Comment: Order-to-cash process, the lifeblood of any business

Let's imagine, you work as a buyer for a retailer and through a series of negotiations with one of your suppliers, you arrive at an agreement to list the supplier's new product.

Terms have been agreed, the launch date has been finalised, you've decided on the number of stores where the product will be stocked and you've settled on the position on the fixture that the new product will occupy. All looks good for a new product introduction.

In our industry, events like this happen several times a day, it's the way we do business together.

This scenario is now part of the 'order-to-cash' process – the business process of receiving, fulfilling, receipting and invoicing customer orders. This too happens several times a day.

Yet this process is fraught with inefficiencies and errors which can add significant 'hidden' costs to both retailers' and suppliers' businesses.

I'm reminded at this point of an instance early in my career, when at a business review meeting, a senior retail executive said to me: "It's very simple, you make it, we sell it, but in between, we make things very difficult for ourselves."

He was right then and those words still ring true today. What could possibly go wrong in what looks to be a simple transactional process between a buyer and a seller?

There are any number of different events that interrupt the flow of goods through the supply chain, and the implications of getting things wrong get amplified later in the 'cash' process.

For example, because of poor data quality, on arrival at the retailers' distribution centre, the receiving staff can't identify the product being received, so they return it to the supplier. If it's accepted, on arrival at the store, the staff can't merchandise the new product on shelf, because a wrong pack size has been entered into the shelf plan and the required number of facings can't be achieved.

Worse still, when the retailer receives the supplier's invoice, the wrong price has been applied and as a result the invoice will not be paid until the issue has been resolved.

Events like this happen because we, as an industry, tolerate them. Yet the cost to the industry, whether you are a retailer or a supplier, runs into tens of millions of pounds per year. These days using modern technology, the whole process should be seamless for every retailer/supplier relationship.

Currently most of the major suppliers are able to exchange electronic messages with retailers through EDI (electronic data interchange) for which there are agreed industry standards for different message types based on GS1 standards.

Everything around the order, despatch, invoicing and payment can all be managed and processed electronically, without human intervention. Exceptions still occur – usually around price and any rejections at the point of delivery, due to damaged goods or fresh produce not being up to specification.

As part of our Perfect Order industry-backed programme, I've recently spent time with teams from both retailers and suppliers looking at the 'pain points' within the 'order-to-cash' process and was surprised at the level of manual operations on both sides.

Suppliers are still receiving customer orders by fax, email or phone. Trying to decipher a customer's handwritten faxed order slows down processing the order, especially if it requires a phone call to the customer to confirm what they actually ordering. This adds cost and complexity and is open to errors.

Keeping a rein on your company's 'order-to-cash' activities is the difference between a going concern and going under, especially if you are a small company. Cash is the lifeblood of any business and putting invoices at the risk of delayed for payment is not good practice. Thankfully I saw evidence of a large company going out of its way to coach smaller suppliers to ensure invoices get paid on time.

And using GS1 standards, makes the process of ordering, delivering and paying for goods much faster, more accurate and cheaper. Here are a few tips to make sure your 'order-to-cash' process stays efficient:

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