The Digitization Of Customer Order Channels
If you’re a supplier, nothing makes you happier than receiving a customer order—and the more orders you get, the better. However, there are many different ways for customers to transmit those orders, from highly automated approaches to manual entry. What challenges does this create for suppliers? How can technology and digital networks streamline and automate the order-to-cash cycle? That was the main focus of my discussion with Gary Neights, Senior Director, Product Management at Elemica, during a recent episode of Talking Logistics.
The order capture challenge
Capturing customer orders seems like a simple process, but it can be much more complex than that. Gary agrees that automating orders can be simple for procurement and logistics departments because they can specify the formats. “But if you’re a supplier, you have to take orders pretty much however customers want to give them to you,” says Gary.
Gary points out that orders can come on paper documents, in emails, on spreadsheets, via portals, as well as from various automated systems. But customers also may want you to monitor their tanks, railcars or other inventory and resupply them automatically when they reach specified thresholds. “All these different formats are a challenge for suppliers,” he says. “There are also process issues. For example, rather than a purchase order, a customer may send a scheduling agreement out of an SAP system, which is common in the CPG and automotive industries, that has to be manually entered. Manual entry introduces errors and latency to the process, limiting responsiveness. But suppliers have to deal with all of this because it represents revenue.”
Data synchronization is another issue. Customer product numbers may be different from supplier product numbers. Units of measure may be different. And delivery locations may vary based on product type, order quantities or weight. Often, there is manual effort required to make these translations. The shortening of product life cycles today further exacerbates these issues.
As with most challenges in our industry, technology has a role in finding solutions. Gary notes that it starts with automating order entry. “Being able to receive an order from an email or as an iDoc and translate it into an order format for your ERP system is the first step,” states Gary. “This is especially important for the ‘long tail’ of your order curve — those customers who order fewer items or less frequently, but who often cause the most problems for translation because their orders aren’t automated.”
Gary says the second step is visibility. Customers want the right product at the right time in the right place and they want to have visibility throughout the entire order life cycle, from order confirmation through final delivery.
Gary further notes that digitization can provide visibility into multi-echelon supply chains, especially where tracking raw materials or product pedigrees is critical. The network effect of B2B connectivity in these scenarios goes beyond digitization to offer lower cost of operations as well.
The benefits of digitizing order entry encompass both the obvious ones, such as efficiency and reductions in errors and latency, but also less obvious ones. Gary mentions operational benefits such as providing more time for companies to react. He gives the example of same-day delivery. Today with manual order entry, you might have a cutoff time of 10:00 am in order to deliver orders that same day. With automation, however, you might be able to move the cutoff time to 11:00 am or later, thus increasing revenue and customer satisfaction.
Gary also cites working capital benefits. You may have kept extra inventory to buffer for manual processing issues. With digitization, you can reduce those inventory buffers. He further points out that digitization can provide better visibility to process metrics, as well as predictive analytics using AI and machine learning, so management can improve operations.
The first step in getting started on a digitization strategy for order entry is to assess where you’re at today. I asked Gary what differentiates the leaders from the laggards in this area, as well as what actions companies should take to begin this journey. I encourage you to watch the full episode for all of Gary’s insights and advice. Then keep the conversation going by posting your own thoughts or experiences.