Perfect order management requires end-to-end process view |
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By Courtney Bjorlin, News Editor
25 Mar 2009 | SearchSAP.com |
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To achieve perfect order management, application professionals must push for an end-to-end process view of functions that are now broken into departments, according to Forrester Research.
Organizing work and the applications used to expedite it by processes can help application professionals consolidate sales order management systems and reduce waste, inefficiency and duplication in orders, according to Ray Wang, Forrester vice president and principal analyst with the Cambridge, Mass.-based firm. Those processes include opportunity to order capture, order capture to order fulfillment, order fulfillment to order completion, and order completion to order settlement.
For instance, a common problem is having too much inventory. One side is working to reduce the level of inventory in the warehouse using lean principles such as Just-in-Time production. But on the sales side, someone could be trying to sell something, and the system is showing the product isn't available. These processes need to be aligned, Wang said.
"It's really important for people to look at it from an end-to-end process -- looking at it from the time you take the order to the time you pay for the order," he said. "Those are typically across a ton of different departments."
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| A sampling of the 20 steps to the perfect order |
Opportunity to order capture: Provide both product and service selection, enforce pricing policy.
Order capture to fulfillment: Recommend sourcing options, offer delivery or installation options, suggest packaging options.
Order fulfillment to order completion: Allow warranty claims, manage service agreements.
Order completion to order settlement: Efficiently collect and settle invoice. |
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Wang has developed 20 steps corresponding to these processes to help companies deliver the perfect order -- a sales order that consistently meets customer, supplier, partner and employee expectations. Companies can measure themselves against these 20 steps to see how well they execute best practices such as supporting multiple channels and delivering a consistent brand experience across all channels.
There are certain processes that give many companies trouble -- such as "buy anywhere, return anywhere" policies, and selling services like installation with a product.
"That's very complicated," Wang said. "Let's say I buy on the Web and return in store. I can't track inventory."
Not having the right technology in place and not having the funding to remedy this are major challenges to managing the perfect order. But determining how well an organization is aligned with the steps can help application professionals consolidate applications, such as transportation and warehouse management, and free up capital.
There may be 10 applications supporting those 20 steps, and by taking a process view, application professionals can figure out which ones can be decommissioned, and which ones they can consolidate.
A survey of 61 companies running sales order management systems found that, on average, companies had 11 order management systems, Wang said. If that number is consolidated from 11 to three, he said, companies can probably achieve a 20% to 23% cost savings.
This can free up capital for new technology projects and purchases -- such as an order management hub, which handles multi-channel requests and enables end-to-end business processes.
"How can they free up some of that capital? Part of it is by consolidating some of the older systems," Wang said. "The ability and some of the efficiencies gained in the newer system pay for investments."
Factors like compliance can help to drive the project -- if an existing system doesn't allow a recall, for instance.
In turn, companies that deliver perfect orders have higher customer retention -- 8% to 19%, according to Wang -- which results in a 3% to 5% increase in order sizes.
Companies Wang interviewed reported a 5% to 17% cost savings from optimizing core order management processes, such as multichannel selling processes. Many companies are finding value, for instance, in channeling repetitive and low-margin orders to Web-based channels and putting more human interaction into the higher-dollar-value orders, he said.
"Conventional wisdom suggests that companies retrench and hold off on investments," the report says. "However, those business process and applications professionals who successfully lead the achievement of a perfect order will set the stage for significant competitive advantage. Perfect orders will move from being a concept to becoming the differentiator between survival and success."
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