Order Management System Best Practices

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1 Order Management System Best Practices

2 For most organizations, order management taking, fulfilling and shipping orders is far from simple. In fact, there are some common holes in order management software systems that can lead to some expensive failures. An effective order management system takes on added importance in slow economic times, when companies have to operate more efficiently, according to one consultant. In this E-Guide, readers will learn how to avoid the pitfalls of order management and best practices for maintaining order management in a touch economic environment. tough economic times By: Todd Morrison, News and Features Editor While required in any business climate, an effective SAP order management system takes on added importance in slow economic times, when companies have to operate more efficiently, according to one consultant. A major part of that equation is taking advantage of financial tools within SAP order management, which can help ensure that companies get paid faster and more accurately, according to Rohana Gunawardena, SAP practice director for Quality Systems & Software, a consulting firm based in Las Vegas. Those tools include SAP applications in billing, credit, collections and dispute management, he said. In SAP order management, the customer data, including leads and other marketing information, resides in the SAP CRM system. The order moves to SAP ERP for tasks ranging from order fulfillment to billing. Order management is integrated with SAP Supply Chain Management (SCM) for more sophisticated products. Financial tools within order management can also minimize credit risks that companies face when doing business with new partners whose stability may not be clear. Page 2 of 9

3 There s a lot of emphasis around these areas from CFOs [chief financial officers], Gunawardena said, given the state of the economy. SAP Credit and Collections Management Wise use of SAP Credit Management starts with deciding how much credit to give new customers -- if at all, according to Gunawardena. After that, it s a matter of monitoring those clients to see if that credit rating should be changed, he added. The SAP BusinessObjects analytics that are embedded in SAP Credit Management and other applications across the order management portfolio help make that happen, according to Craig Himmelberger, SAP s director of systems marketing for SAP ERP Financials. By pulling in real-time credit ratings information, companies can make better credit decisions, thereby minimizing any potential risk associated with granting too much credit to a company that may not deserve it. Embedded analytics can refine the scoring of an applicant based on past payment history and behavior [or] external credit rating data, [the customer s] importance to profitability margins and provide insight to the credit manager in order to make the decision on the spot rather than after exiting the financial system and accessing other external records, Himmelberger said. Analytics plays an important role in collections and dispute management, Himmelberger said. In the past, he said, collection agents would get a partial list of customers with outstanding receivables, and then get on the phone and start calling blindly. SAP collections and dispute management applications take that worklist and put it behind a prioritization analysis, he said. That helps make sure that a company s collections department only sees accounts that truly need its attention, Himmelberger said. Page 3 of 9

4 With collections teams, the challenge is to take the finite resource of the collections agent s time and apply it against a seemingly never-ending list of potential actions, such as phone calls, dunning letters and inquiry research, he said. Calling a customer who always pays after 10 days on the ninth day is not an effective use of time. Embedded analytics can alert agents to this kind of payment behavior, or better still, automatically adjust the worklist so that such customers never show in the to-be-called list until after the 10th day, Himmelberger said. Companies can also use SAP BusinessObjects analytics can to evaluate the performance of their collection agents, including which agents are most effective at collecting on outstanding accounts. It can also be used to analyze what your customer rating satisfaction is, compared with how efficient the agent is, and see the correlations between those two, Himmelberger added. SAP Biller Direct The SAP Biller Direct portal is a part of SAP Financial Supply Chain Management. It includes functions for electronic invoice and bill presentment and payment (EIPP/EBPP), which companies can employ to gain better visibility into the status of their accounts receivables, according to SAP. In the portal, companies keep electronic records of just about every part of the company s business relationship with its customers, so that either side can access that information at any time. That allows customers to see their account balance with the company, make payments and view credits as well as past payments and bills, credits or payments. It also enables real-time integration between the SAP back-end system and the Internet without any data redundancies, according to SAP. More and more companies are looking to pay electronically in order to reduce their financial cycles and reduce the cost of doing business, according to R. "Ray" Wang, an analyst and CEO of Constellation Research Inc., all of which helps minimize the friction of the transaction. Page 4 of 9

5 SAP Biller Direct was also created to make it easier for companies and their customers resolve payment disputes in less time by providing the capability to work off the same financial information. The big hassle in the past was that one company s accounts receivable and another company s accounts payable department would spend days, weeks, if not months, dancing around one number they both could agree on before the payment could be completed, Himmelberger said. And it s nobody s interest to waste effort in that regard. management software By: Chris Maxcer, Contributor For most organizations, order management -- taking, fulfilling and shipping orders -- is far from simple. In fact, there are some common holes in order systems that can lead to some expensive failures. There are two classic areas: The first one is when you have high growth in the volume of orders or in the source of orders, and keeping track of these orders or even unwinding orders becomes so complex that it s a problem, said Alexander Drobik, a regional research director for EMEA, ERP, and Enterprise Suites for Stamford, Conn.-based Gartner Inc. Initially, order management begins as a well-defined end-to-end process in a small company where there s a single interaction for creating and processing an order. However, once volume grows, orders bottleneck and order queries and new channels outgrow the system. Channels can range from an e- commerce site to the sales force to telephone sales to direct orders. Page 5 of 9

