill of Material (BOM)
Real Experience. Real Advantage. 6

7. [ Order To Cash Process
1. Delivery
 Picking with automatic transfer order
creation and confirmation
 Picking with manual transfer order creation
 Confirmation
 Packing
 Posting goods issue
 Invoice
 Payment by Customer (Cash)
Real Experience. Real Advantage. 7

8. [ 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
Real Experience. Real Advantage. 8

9. [ 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
Real Experience. Real Advantage. 9

10. [
• 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.
Real Experience. Real Advantage. 10

11. [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.
Real Experience. Real Advantage. 11

12. [ 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.
Real Experience. Real Advantage. 12

13. [ 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)
Real Experience. Real Advantage. 13

14. [ 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
Real Experience. Real Advantage. 14

15. [ 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 invoicing
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)
Real Experience. Real Advantage. 15

16. [ Best-in-Class AR Technology Profile
60% Best-in-Class All Others
50%
50% 47%
43% 43%
40% 37% 37%
33%
30% 26%
23% 23%
20% 18%
12%
10%
0%
Integrated BI / Electronic Performance Event Customer
Order-to-Cash Analytics Workflow Dashboards Management Portal
Systems
Source: Aberdeen Group, The Order-to-Cash Cycle: Enhancing Performance with Process Automation (July 2011)
Real Experience. Real Advantage. 16

17. [ Performance Results : Average (Middle 50%)
 15% improvement in order-to-fulfill cycle time
 88% complete and on-time shipments
 48 DSO
 8.6% of AR past due
 4.1days for payments to clear the AR ledger
 44.9% of invoices require manual intervention
 3.9 days from completion of product/work to invoicing
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)
Real Experience. Real Advantage. 17

18. [ Performance Results : Laggard (Bottom 30%)
 9% improvement in order-to-fulfill cycle time
 83% complete and on-time shipments
 58 DSO
 16.1% of AR past due
 11.7 days for payments to clear the AR ledger
 79.9% of invoices require manual intervention
 6.1 days from completion of product/work to invoicing
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)
Real Experience. Real Advantage. 18

19. [ 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.
Real Experience. Real Advantage. 19

20. [ 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
Real Experience. Real Advantage. 20

21. [ 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
Real Experience. Real Advantage. 21

22. [
]
 Thank you for participating
 PMMS SIG / Aberdeen Group
Real Experience. Real Advantage. 22