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Order to Cash Part 3: eBusiness
In this three-part blog series, we have looked at the Order-to-Cash (O2C) process and how you can implement efficiencies to maximize revenues and customer satisfaction while at the same time minimizing error and waste of resources.
Previously we looked at On-Time Delivery and Order Rejection as areas in which the O2C process can be improved. Now we’re going to look at a third and final area: eBusiness.
What is eBusiness?
First, a clarification: “eBusiness” is not the same thing as “eCommerce.”
The latter involves the sale of goods and services online, whereas eBusiness not only involves eCommerce but the wide range of processes which go on behind it, such as supply chain management, order processing and customer relationship management.
The essential goal of eBusiness is to automate as much of a company’s activity as possible, removing the need for human intervention and thereby streamlining processes and removing the possibility of human error.
Why use it?
Human intervention is costly, time-consuming, and prone to error. The eBusiness world is ideally paperless, with computers and servers communicating clearly, accurately, and instantaneously with one another.
Despite the Internet now being a ubiquitous presence in our lives, many businesses continue to operate in an analog fashion, with lots of orders being taken over the telephone and by fax.
Even where orders are placed by email, it is often the case that these orders come as attachments which must be printed off and/or have their details manually entered into a system by a human operator.
The potential impacts on efficiency are immediately obvious: orders take longer to process and even the best worker makes mistakes. A mistyped address, price or quantity will result in an incorrect order that is likely to be refused or returned. This all impacts the O2C process by lengthening the time it takes for orders to be completed and collected on.
What is EDI?
At its core, the eBusiness model involves using Electronic Data Interchange (EDI). With EDI, companies communicate with each other on a computer-to-computer basis using standardized document formats.
This minimizes the need for human interventions and makes for faster, more accurate communication between businesses. Yet despite its proven effectiveness—U.S. retail giant Walmart has long championed it –uptake of EDI has been slower than might be expected.
It is estimated that only 10%-20% of business transactions are conducted using EDI, with the remainder utilizing methods which require human intervention. Thus, most companies have massive potential for this technology to be incorporated into their operation and thereby benefit from efficiency gains.
But if the benefits are so clear and so provable, why has uptake of EDI and eBusiness practice not reached near 100%?
Why aren’t businesses taking advantage?
For many businesses, it’s simply a lack of awareness: EDI usage is growing slowly but steadily. For others, it’s a question of calculating how and where to implement EDI and which systems to use.
Various systems exist at varying price points. The more expensive packages can price out small and medium-size enterprises, but lower-price EDI systems may still prove suitable.
One key consideration when implementing EDI systems is the compliance of trading partners. EDI functions by allowing the instantaneous transfer of standardized documents. This requires customers to adopt these standardized formats when dealing with your business.
Also, should there be any technical issues with the EDI system, research indicates that both your internal and external stakeholders will swiftly begin avoiding its use.
But when these potential potholes are compared to the savings that can be made via EDI implementation, it is immediately understandable why more and more industries are moving toward adoption.
What are the business benefits of EDI?
EDI uptake has been particularly high in sectors such as retail, grocery, and automobiles. These are all industries which tend to have steady, constant supply chains and continual dealings with their suppliers and buyers.
Numerous studies have demonstrated the cost efficiencies and savings resulting from EDI uptake in these industries. The twin benefits of speed and accuracy have been confirmed over and over, with cost benefits also being derived from going paperless.
Studies have found that switching to an EDI system consistently results in operation costs dropping by around two-thirds. Fast, accurate processing of orders and invoices with little need for human intervention produces small incremental savings which add up considerably over the course of a year.
Sometimes it is not necessary for the entire company to move to an EDI model. Savings can be generated by implementing it only in the most effective parts of the operation. Improving the speed and accuracy of key parts of the supply chain has domino effects for the entire business.
How process mining technology complements EDI
But where would EDI best be employed in your operation? That’s a question which, ironically, used to require human thought and analysis.
The advent of process mining technology means that an operation’s digital data can be thoroughly and forensically analyzed to provide insights that human analysis of the same data could not possibly hope to match.
By highlighting areas where manual interventions are most prevalent, process mining shows where automations could potentially be implemented in order to improve speed and accuracy, to the ultimate benefit of throughput and cashflow.
If the business is already implementing EDI in some areas, undergoing process mining analysis will allow for EDI-implemented areas of the operation to be compared with non-EDI using areas of the operation, to see which is benefitting from greater efficiencies.
With demonstrable benefits to supply chain efficiency, order accuracy, invoice processing, human resource time, and a reduced order-to-cash cycle, there are many arguments in favor of implementing EDI in your business and few against it.
To gain some insight in the possible benefits for your business, consider process mining to be your first step. Can any business afford to say no to greater efficiency and savings?
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