How Can You Do It? And Why Should You Care?
As a seller, you’re all too familiar with the problems that can plague an order between the time you receive it and when it’s finally paid. So “creating the perfect order” may sound daunting. Yet a growing number of sellers are doing exactly that—and realizing major benefits as a result, such as:
- A shorter order-to-cash cycle with lower costs
- Increased customer satisfaction and more chance of becoming a strategic seller
- Higher sales and market growth
At an Ariba LIVE 2013 session, seller Chris Lawler, e-procurement business manager for Agilent Technologies, and buyer Jennifer Roberts, supply chain systems manager at Sonoco, joined Ardent Partners chief research officer Andrew Bartolini to discuss what their companies gain from the perfect order, why they pursue it, and how you can, too.
What is the perfect order?
The Supply Chain Council defines the perfect order in its Supply Chain Operations Reference (SCOR) Model as “delivering the correct product, to the correct place, at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation [e.g., order acknowledgements, ship notices, and invoices], to the correct customer.” Of course, the definition of “perfect” varies by stakeholder, company, industry, product, and defined tolerances; one bent nail in a five-pound bag is less likely to create problems than one day’s delay in crucial manufacturing components.
Why does the perfect order matter?
- Your customers want it. Besides saving time and money, the perfect order helps your customers improve spend management metrics—a goal that looms larger than ever for today’s buying organizations. “If you’re a high-volume vendor, you’d better have this,” Lawler says. “The bar is rising every day on what your customers are expecting from you.”
- It helps you get business. Sonoco uses e-commerce tools to track delivery, quality, order completeness, and similar criteria as part of its perfect order efforts, then channels a higher percentage of business to top-performing sellers. For example, the company moved from using 20+ waste management vendors and over 50 temporary service vendors to just one of each, rewarding their perfect order partners.
- It delivers big benefits for you and your customers. The e-commerce tools automation underlying Agilent's perfect order initiative has helped the company level the playing field with competitors, improve the buying experience, and build shared efficiencies with customers, which in turn drives up sales. "As we go further with e-procurement and e-commerce, our customers become more efficient, we become more efficient, we automate more and ahve less touch and fewer errors; its a great win-win for everybody.", Lawler says.
- The downsides of imperfection can be huge. For sellers, order errors and delays can lead to bad buyer ratings, damaged customer relationships, reduced productivity, late payments, missed opportunities to secure preferred supplier status, and worst of all, total loss of your customer.
How can I create the perfect order?
- Define clear parameters early on. By working with your customers to set specific, agreed-on perfect order standards up front, you can eliminate ambiguity and ensure everyone is on the same page.
- Align efforts to rewards. Error elimination comes at a cost, so don’t overshoot the mark in your quest for perfection. Define acceptable variances for each process based on its value to you and your customer (e.g., it may not make sense to spend 200 USD tracking down a 40-cent mistake). Then continue to adjust metrics as your business environment and requirements change.
- Embrace automation. Leverage technology and network capabilities to reach your goals, and take full advantage of the capabilities they offer. For example, Agilent realized 80 percent touchless processing with one customer by using the Ariba® Network to accept orders, send ship notices and order confirmations, and invoice electronically. This enabled them to book orders as soon as they arrived, resulting in fewer errors and a more consistent customer experience. Adding PunchOut pushed touchless processing closer to 95 percent. The results? “Fewer obsolete part numbers, fewer unit and measure problems, less touch on the buy side, less touch on the fulfillment side, and a better customer experience overall,” Lawler says.
- Prioritize and pilot. Examine current customers for the best candidates to work with first—e.g., top run rate accounts that will benefit the most the fastest, or those most likely to offer good growth partnerships—and launch a perfect order pilot program with one or two. Measure your results quarterly to track ROI, then use those numbers to encourage other customers to participate.
- Use standardized platforms and solutions. Common platforms like the Ariba Network help drive efficiency, since the capabilities and resources you develop with one customer can be leveraged with others. “We like common platforms,” Lawler says. “The standardization is great; we don’t have to build 50 independent custom connections, it helps us to scale better and faster, and for everybody it keeps costs down.”
- Manage culture change carefully. “Culture eats strategy for lunch,” Lawler points out, noting that careful pacing and management of the new approach are crucial to ensure success. “Don’t try to do too much too fast, or organizational antibodies will kick in,” he adds. “At the same time, you have to nurture execution of the strategy, or you’ll get death by a thousand paper cuts.”
- Plant seeds, then assess progress. Socialize key messages throughout the company, and monitor the way employees interpret and implement new strategies through their daily choices and actions.
- Don’t underestimate the magnitude of the change. “View it as a transformation from top to bottom,” Lawler advises. “It’s not just about e-invoicing, it’s about being more strategic with customers and helping them drive efficiency into that perfect order as well as within their organization.”
Where can I learn more?
To hear the entire session, go to http://www.slideshare.net/Ariba/accelerate-the-sales-cycle-through-the-perfect-order-20427655.