How To Optimize Your Inefficient Order to Cash with Process Mining
Order to cash (O2C) is the process where an organization delivers a product or services to a customer in exchange for money. It starts from the customer’s order and ends with customer payment.
- Why Is O2C Important
- Four Signs Your Process Is in Trouble
- Key Challenges In O2C Improvement
- 6 Steps to Improve the Order to Cash Process with Process Mining
O2C is a highly complex, cross-functional process that directly affects an organization’s bottom line. It's vitally important that O2C be efficient and at the same time very difficult to do so.
In this article we’ll take a look at what makes O2C a pivotal business process for the organization, the challenges that threaten successful process improvement, and how process mining is the remedy to a slow and inefficient O2C.
Why Is O2C Important?
The O2C process is how your business gets money. The more efficient it is, the faster you can sell your products or services in exchange for the money that will be invested back into the business to increase innovation and reach new business goals.
It’s also both a customer-facing and business-facing process, so it’s expected to meet customer expectations while simultaneously staying aligned with business objectives—no easy feat when you’re dealing with a cross-functional process.
When the process is inefficient, customer loyalty weakens, cash flow slows, and the entire business is negatively impacted. Due to the health of an organization being directly linked to O2C, it’s become a major focus in business optimization strategies in recent years.
Four Signs Your Process is in Trouble
The most obvious sign of any process in trouble is inefficiency. A process can become inefficient for a variety of reasons, usually stemming from overcomplexity. Here are a few issues that commonly bog down the O2C process.
Too many manual activities - Manual activities are slower than automated ones and they’re prone to create bottlenecks and delays. For example, when too much of order management is manual, shipments can be late and customer retention is put at risk.
Human error- Tied in with the previous point, human error usually happens when there are too many manual activities within the process which results in a high rate of reworks. Think manual activities like matching invoicing.
Siloed departments - Organizational silos impede collaboration and create a lack of visibility. When departments are siloed, opportunities like upselling are missed, the probability of committing errors goes up, and the entire O2C life cycle gets longer, making customer satisfaction drop.
Poor cash flow - This issue should raise a red flag immediately. You can’t have a poor cash flow without also having underlying issues. How much of the problem is due to rapid growth, an inefficient process, or both? The situation with poor cash flow is a grave one—you should make every effort to understand if process inefficiencies are choking your cash flow.
Key Challenges in O2C Improvement
Because O2C is such an important, yet complex process, process improvements won’t come without its own list of challenges. Here are some things to consider before you start making any drastic changes.
The customer journey is hanging in the balance
Remember, it’s not just the business that will feel the impact from changes in the process. Any changes you plan to make for operational efficiency could affect the customer journey.
So, before implementing changes, it’s essential to evaluate the risk on customer experience which will in turn affect the bottom line and cash flow.
There's a lot of data
Think customer information, invoices, shipping details, payment details, and the list goes on. What’s more, the data is often divided into several different systems that interact with each other throughout various points in the cycle.
Throw in a few legacy systems to house your most valuable data and the hopes of getting any real amount of insight drastically fall.
Without a complete view of your process data, it’s difficult to create accurate reporting to understand the inefficiencies and understand how the process is actually running.
Many departments are involved
Planning and executing operational changes across multiple departments is a tricky task. And getting all stakeholders involved and keeping them constantly updated throughout the change process is time-consuming.
Whether you plan to implement best practices or do a complete overhaul of your ERP system, there’s a risk that any operational changes will affect other areas of the process, some of which could be further down in the process and impact other departments.
6 Steps to Improve the Order to Cash Process with Process Mining
So, how does process mining remove inefficiencies in the O2C process while avoiding the challenges that threaten successful improvement initiatives?
Process mining’s approach to process improvement differs from traditional process analysis which is prone to risks and constraints. Most notably, process mining insights are data-driven, supported by unbiased data rather than human input about process performance. Analysis is also automatic and the insights obtained are clear and actionable.
Follow these 6 steps with process mining to get your O2C process back in shape and start increasing your bottom line.
- Start by visualizing the end-to-end process
If you suspect there’s a problem in your process, what better way to see what’s happening than to map out the process to see what’s going on. With process mining, you simply upload your system data and you’ll automatically get a complete view of your process and average lead time. Process mining is application-agnostic. Regardless of how many applications are involved, process streamlining is possible. After the data is uploaded, process mining immediately shows where there are bottlenecks and how often reworks are taking place.
- Do a Root Cause Analysis
You’ve located the activity that’s causing the bottleneck. Now it’s time to compare the expected process behavior with the activity’s actual behavior to find deviation and perform a root cause analysis to understand why the activity is causing a backup in the first place.
- Find the Best Way to Do Things Manually
Task mining dissects how manual activities in the process are carried out. Capture how long it takes to manually input a purchase order and any bottlenecks and deviations taking place. Root cause analysis can be done for your manual activities too.
Once you find the most efficient path to complete the purchase order, you can set it as a best practice.
- Increase Your Automation
Automation is a great way to speed up O2C and reduce human error. Pairing task mining with process mining, you can combine the manual activities recorded from task mining with the activities taken from business systems data to get a complete picture of the process.
From there, you can calculate the amount of automation you want to add into the process and get a visual look at which manual activity will add the most value to the process if automated.
- Only Improve What Brings Results
Simulation makes process improvement safe. Testing changes before you implement them into your to-be process will give you the visibility into how the process will run in the future. Remember, any and every change you make in the O2C could negatively affect customer experience—by testing out your best practices with simulation, you’ll get the proof you need to understand if your best practices actually are the best way to improve the process or if there’s a faster way to hit your KPIs.
- Continuous Improvement
Monitoring reveals buying behavior by keeping track of operational changes to understand if there is a direct impact on customer satisfaction after drastic changes like new bots or even just to check that a new hire is performing their job correctly.
With the ability to discover the entire end-to-end process, test out changes, seamlessly add automation, and guarantee satisfied customers while increasing ROI, process mining is the perfect tool to improve O2C.
See how the world leader in the energy and telecom cables industry experienced drastic cost reductions in its O2C process with process mining.
Stefano Pedrazzi has 15+ years of experience in the ICT and BPM field. He spent a significant part of his work life leading and managing Business Process Management and System Integration Projects for OT Consulting. Since 2017 he has been the VP of Sales & Marketing at myInvenio, helping his customers kick-start their Process Digital Transformation revolution using myInvenio’s process mining solution.