The large number of processes found in a typical Order-to-Cash operation lends themselves very well to being the focus of a Continuous Improvement program. The challenge companies often face is implementing the program properly and then actively nurturing it on a go-forward basis.
Recently on a Peeriosity PeercastTM, a major consumer products company with operations across the globe shared their experiences with Continuous Improvement since the program was formally introduced to their Order-to-Cash operation several years ago. As part of a much broader Shared Services organization with a wide variety of process areas included within its scope, this Order-to-Cash operation also provides a broad range of services, including the following:
- Customer Service
- Transportation Planning
- Export Order Management
- Billing / Collections
- Cash App / Deduction Management
- Customer Contract / Trade Funds Administration
- Broker Contracts Administration
As part of a company-wide Continuous Improvement effort called “Comprehensive Continuous Improvement (CCI)”, the definitions of the types of potential savings were broken into two classifications:
Cost Savings – Actions taken to reduce current costs, which impact year-on-year actual P&L results.
Examples: Negotiated savings on existing goods or services and energy conservation programs resulting in lower operating expenses.
Cost Avoidance – Actions taken to prevent current or future costs from increasing. Examples: Additional services provided at no additional cost and elimination of a price increase on existing goods or services.
The leadership of the Shared Services organization as a whole developed a range of targeted cost savings, as well as a stretch target. All Shared Services employees, including those in Order-to-Cash, were provided with the necessary training and each was given both a time savings target and a cost savings target that were tied to their annual performance review.
Using such tools as brainstorming, Kaizen Blitz events, and process mapping, the Order-to-Cash organization was able to contribute significantly to the overall Shared Services cost savings target, with savings of well over $1M USD being achieved each year. The feature company then shared their CCI scorecard, process improvement action template, and details about two specific cost savings projects from the Order-to-Cash process areas.
Looking at the results of two iPollingTM questions related to this Peercast, the first question asked companies to identify what the primary formal process improvement methodology was for the Billing process. Lean Six Sigma was the most popular response, at 36%, followed by a hybrid model (21%) and no formal methodology (21%). While not required to effectively carry out a Continuous Improvement effort at a company, these formal methodologies are well-tested and can provide the structure for achieving more success than when not utilized.
The second iPollingTM question looked at how extensively these formal process improvement methodologies are actually being utilized to streamline the Customer Billing process. Combining the top two responses of Extensive Use (46%) and Moderate Use (24%), this shows that 70% of the companies participating in this research have involved formal process improvement on a significant basis in the Billing area.
Clearly, as was demonstrated by the company featured in this research abstract, as well as by many other companies world-wide, by helping focus the Order-to-Cash team on Continuous Improvement efforts, great results can be achieved both in cost savings and future cost avoidance. While the efforts to implement a structured program such as this may be fairly significant, the potential ongoing benefits can be a game-changer.
How effective is the current Continuous Improvement effort in Order-to-Cash at your company? Are you dedicating the appropriate amount of time and resources to ensure the success of this effort?
Who are your peers and how are you collaborating with them?
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“iPollingTM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility to all respondents and their comments. Using Peeriosity’s integrated email system, Peer MailTM, members can easily communicate at any time with others who participated in iPolli
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