SAP EM Blog Series #12 - Benefits of SAP EM as it relates to an Order to Cash process

[kevin_wilson2]

In the 1st blog of this series I described what SAP EM is and in the 6th one I described, in 2 parts, what the challenges and benefits are that are associated with SAP EM. I want to take that a little deeper and relate it directly to the order to cash process.

What is covered in an order to cash process? For simplicity sake I will address a simple scenario where an order is taken and fulfilled out of a warehouse. Similar discussions and benefits can be described for orders being fulfilled via drop-ship or via a manufacturing process.

So, what are we talking about in terms of the process?

1) The Sales Order representing a customer's demand for a particular product. It reflects the price the customer is on the hook for the order. It also states what the product is, the quantity needed and the location that it should be shipped to. Lastly, and probably most importantly, when the customer can expect the product to be shipped and ultimately delivered. PS: There are naturally many more aspects to a Sales Order but these are the key attributes that we will focus on.

2) The Delivery representing the document that is used by the warehouse to manage the process of picking the applicable product from the bins in the warehouse in order to pack them in a box to be shipped to the customer. The key information that we need to track here is the location of the warehouse, the location of the customer, the carrier that has been selected to transport the goods, the carrier's tracking number (or numbers), the packing information (what's in the boxes) and last, but not least, the date that it left the warehouse. PS: Again, there are many, many more aspects to a delivery but these are the components that are of most interest to up-stream and down-stream processes. i.e. The customer service rep is interested in this information just as much as the actual end customer.

3) The Invoice representing the document that is used by the Accounts Receivable department to collect the money from the customer for the order that was placed. The key information here is when the invoice was created, where it was sent to, what the payment terms are, when payment can be expected and any applicable discounts and charges that were associated with the order.

That's a 10,000 foot view of the OTC process for a warehouse fulfilled Sales Order: Order -> Delivery -> Invoice. Now let's see how SAP EM plays a role in monitoring and managing this process...

SAP Event Management (EM) is a tool provided for, by SAP, to help you manage your business processes (any business process) by exception. Listed below are the main aspects of SAP EM that are beneficial within the OTC process, together with a description of the potential benefit for each point.

• Status Management – At each stage in the process, at an instance level, you are easily able to view the real-time status of your business process. The status of the Sales Order (at a line item level) is updated in real time to reflect its change in status. The status reflects a change in disposition of the applicable document in the OTC process and these are shown in detail below.

Sales Order:

Typical changes that we track for a Sales Order include:

1. Sales Order was placed on a delivery block <-> Sales Order was taken off a delivery block
2. Sales Order was placed on a CR block <-> Sales Order was taken off a CR block
3. Sales Order is incomplete (it still needs some information in order to be processed further) <-> Sales Order has all the needed information to proceed
4. Sales Order is ready for fulfillment

Things that SAP EM monitors at this stage of the process include:

1. Is the Service Level Agreement (SLA) being upheld to ensure a delivery block is removed in the agreed time?
2. Is the SLA being upheld to ensure a CR block is removed in the agreed time?
3. Is the SLA being upheld to ensure the in-completion reasons are removed in the agreed time?
4. Is the delivery going to be created in time in order to still deliver to the customer as promised?

Delivery:

Typical changes that we track for a Delivery include:

1. Delivery has been created against a Sales Order
2. Delivery has been picked and Packed
3. Delivery has been Shipped out of the warehouse

Things that SAP EM monitors at this stage of the process include:

1. Is the Service Level Agreement (SLA) being upheld to ensure the delivery is created on time?
2. Is the SLA being upheld to ensure the delivery is picked and packed in the agreed time?
3. Is the SLA being upheld to ensure the delivery ships out of the warehouse on the agreed date?
4. Is the customer still going to receive their product on the promised delivery date?

Invoice:

Typical changes that we track for an Invoice include:

1. Invoice has been created against a Sales Order or Delivery
2. Invoice has been sent to the customer
3. Invoice has been paid in full

Things that SAP EM monitors at this stage of the process include:

1. Is the Service Level Agreement (SLA) being upheld to ensure the invoice is created on time?
2. Is the SLA being upheld to ensure the invoice is being paid in the agreed time? i.e. within payment terms

The benefits attributable to knowing the status at each step of the OTC process includes the following:

1. Improved customer satisfaction through informed partners (Sales Reps and customers) knowing the current status in real time. If, at any time in the process, an SLA is missed or the agreed on ship or delivery date are adjusted, the customer can immediately be informed.
2. Improved customer satisfaction and reduced customer touches through the provision of the real-time Sales Order status to the customer via a web portal (other mechanisms to expose the status to a customer are also available e.g. Web Service)
3. Reduced Sales Rep average handle time due to a reduction in effort to locate the status of an order (SAP EM is the one stop shop for Sales Order status)
4. Improved customer satisfaction through reducing uncertainties in the process. A CSR can inform a customer as to when certain events, that have not yet occurred, are planned to occur.

