Question

Commercial off-the-shelf enterprise systems have been widely adopted by large businesses as an alternative to developing their own solutions. Explain the basic principle underlying Enterprise Resource Planning (ERP) solutions. Using the order-to-cash process as an example, explain the main steps in a standardised business process, identifying roles, transactions and main activities. Also explain how process steps can be designed with a sequence that ensures information integrity.

Answer 1

Principle behind ERP

ERP software is basically made for smooth functioning of an organization by integrating several business processes into one focused system.

When the application is installed, they figure the team is going to be scuttled and everyone will return to their day job. With these security goods, it isn’t vital to use the computer software. ERP software is utilized to handle the business. Enterprise resource planning (ERP) applications is utilized by huge amounts of people daily to run common little business processes.

By altering a manual procedure into an automated electronic procedure an ERP system can conserve truly hundreds of hours annually in administration. In future, it is going to have a lower implementation cost and a lower maintenance cost also.

With ERP systems, you’re constantly being trained. Once implemented, an ERP process is difficult and pricey to undo. ERP systems let you customize your reports so you see just what you need to. They seek to automate as many of these endeavors as possible and alleviate this kind of business pain. Among other things, they enlarge the scope to solve this problem.

Order-to-cash

The order-to-cash, also known as the O2C or OTC, process, refers to a company’s business process for the entire order processing system. This is a set of business processes to manage from sales order right through to customer payments.

The below steps talk about the flow of OTC with their activities, transactions and processes:

Step One: Customer Places an Order

The cycle begins each time a customer orders goods or services from your company. Having an efficient order management system is important, to ensure there are no delays in order submission, or time wasted with order re-entry.

When your order management system isn’t working properly, you’ll have plenty of issues, such as customers calling about shipment delays or receiving the wrong items. When you have an isolated incident here or there it’s not too much of a problem. But, if this is happening frequently, you’re paying high costs in fixing the original order mistakes and repairing damage to customer relationships.

Step Two: Order is Fulfilled

At this stage, your sales order is prepared for shipment to your customer, or the service appointment is scheduled. In a smooth operation, your order fulfillment is directly linked to your ordering software. This way, your pickers know exactly where to find all the items in the warehouse to prepare orders for shipment.

Step Three: Order is Shipped

In this step, the order is shipped to the customer, or the service order is completed. In shipping, some of this can be automated. For instance, when someone marks the order as shipped in the system, the customer should automatically receive an email with tracking information, so they can know when to expect the items.

Step Three: Invoice Created and Sent to Customer

Unless payment took place at the time the order was placed, an invoice must be generated and sent to the customer. Automation can simplify this process and reduce the likelihood of error.

Step Four: Customer Pays Invoice

At this stage, the customer sends payment for the invoice. Ideally, there should be multiple options to choose from, such as electronic funds transfer, credit, or debit card payments. While you can provide the option to mail in a check or money order, this opens up room for delays in the process. The easier you can make it for your customers to give you money, the faster you can get paid.

Step Five: Payment is Recorded in General Ledger

When you receive payment for an order, the accounts receivable department will record it in the general ledger.

“By using integrated software, you can automate parts of the process and reduce error, improving customer service and operating cashflow.”

Ensuring information integrity in processes

Fully integrating your ordering, fulfillment, and billing and payment systems may take time, but can shave days to weeks off your cycle time.

It will automatically take order data and send it to fulfillment, and then send it to billing, and record payments. Imagine the time you can save when you no longer have to manually push an order from one stage to the next.

With these ways you can improve the existing process steps:

1. Automation - Sending out invoices and collecting payments are two of the first areas you can easily automate.

2. Standardized O2C processes - The more employees in your company, the more documented procedures become important. These standardized forms of communication ensure every employee receives the same instructions for his or her role. Assuming documentation is being kept up to date when an employee leaves the company, they don't take important knowledge with them. Having readily available documentation for tasks allows new employees to more quickly get up to speed.

3. Keep Customer Service In-House

Many companies try to reduce their cost by automating or offshoring customer service. Having someone with a different accent read from a script can be off-putting to your customers.

Running them through a chatbot that is never able to provide an adequate answer either, this type of automating isn't going to win you any additional customer loyalty.

4. Avoid Tacking on Fees

Ivoice the customer for the product and fees they are expecting. For any unexpected fees, send a separate invoice describing in detail what the fees are.

5. Accurate Customer Data

Maintaining accurate customer data across different systems within the same company can seem like mission impossible.

However, inconsistent customer data can wreak havoc on productivity and customer satisfaction.