6 Typically, companies then put in analytics and new technology overlays to try to see what s happening along the way, but these extra solutions often don t fix the root problem, according to Drobik. So you end up with someone who s asking, What can we do to streamline the volume? he said. Well, the answer is a not a lot, because you want the volume. The challenge, of course, is that whenever a company experiences high volume, opportunities arise for little bumps along the way -- orders might become mislabeled, lost in transit, returned, or held, all of which can further slow the process. We get customers who are so disgruntled with their order management endto-end process inefficiency that they seriously consider building a new order management system that completely bypasses all of their other systems, to have it outside of all the systems, and then use it to control the internal process and feed back into the existing systems at the right points, Drobik said. Finding order management system bottlenecks Most companies ultimately come to their senses and identify the areas of an order management system that are working, then look for the bottlenecks. However, those bottlenecks can be hard to identify until they clearly constrict your processes. For example, earlier this month Tesco Direct, an online retailer in the U.K., offered the new ipad for about $70 because it left a zero off the price. Tesco has a clause that lets it accept orders and change them until the point of shipment, but it illustrates some of the challenges with order management, Drobik said. The reality is that it takes a massive effort to fix this problem and avoid order management system failure. Page 6 of 9

7 Now the company has to say to its customers, You clicked the pay button, and we might have started the payment bit, but now we have to unwind the order. How do you plan for that kind of mistake? Drobik said. They had terms and conditions that said they are not legally obliged to supply the order, but they still have to take the orders, unwind the orders, send messages to their clients, say they are sorry, that it was a genuine error, give out a 5% voucher to help keep customers satisfied, and now unwind the finance pieces. A small mistake could also lead to a much bigger problem that can jam up orders that are still coming along behind it. Fierce storms during the holiday season or rapidly changing clothing fashions can gum up the order management process. These problems point to potentially weak spots in an order management system. Beyond the obvious crashes, there are other spots that can point to order management technology holes. Jonathan Gross, vice president and corporate counsel for Toronto-based Pemeco Consulting, said that the inability of a company to respond to certain types of requests for quotations is big-time indicator that existing order management systems aren t up to the task. "For example, he said, are you unable to create orders if materials are not available or if future workload capacity is unknown? Scenarios like these usually provide insight into what s missing and what s needed. Many ERP systems have sophisticated order management capabilities that give businesses opportunities to prepare orders based on relevant planning and control data. Business planning key function of order To find the areas where order can help requires understanding the circumstances under which a company cannot prepare meaningful orders, he added. Good order management should account for all relevant planning requirements, including lead times and material requirements. Page 7 of 9

8 George Lawrie, vice president and principal analyst for Forrester Research in Cambridge, Mass., agreed. If an order management system can t account for lead times and requirements through customer, item, and inventory master data in accordance with company policies, organizations have a hole that the right technology -- often an ERP system -- can fill. For example, you might have a policy that lets your best customer have first pick when you have limited inventory. I think lots of people with dislocated systems or point solutions are trying to do that manually -- and they disappoint, so they don t meet their customer service goals, they upset sales guys, and they upset their best customers, Lawrie explained. Generally speaking, if you re not meeting shipment dates, that s a symptom of multiple different systems rather than one well-implemented ERP [system]. The inability to apply the correct pricing to orders is another problem companies have with their order. For many people, that s what tips them into ERP solutions. They are trying to price orders individually and there are too many different conditions, Lawrie said. You have conditions about the quantity but it might also be the combinations of the items, and lots of people have quite complicated rules about that. Page 8 of 9

9 Free resources for technology professionals TechTarget publishes targeted technology media that address your need for information and resources for researching products, developing strategy and making cost-effective purchase decisions. Our network of technology-specific Web sites gives you access to industry experts, independent content and analysis and the Web s largest library of vendor-provided white papers, webcasts, podcasts, videos, virtual trade shows, research reports and more drawing on the rich R&D resources of technology providers to address market trends, challenges and solutions. Our live events and virtual seminars give you access to vendor neutral, expert commentary and advice on the issues and challenges you face daily. Our social community IT Knowledge Exchange allows you to share real world information in real time with peers and experts. What makes TechTarget unique? TechTarget is squarely focused on the enterprise IT space. Our team of editors and network of industry experts provide the richest, most relevant content to IT professionals and management. We leverage the immediacy of the Web, the networking and face-to-face opportunities of events and virtual events, and the ability to interact with peers all to create compelling and actionable information for enterprise IT professionals across all industries and markets. Related TechTarget Websites Page 9 of 9

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