• Exception Management – Since SAP EM stores the “plan” for your business process (when things are supposed to happen, by who, at what place) and can measure it against the “actual”, the exceptions to the plan are highlighted, in real time, and can be proactively worked to resolution. This includes exception events or delays in the expected process.

Sales Order:

Typical changes that we track for a Sales Order include:

1. Sales Order was placed on a delivery block
2. Sales Order was placed on a CR block
3. Sales Order is incomplete (it still needs some information in order to be processed further)
4. Sales Order has been cancelled (An exception)

SAP EM is leveraged to manage by exception at this stage of the process as follows:

1. As a CSR show me all the orders, that I am responsible for, that are on a delivery block so that I may address them
2. As a CR rep show me all the orders, that I am responsible for, that are on a CR block so that I may address them
3. As a CSR show me all the orders, that I am responsible for, that have missing data so that I may address them

Delivery:

Typical changes that we track for a Delivery include:

1. Sales Orders where a delivery has yet to be created (yet should have been according to the schedule line of the order)
2. Delivery date has been adjusted to a different date that does not meet the customers promised delivery date
3. Delivery has yet to ship, yet it was due to ship
4. Delivery shipped late

SAP EM is leveraged to manage by exception at this stage of the process as follows:

1. As a CSR show me all the orders, where the delivery has yet to be created, but should have been, so that I may address them
2. As a CSR show me all the orders, that I am responsible for, where the delivery date differs to what was promised to the customer, so that I may address them
3. As a CSR show me all the orders, that I am responsible for, where the delivery has yet to ship but should have, so that I may address them
4. As a CSR show me all the orders, that I am responsible for, where the delivery shipped late, so that I may address them

Invoice:

Typical changes that we track for an Invoice include:

1. Invoice has yet to be created but should have
2. Invoice was created late
3. Invoice has yet to be paid in full and is outside terms
4. Invoice has been cancelled (An exception)

SAP EM is leveraged to manage by exception at this stage of the process as follows:

1. As a CSR show me all the orders, where the invoice has yet to be created, but should have been, so that I may address them
2. As a CSR show me all the orders, where the invoice should have been paid, but no payment has been received, so that I may address them

The benefits attributable to knowing the status at each step of the OTC process includes the following:

1. Improved customer satisfaction and reduction in customer calls to query issues. Real time exception management with no lead time between when the system notices the exception to when it is delivered to the applicable person for resolution (reduced time to action) => reduction in total cycle time. You notice the exception before the customer does… In the end the goal is to only work the true exceptions in your business process.
2. Improved customer satisfaction and reduction in customer calls to query issues. Due to the ability to capture all exceptions whereas previously only transaction exceptions were possible. SAP EM has the ability to capture exceptions around the message of an event. E.g. We can receive a delivery PGI event at 10PM telling us that the PGI occurred at 2PM… well the PGI event occurred on time but the message telling us about this was several hours late!!! (See my blog on the distinction between messages and events)
3. Reduced time to resolution through system automation of known issues. If exceptions are well categorized and the underlying data (master and transaction) is well formed then automatic rescheduling and notification is possible => hands off automation to correct certain exceptions.
4. Reduce CSR education effort by leveraging the tight integration with workflow and the alert framework allowing you to easily embrace existing technologies to proactively work exceptions

• Process Analytics – SAP EM has tight integration built in with SAP NetWeaver BW where comprehensive analytics can be performed showing how each stage of your process is performing. In addition SAP EM is now available on the SAP HANA stack so you also have the ability to leverage SAP HANA anayltics to access Real-Time analytics for your OTC process.

Benefits:

1. Improved processes through leveraging business intelligence gained from knowledge of the process. Departments and partners can be measured against the “plan” and also ultimately against their individual SLAs => Can highlight and identify bottlenecks and address process deficiencies.
   1. Scorecards (How is each department performing against their individual SLA?) can be enabled through SAP EM
   2. Cycle counts are possible for each stage of the business process.
      1. E.g. Process cycle count, Average cycle duration: Total cycle, Order create to ready for fulfillment, Order create to delivery create, Delivery Shipped to Invoice create. Also % on time vs. early vs. late: Delivery Shipped, Invoice create, Sales Order ready for fulfillment.
2. Reduce uncertainty by knowing how your process is performing as opposed to guessing

• Visibility – All interested and authorized parties will have visibility to the status and attributes for their processes.

Benefits:

1. Real Time Visibility to the status and exceptions occurring within your process => Better quality information regarding your process.
2. Faster resolution of the root cause because if issues and exceptions are more visible then the drive to reduce or eliminate them is more prevalent.
3. Improved service levels through fewer surprises occurring throughout the process

If you have experience in implementing this scenario please feel to share your thoughts. In my next blog I'll run through the process of integrating workflow in to your SAP EM scenario. Thank you

Kevin