The perfect order is more than a quixotic, impractical concept. The ability to deliver the right product, in the right quantity and configuration, and with the right documentation — all at the right cost — is becoming essential to survival as market forces make it increasingly important for manufacturers to retain customers and increase revenues.
Despite these business imperatives, many manufacturers still often fail to execute orders perfectly. That's hardly surprising. According to Ray Wang, principal analyst at Forrester Research, there are 10 things manufacturers must get right in order to consistently deliver perfect orders.
"For manufacturers to do all 10 things right, they must master order processing, be able to adapt in mid-flight, and have the flexibility to move or re-route a source based on conditions," Wang says.
Many manufacturers struggle to achieve such adaptability and flexibility because they are saddled with system inflexibility and legacy systems integration challenges.
Fortunately, however, a new wave of order management software is appearing that can help manufacturers overcome legacy system problems while improving order process visibility and enhancing supply chain agility. These tools can help manufacturers deal with increasingly complex order fulfillment processes while allowing them to effectively manage the bundling of post-sales services with manufactured products, experts say.
One of the obstacles standing in the way of achieving the perfect order is the large number of legacy ERP systems that burden manufacturers. According to Rob Bois, research director at AMR Research, manufacturers today juggle an average of 5.2 legacy order management systems.
"Multiple systems mean there is a limitation in terms of managing global order visibility and managing order servicing across companies and divisions," says Ken Ramoutar, global product line director at Sterling Commerce. "Today, companies are trying to move from having multiple, loosely integrated order management systems to a system that provides a more unified view of their global order management."
Forrester's research supports Ramoutar's firsthand observations. According to a 2007 Forrester study, enterprises often cobble together fragmented ERP, CRM, and SCM systems without ever considering the end-to-end order flow. Yet, the business processes of a perfect order must seamlessly integrate across all stakeholders and transcend functional fiefdoms to address order management challenges.
"For example, engineer-to-order products go through a number of changes as they pass through the development stage of their life cycle," Forrester's Wang says. The party that wants to see an engineering change implemented submits an engineering change order (ECO). Usually that document contains a statement of why the ECO is being requested or what design or manufacturing problem the ECO resolves.
Historically, such ECOs have been paper documents that get filled out and then mailed or faxed, Wang says. Manufacturers in many industries have been looking for ways to effectively automate and streamline the processes. One industry-specific organization, RosettaNet in the semiconductor industry, has been developing a set of standard process steps that let manufacturers handle such ECO documentation efficiently and electronically, Wang says. But, without well-integrated internal order management systems and processes, manufacturers will run into difficulty implementing such standard order management processes.
Multiple order management systems also often make it hard to manage increasingly complex supply networks, Sterling's Ramoutar says. "Large manufacturers are fractured internally because they are managing orders that are often sourced from multiple divisions of their own company. The order fulfillment process is a complex task. Manufacturers have to manage an ecosystem where order information is sent to suppliers — inside and outside the enterprise — which is later consolidated to appear to the customer as one order."
For many manufacturers, the order management process is further complicated by orders containing multiple line items that will be sourced from various external suppliers. "When a manufacturer receives an order, there are sometimes hundreds of line items," Ramoutar says. To fill the order, the manufacturer must figure out how to gather those items, based on company-specific factors, such as policies and rules, inventory locations, order fulfillment costs, ship times, etc. The more quickly a decision is made, the less it costs to fill the order. "An automated order management solution helps companies make the best decision about how a particular order should be sourced," he adds.
Sterling is not alone in helping manufacturers automate their order management processes. Suppliers such as E2open, Exostar, Extol International Inc., and i2 Technologies are bringing automated, customer-facing order management solutions to market to help manufacturers execute more perfect orders.
Facing the Customer
One company on its way to achieving perfection in how it manages orders is Haworth Furniture, a leading manufacturer of adaptable office furniture. With help from Sterling, Haworth created an order management platform that can respond quickly to customer-facing e-procurement requirements, according to Jeff English, global process manager-IS at Haworth.
"Our customer-facing solution has allowed Haworth to improve upon the standards that the company has defined for our furniture purchase orders," English says. "It has also given the customer control of how they want to make their purchase while ensuring that they are receiving the proper product and correct pricing."
