CF Industries exemplifies the complexity of the order-to-cash cycle facing many manufacturers today. The $2.8 billion company markets fertilizer products made at plants in Florida, Louisiana, and Alberta, Canada. The company moves its product in bulk by pipeline, vessels, barges, railcars, and trucks throughout North America. CF Industries offers four different pricing options to its customers, who buy fertilizer from CF's plants, warehouses, and terminals. With such a diverse order landscape, transaction errors are not uncommon.
At least they were not before the company deployed a new order management and fulfillment system in 2004. At the time, CF Industries used three different homegrown systems for order management, pricing, and billing, complicating its processes even further.
"The old system would sometimes bill out the wrong price," says Christine Dingman, director of sales support at CF Industries.
CF Industries isn't the only manufacturer trying to cope with the consequences of increasingly complex order-to-cash processes. Traditionally, the order-to-cash process looked like this: A customer sent a manufacturer an order, and then the manufacturer made the product, shipped it to the customer, and sent an invoice.
As the saying goes, that was then and this is now.
Today, products are manufactured by a variety of outsourced providers all over the globe to serve equally geographically dispersed customers. Orders come in via channels ranging from websites, to brick-and-mortar stores, to distributors, to e-mail, to phone/fax. Consumer product manufacturers are learning to be retailers, as they make private-label goods. In many industries, the number of components has mushroomed, so assembly is another major undertaking. Once the product is assembled, an army of third-party logistics providers (3PLs) delivers the product. Manufacturers in all vertical industries now play in the global sphere, where regulatory requirements can be complex, and sustainability is yet another puzzle piece.
Against this backdrop comes an urgent need for as much operational efficiency as possible in order to reduce costs and drive profits to manufacturers. At the most basic level, this means improving cash flow. Manufacturers use a variety of technologies to automate the order-to-cash cycle, including ERP modules; electronic exchanges, many in specific vertical markets; and most recently software as a service (SaaS) order management offerings.
The Perfect Order
Beyond improving cash positions, order-to-cash excellence can provide a competitive advantage in industries where the product is highly engineered or the item is valuable but has a short shelf life, according to AMR Research analyst Jane Barrett. High tech and aerospace/defense are two vertical industries that fill the bill.