Medicating the order-to-cash cycle

October 1, 2009
Pharmaceutical Technology Editors

Pharmaceutical Technology Europe PTE

How manufacturers can accelerate cashflow by cutting out the paper trail.

The novelist and philosopher Ayn Rand stated that ‘money is made possible only by the men who produce’; yet if manufacturers fail to fulfil orders quickly and accurately, customers will soon take that money elsewhere. Conversely, if an order reaches its purchaser quickly and correctly, that customer is ripe for repeat business.

With this in mind, the vast majority of manufacturing organizations have streamlined their dispatch offices and factories to a point where they are more efficient than a low-energy lightbulb. Despite this, the technology behind the processing of order forms has lagged.

Most manufacturers receive purchase orders by fax or email and the details are then keyed manually into the order processing system. This process is permeated with problems. Not only is the manual keying of orders slow, it can also lead to errors and misplaced forms, providing scope for severe delays. Customer services staff are then taken away from value-added tasks in an attempt to speed up the processing of order forms, leading to a loss of efficiency in other areas of the department.

Furthermore, order forms must be workflowed physically around offices and departments to deal with any discrepancies, leading to further slow down. Even after the manufacturer has dispatched an order, there is still the need to deal with the paper chain; every paper form must be stored for traceability and auditability, which leads to more costs. As a result, the cost of processing a single order can be as high as £40.

Resolutions
Any solution that lightens the daily deluge of paper descending on the customer services department has the potential to impart a number of benefits, including a high return on investment because of the sizeable cost-savings and the ability to speed up the order-to-cash cycle, leading to improved cashflow and customer service.

The clearest way to enable streamlining in this area is to eliminate paper altogether. By reading incoming data directly from faxed and emailed order forms, and turning it into meta-data that is understood by Enterprise Resource Planning (ERP) systems, the above benefits can be achieved, without changing the way in which customers order.

To delve deeper into the elimination of paper, we will look at an example of a pharmaceutical manufacturing company, which cannot be named for the purposes of this article. We will refer to them as PharmaX. Running SAP ERP software, PharmaX had previously been keying their orders into the system, but are now running ITESOFT.FreeMind for Orders.

Loss reduction
PharmaX is a manufacturer of pharmaceutical goods, targeted at the private health sector. They receive more than 300,000 orders per year from a variety of customers. Less than a year ago, they were hiring more than a hundred staff and spending roughly 400 man-hours a day on processing order forms.

When an order was received by fax or email, it was printed off and its details were manually keyed into the SAP system, which was time consuming and also presented the potential for keying errors. Any discrepancies on the order would lead to the paper form being sent to a manager, allowing him to deal with the problem. However, this led to more wasted time, particularly when order forms inevitably became lost.

To confound matters, there was no method to the processing of orders; it was simply first-come-first-serve, leading to important or urgent orders being delayed or typed in a rush at the close of the day, and causing strained relations with key customers. When one of their top accounts left for a competitor because of one misplaced order too many, PharmaX decided to deploy a document capture and automatic processing solution to handle its incoming orders.

Improving profits
Now, when an order comes in via fax or email, meta-data from the file is captured using a full text optical character recognition engine. Posted orders are scanned and the data are read via the same engine. Not only are the data read, but the image of the order form is stored in an archive, allowing it to be searched for at will through a variety of fields and removing the need for costly paper storage.

As well as reading data such as customer name, multiple addresses, account number, product codes and the overall value of the order, the solution can also pick up stop-words such as 'urgent' or 'express', allowing important orders to be prioritized.

The solution itself sits within PharmaX’s SAP system and provides a number of benefits. The meta-data extracted are verified both internally and externally — internally, the data is checked mathematically against itself; external verification allows it to be checked against all of the current data in the SAP system, including the status of the customer’s account.

Any discrepancies found through either form of verification are flagged, which initiates an electronic workflow. The rules of this workflow can be altered, allowing, for example, erroneous orders of a certain value to go to a supervisor, while others go to a director. Within SAP sits a dashboard that enables the user to view, at a glance, the status of all orders currently in the system for full visibility.

PharmaX has found a number of overall benefits including reduced time spent keying in orders and, consequently, reduced costs. Customers are far happier with the service that they receive and there is no longer the fear of missing an urgent order from an important customer.

Reality
Many users employing automated order processing solutions can find a high return on interest. As orders are dispatched more quickly, cashflow improves. As already mentioned, less quantifiable benefits are also noticeable; customers enjoy better service, which leads to repeat business.

The bottom line is simple: automating the order-to-cash process extends the reach of ERP systems, allowing for a central system and knowledge base to deal with the entire procedure and improve efficiency. Freeing business from the noose of the paper chain can lead to a far healthier bank balance.

www.itesoft.com