Bringing powerful connections to your supply chain pays—and it’s not as complicated as you might think. Reach out to an Elemica consultant and see how you can start transforming your supply chain today.
March 31, 2021
The ant and the grasshopper. The tortoise and the hare. Aesop, the mysterious, and likely apocryphal, author of Greek fables, has given the business world many a cautionary tale. And today I’d like to share one of his lesser-known fables with you; one that might explain a painful truth about how many businesses run their order-to-cash process.
One day a very wealthy man purchased some land and went about building out the estate of his dreams. Only when the leather tannery next door began running its operation at full blast, the smell was unbearable. The wealthy landowner stomped next door and demanded that the tanner move his factory away from his new home and to another plot of land. The tanner agreed.
Only the tanner was clever, and delayed his departure using one excuse after another. Waiting until the rainy season was over. Giving his herd more time to grow. Settling all of his local accounts. Soon he’d delayed so long that the rich man got used to the terrible smell and no longer complained. The moral: people can get used to almost anything, no matter how unpleasant.
I feel like that innate willingness to put up with something less-than-ideal rather than continue working the problem provides the only possible reason why any business would still enter orders into their Enterprise Resource Planning (ERP) software manually. It’s expensive. It’s risky. It eats up all kinds of time and resources. Yet, here we are still finding it a common practice.
According to one McKinsey report, most companies are only about 40 percent digitized on average; and that includes sales order automation efforts. In an age where as many as 45 percent of all activities could be automated, right now tens of thousands of customer service representatives at enterprises worldwide are bored to tears performing this tedious work—and at a high price for everyone. So what, exactly, are the costs of this old school approach?
At a certain sales volume, manual order entry will mean rework no matter how good the team. Order entry errors are one of the biggest contributors to hard costs within the supply chain, averaging out at around $200–$250 per instance and having the potential to cost much, much more. It’s far less expensive to have data entered accurately the first time through automation.
Ideally, your order-to-cash processes would optimize for not just accuracy but also speed—putting money in the bank as quickly as possible. One recent study shows that 50 percent of executives complain about how long it takes to process a sales order. Automated order entry fractionalizes order processing time and speeds up order-to-cash in a way that’s undeniably quantifiable.
Your relationships and brand represent a lot of investment, especially given that it’s far more expensive to earn a new customer than to optimize revenue from an existing one. Don’t be the company that blows a $50M annual account due to just one too many small order mistakes; automated order entry can help lock in customer relationships and market share.
Data entry is an important job. Unfortunately, for some it can be tedious. And that makes it tough to hang onto strong employees. By insisting on manual order entry, you’re chaining these talented and valuable employees into a role that might run them off. By automating order entry, you could focus these teams on more strategic initiatives such as upselling or cross-selling, improving customer satisfaction KPIs or developing them for more strategic executive roles. And if you can’t hang on to them, you’ll pay. According to the Society for Human Resource Management, an employee making around $60,000 annually typically costs around $30,000–$45,000 in recruiting and training costs. You can save this money by simply giving your team more interesting and value-added things to do.
Salaries. Payroll taxes. Insurance and other benefits. Data entry teams are expensive—and so is the equipment, real estate, infrastructure and other resources it takes to keep them humming along. A $70,000 employee can easily cost more than $100,000 when it’s all said and done. Not to mention materials, office supplies, transportation, etc. If you’re maintaining a customer service department, you need the freedom to put them onto strategic functions that add enough value to ensure that this machine makes sense from a return-on-capital standpoint. Another recent survey showed that 41 percent of supply chain executives complain about data entry tying up valuable teams that could be doing more strategic things.
Once ERP data gets into the system, it can deliver high-value indicators surrounding customer orders. These include clues that could help allocate resources more effectively, anticipate customer needs more accurately, forecast inventory and labor needs, identify your most profitable Stock Keeping Units (SKUs) and hundreds of other optimizations. But you have to be able to trust the data. If you’re constantly fighting fires in the system because too much garbage went in, people are hesitant to put much faith in any resulting analytics. So all of the potential sales, savings and efficiencies that might come from those analytics now become opportunity costs. Automating order entry data keeps data clean and improves analytical confidence on the back end.
I know at least some of these costs resonated with you, because I’ve suffered through them myself over the years in the course of helping some of the world’s leading companies streamline their order-to-cash. But there is good news. These days it can be surprisingly painless to automate incoming sales orders; much more so than it was even just 10 or 20 years ago. In fact, now there are even ways to implement automated order entry solutions so that customers don’t even know anything has changed. So stop the irrational unpleasantness that is manual order entry. You deserve more, and so do your sales and service teams. 2021 could be the perfect year to clear the air with automated order entry, and make your team a hero by working smarter and not harder.