Order-to-Cash (OTC or O2C) describes the set of business processes to transpire between when a customer order is placed and when payment for the delivered order is ultimately received and recorded in the ledger. With lean supply chain/inventory strategies and just-in-time fulfillment at the forefront of contemporary business practices, it has never been more critical to shorten the gap between purchase order and settlement. Read on to learn how a great TMS helps improve cash flow by shortening the order-to-cash lifecycle.
Enterprise software like ERP solutions from companies like Oracle, SAP and others are designed to (among other things) help improve the order-to-cash lifecycle. However, they have limited capability when it comes to the transportation portion of the lifecycle. That is where TMS solutions can play a very significant role.
The order-to-cash lifecycle is broadly comprised of the following processes in order of execution:
• Customer order submittal
• Order fulfillment
• Order shipment to customer
• Invoice created – sent to customer
• Customer payment sent/collected
• Payment recorded in general ledger
With a best-in-class logistics IT platform, organizations are compressing the order-to-cash lifecycle while improving cash flow and overall operations.
Finding ways to reduce the time between each of these activities is the name of the game for different software tools. Unfortunately, the shipment portion of the lifecycle is the most prone to lagging since it takes time to actually move physical product between manufacturing facilities and retail outlets; or from DCs to customers, etc. That said, there are often inefficiencies in the logistics and transportation portion of the lifecycle which can be easily minimized or even eliminated through the use of logistics IT solutions like transportation management systems applications.
The key is to shrink the amount of time between order submittal, invoice delivery and customer payment. This is accomplished well by TMS systems that leverage powerful optimization engines to determine optimal load and route plans, reducing transit time and expediting loading/unloading. TMS systems also eliminate the tasks associated with manual tendering to carriers, automating the process for much greater efficiency. Add to the TMS platform an integrated yard management system capability and significant time can be carved off of dwell times through better dock door scheduling and utilization.
But perhaps the most important benefit of using TMS solutions for more efficient supply chain management is the automation of freight payment and auditing capabilities. Exerting superior control over the financial portion of transportation, coupled with exceptional visibility into freight in transit means getting invoices delivered and processed in the shortest amount of time. With a best-in-class logistics IT platform, organizations are compressing the order-to-cash lifecycle while improving cash flow and overall operations. Are you ready to put such a program in place within your organization?