Automated Order Processing: Understanding the Spectrum of Sales Orders

This article examines the types of sales orders that organisations process, the associated challenges and the need to understand the spectrum before determining appropriate technology for sales order automation.

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The Spectrum

There’s no “average” Sales Order and it’s probably reasonable to assert that Purchase Orders are generally more troublesome to process than other financial process documents such as Supplier Invoices and Remittances.

Sales Orders sit on a continuum and at one end you have simple, transactional orders that are typically low in value, involve “generic” products and have standard supply terms and conditions. These reflect a more simplistic transaction, e.g. standardised products for re-sale.

At the other end of the scale, you have purchase orders that result from transactions with significant complexity; these typically involve a combination of products, services, call-offs and contractual supply obligations as well as other elements.

These Sales Orders can be for unique one-off items and may involve legal teams on both sides agreeing to the terms of the supply and sale.  It’s fair to state that the industry and company type dictates the types of orders that you need to process.  It’s also fair to state that for the customer, i.e. the receiver of the goods and services, they may not be aware of the downstream processes required and are really only concerned that their order is processed.

Sales Order Spectrum
Sales Order Spectrum

Standing back and looking at this continuum, the processing requirements reflect the differences in complexity and volume of orders. One is about recording essentially the same information for multiple, regular customers.  At the other end, it’s about managing the complexity and ensuring that carefully agreed terms and conditions are adhered to and the company is entering into a transaction for which they are prepared for.

Of course, grouping sales order processing purely into 2 principal categories is over-simplifying things and many organisations will find themselves somewhere in between or have a mixture of both extremes.

Finance Document Process Automation – Purchase Order to Invoice Parallels
It helps to look holistically in general at financial document processes. There are many parallels as well as subtle and quite substantial differences. But true of all of them, organisations have long considered ways of streamlining the process.

One of the major stumbling blocks is the fact that in most cases, Sales Orders, like many other finance systems processes, are based on the exchange of “human readable” documents.  Human readable documents represent the ultimate “lowest common denominator” for system-to-system communication.

There’s definitely an implied expectation or assumption on the part of the customer that the order will be interpreted by a human being, not a computer and that an individual will take the responsibility for loading the contents of the order onto the supplier’s system.

It’s clear that if an organisation’s sales orders can be standardised and coded into a predictable and consistently accurate, structured dataset then the requirement for a human to intercept, transcribe and upload Sales Order details can be avoided or even eliminated.

This was the premise for Electronic Data Interchange (or EDI) solutions in the 1960s and 1970s.  Due to the infrastructure requirements at the time, these systems were by necessity, quite complex and specialised.

As a result, they had a relatively expensive initial setup, on-going support and maintenance costs – meaning that they were only really viable for the largest of organisations with high volumes.

To some extent that remains true today. It tends to be the higher volumes that are moved across to EDI and an acceptance that the outliers will be processed by more conventional methods.

Over the years there have been some system-to-system solutions that do deliver many of the benefits of EDI but without the high level of complexity and costs.  These started to emerge as a part of eCommerce systems and are also available by various platform providers – they tend to follow the purchase to pay model whereby a standard “transaction” packet is sent across a proprietary network.

The same approach has been seen in Sales Order processing domains in that, large high volume customer orders tend to be pushed through EDI channels, but the lower volume or value orders were left for manual processing.

The Goal
“No touch order processing” sometimes referred to “touchless order processing” is often stated as the ultimate goal for many organisations and to some extent EDI can assist with this. Where data is sent in the required format in the right way, this can bypass manual tasks required to process orders. The reality for most organisations however, is that not everything is received by EDI and even with EDI there can be issues with data that requires exception handling, approvals and client communication that are tasks best handled by people.

In reality, “touch-less processing” where the focus is on reducing the number of touches people have to make to process an order is more achievable and will deliver significant gains in process efficiency, customer experience, job satisfaction and competitive edge. Technologies such as Cognitive Capture, Process Automation and Process Intelligence which incorporate machine learning, artificial intelligence and Robotic Process Automation can help organisations achieve this.

Challenges Processing Sales Orders 
The real challenge in processing Purchase Orders is those received from organisations that can’t or won’t adhere to the requirements of your “electronic” portal or EDI standards.

There are two principal scenarios:

  1. Those purchase orders received outside of the high-volume EDI customers
  2. Those organisations with either a diverse set of customers where the complexity to deliver a full EDI solution is too high or those with customers that due to the style of their business, simply can’t or won’t change

In the first situation, you need to either accept orders from this minority group or not. If this group includes some large or profitable customers, then alternative sales order submission methods may be acceptable to the business.

Consider a scenario where your largest customer by order volume and value uses their own naming convention for products and product codes. In some cases, concatenating two products into one totally new product code. There is then the unenviable task of deciphering this in order to process the order. There would certainly be a reluctance to not receive orders from this customer, but a desire to automate the process as much as possible. With a high number of product codes, which changed frequently, a full EDI solution would be difficult or impossible to maintain, but there are other techniques and technologies that can at least in part automate the process and provide operational efficiencies to help ensure orders could be processed and customer expectations met.

The second scenario is difficult – essentially you have 100% of your Purchase Orders submitted in formats that are essentially one-offs. This may be due to complexity or the style of business but whatever the underlying reason, it’s probably a challenge to scale and become more agile. Here it is more about managing the process.

The Purchase Order process is likely to involve some errors too.  It’s difficult to accurately assess the adoption rates for automated Purchase Order processing but the consensus is that there is a large volume that are not automated. This is partly due to disparate proprietary standards and the cost of adherence by customers and suppliers alike as well as the Spectrum of Orders that may be received.

Telic Digital helps organisation’s to optimise their sales order process by using machine learning and artificial intelligence to automatically process orders, drive electronic workflows and provide visibility into the process, which in turn delivers improved customer experience, reduced operational cost, and faster turnaround. To discover how your organisation may be able to benefit from our solutions, you can contact us here and one of our experts will be in touch.

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