Prior to installing the Sterling software in 2003, English had witnessed a transition in the company's largest corporate accounts. These accounts adopted e-procurement systems to streamline and standardize their internal procurement processes. Subsequently, many customers asked Haworth to link its order management system with their procurement systems. This demand meant Haworth had to find an application with the ability to support numerous customer-facing business processes.
To address this requirement, Sterling's software checks prices based on a customer's pricing agreements with Haworth and accesses appropriate discounts. It has also enabled Haworth customers to select and configure products based on their preferences and other factors. The system has streamlined what English calls the triangular relationship among the customer, Haworth, and the servicing dealer.
"Today, our customer can go online and select items from our catalog. The system then allows their procurement office to electronically send that order file to our supporting dealer, who can assist with design, installation, or order-related services. The order is electronically pushed to Haworth to be priced, acknowledged, filled, delivered, and installed. The system reduces cycle time and lowers costs. It clearly reduces quality errors and the chance for order entry errors, and it has obvious business value for the customer," English says.
Haworth's customers have cut their order processing times by up to 50% and their ordering costs by 30%, according to English. Furthermore, Haworth's internal time needed to create customer-specific catalogs was reduced from 40 hours to eight hours.
"We believe we have increased customer service and satisfaction while decreasing the overall cycle time to process orders from days to minutes. Additionally, we have avoided waste/rework by having higher-quality orders and fewer order changes," English says.
The reduction of errors and rework has benefited Haworth's customers, English says. "In the past, customers were ordering non-standard product or the wrong product for the wrong facility, or they were receiving incorrect pricing information. Sterling's system improved the speed of processing orders and the quality of the customer's ordering process."
No Excess Baggage
Improving customer satisfaction was also a major motivation for Gino Giombetti, vice president of operations and IT for Badanco Luggage, when he decided to automate his company's order management system. Badanco, the third-largest manufacturer of luggage in the United States, was acquired in December 2007 by Randa Luggage. The company manufactures, markets, and distributes such well-known brands as CHAPS, Pierre Cardin, Liz Claiborne, and Tommy Bahama.
Badanco does all of its manufacturing in the Far East and had been sharing order information with its contractors' factories via e-mail and spreadsheets. The company suffered from a misalignment between external customer demands and internal business processes, applications, and enterprise data. "Thousands of e-mails and hundreds of spreadsheets were being sent back and forth between us and the factory on a weekly basis," Giombetti says. "We were drowning in paper and spreadsheets."
Giombetti selected Extol's Business Integrator (EBI) to automate the company's order management. "EBI provided us with the ability to create a template for those documents so our people could look at orders using Microsoft Excel," he says. "Doing so enabled us to capture that information directly into our legacy mid-range AS/400 Vormatag 2000 VMI ERP system."
Information that previously was hidden and buried in discrete spreadsheets is now fed via EBI to Badanco's ERP system and deployed to meet the needs of the operational managers and the business. This visibility gives the company's sales force a tool for ensuring customer satisfaction.
According to Giombetti, the new order management system has improved visibility into every component in the supply chain. A salesperson, for example, can now find details about specific containers carrying a customer's order by looking into the ERP system. Salespeople can also use the system to alert customers to products that are becoming available, a capability that has helped the company double its business volumes in the past two years, Giombetti says.
"All of these very discrete pieces of information that, again, at one time were buried in thousands of pieces of paper are now organized electronically and can be reported in a systematic manner," Giombetti says.
According to Giombetti, Badanco has been able to grow over the past two years while adding only a handful of people, none of whom are involved in processing order information.
By automating their order management processes, manufacturers such as Haworth and Badanco are coming closer to achieving the elusive perfect order. In the final analysis, achieving the perfect order boils down to being able to keep promises to customers and suppliers, according to Sterling's Ramoutar.
"Promising is a very difficult thing for a lot of people," Ramoutar says, "but it's a very important aspect of buying. Enabling manufacturers to make promises in real time during the buying cycle is one of things that order management systems like ours do very well. This is very important since much of the buying decision is based on availability and shipping time."
Source: Editorial from the March 2008 issue of Managing Automation, The Quest for the Perfect Order,by Marty Weil, Contributing Editor