In the world of business, it’s all about increasing sales while minimizing or reducing SG&A costs. The workstreams that fall under the “Order to Cash” (OTC) umbrella represent a significant part of a company’s SG&A expenses and as a result, face ongoing pressure to develop strategies that focus on reducing costs without sacrificing service to customers and other internal parts of the organization.
I remember learning a very basic principle in one of my college business classes that I’ve seen hold true time and time again. “Everything in the business world is cyclical!” In the world of customer service, or Order to Cash, this used to play out as companies moved back and forth from “decentralized” to “centralized” work environments. This was driven by the philosophy of the time. The theory behind decentralized was that you were closer to the customer while centralized was considered more efficient and cost-effective since the work could be standardized and you didn’t have “redundant” processes.
Centralized work in the ’80s and early ’90s was usually managed by functional experts in the various aspects of the order to cash process. There were separate groups or departments for Order Management (aka Customer Service), Credit & Collections, Cash Application, and Deduction Management. In the ’90s, many companies moved to a “One Stop Shop” business model. The theory was that better service could be provided to customers if they had one contact in the organization that handled all aspects of order to cash.
In recent years there has been a trend in moving away from the “One Stop Shop” strategy and back toward functional expertise models. Once again, the “everything is cyclical” principle holds true. In many cases, however, the trend of moving back to a functional expertise model has taken place to enable companies to look at “outsourcing” as a way of reducing expenses. By breaking the processes up, companies can target specific work to be considered for outsourcing vs. work that needs to stay. i.e. – right work, right place. Outsourcing has evolved to include offshoring where work can be moved to processing centers throughout the world. In some cases, companies have set up their own “shared service centers” located in lower-cost regions.
When considering a good strategy, it is important to note that one size does not fit all. When evaluating whether to outsource/offshore it is important to consider the goal. If cost is a major factor for a company, then offshoring needs to be seriously considered because of the savings in labor arbitrage. In some cases, however, companies may not want to consider offshoring from a public relations standpoint since they don’t want to be associated with being an “outsourcer of work to other countries”.
Based on personal experience, as well as observations of the journeys that other companies have been on, here are some things to consider when evaluating outsource/offshore as a part of optimizing order to cash structure and workflow.
Develop a comprehensive project plan to include:
In many cases, companies will choose to work with a major BPO company like Accenture or Capgemini. The specific company they choose is usually based on the results of their RFP (Request for Proposal) process where several companies participate. These companies have processing centers in strategic locations throughout the world and can accommodate a wide variety of language requirements if your plans go beyond your U.S. operations. A big advantage of working with a major BPO is that they have A LOT of experience working with many different companies in many different industries on many different processes including OTC.
Although the current trend shows more and more companies are looking at outsourcing/offshoring as part of their strategy, it’s hard to say how long that trend will continue. Costs are steadily increasing in areas that have historically been considered “low-cost regions” which could warrant a strategy change down the road. As politicians continue to address the U.S. economic/unemployment challenges they will more than likely be looking at providing incentives for companies to keep jobs in the U.S. which could also warrant a strategy change. Nobody knows for sure what the future holds, however, if the “everything is cyclical” principle continues to hold true, that might give us an insight into what things will look like the longer term.
Where do you see the future of OTC in the next few years?
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