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8 Steps to Optimize Order to Cash (O2C) with Process Mining [2024]

Organizations that optimize their order-to-cash processes could reduce their operational costs on average by 20%, according to a benchmarking study. Order to cash, abbreviated as O2C or OTC, refers to a company’s entire ordering system starting with an order the customer sends and finalizing the delivery of the ordered goods. O2C consists of 6 steps, shown and explained on Figure 1. 

Order-to-cash process is pictured from 1st step which starts with the order received, continues with preparing the order, shipping it invoicing, receiving the payment until everything is registered on the system as complete.
Figure 1: The Order-to-cash process flow, Source: Deloitte 

Bottlenecks at any of these steps in the O2C can reduce the efficiency of operations, supply chain management and inventory management. For example, an error in order management will cause wrong fulfillment and shipping, leading to high costs for the company and lower customer satisfaction. 

Business leaders and analysts can prevent such devastating scenarios by monitoring their O2C and locating potential errors. However, O2C processes are complex, so establishing an effective management and improvement strategy can take more work.

Process mining helps overcome this difficulty since it can seamlessly discover and visualize as-is processes, run conformance checks against ideal processes, and provide insights for process enhancement.

Therefore, we will list eight use cases where analysts can leverage process mining to analyze order-to-cash processes. 

1. Discover as-is O2C

Order-to-cash contains interactions between each entity it has, such as the steps listed above. These complex processes are difficult to visualize and analyze because they can lead to demanding projects and confusing or oversimplified process models. 

Process mining tools can tackle this challenge because they automatically discover and model order to cash processes using process data recorded on IT systems and applications. As a result, users can skip the demanding phase of collecting data, wrangling and analyzing it to map the O2C process. Thus, the users can also benefit from the tool’s advanced visuals by zooming in on the general O2C process flow.   

Moreover, some process mining tools offer multi-level process mining capability (e.g. IBM) to produce more accurate and detailed models. With such capacity, analysts can receive more useful models to understand better and manage their O2C.  

2. Identify the root causes

Process variations in payment collection, unnecessary steps in order fulfillment or undesired changes in orders can slow down the process and lead to loss of money for the company. 

Reducing such inefficient activities is detrimental to a successful O2C, yet it is not easy as it sounds. The real reason behind the inefficiencies is that they are only sometimes clear to business analysts. Once an issue is detected, analysts dig into interviews and statistical analytics to predict the root cause behind the problem. 

Many process mining software makes such predictions with automated root cause analysis. Using such a tool, O2C analysts can quickly pinpoint the root causes behind the inefficiencies and take proactive measures to address them.

3. Discover automation opportunities 

Order-to-cash steps, specifically invoicing and order fulfillment, might involve manual work, such as data entry and other physical paperwork. However, manual execution requires effort and time, which could be put into more valuable work, such as strategy development. Also, these manual activities can pave the way for mistakes, leading to low customer satisfaction rates and high costs for the firms.

Process mining indicates these manual activities that should be automated. Thus, some process mining software can generate a digital twin of an organization (DTO) to run what-if scenarios and estimate the expected ROI if the selected activity is automated.   

Once decided on which order-to-cash steps, activities and tasks require automation, business leaders can leverage order management systems, O2C software, RPA and orchestration to extend credits, issue invoices and manage inventory. 

In a case study, a multinational manufacturer struggled to pinpoint the root causes behind delivery delays occurring in their O2C. Therefore, the firm leveraged process mining to discover and optimize its O2C process. The firm could:

  • Automate 75% of their delivery activity, which decreases order re-working and increases savings up to USD 60,000,
  • Redesign the process to reduce Logistics Block Removal activities, saving over USD 100,000,
  • Shorten lead times on line creation by three days and reduced associated cost by ~$50,000,
  • Monitor customer leads time variability and increased KPI alignment by 25%. 

4. Achieve compliance

Complex processes like O2C take work to align across the organization. However, the lack of consistency might complicate the work, resulting in inefficiencies and excessive penalties. 

Process mining assesses an organization’s compliance level through conformance check capability. Audit teams can detect variations by comparing different execution practices of O2C across units and individuals. Based on the gathered insights, audit teams can train employees or implement changes to ensure compliance with goals and best-performing execution practices.   

For fast O2C audits, leaders can also invest in intelligent automation technology.  

5. Improve order cycle-time

Order cycle time depends on several factors, such as the product that the company sells, the company’s digitalization level, and supply chain dynamics. For instance, a firm that sells a raw material or provides a technical service might experience longer order confirmation processes than a company selling kitchen furniture. On the same line, for a firm with higher adoption rates for automation, the order cycle time can be faster than others.  

Process mining can estimate cycle time for each business and expose triggering bottlenecks with their root causes behind them. As a result, analysts can redesign each step of the O2C, train the employees or implement automation to ensure on-time delivery. Improving order cycle time contributes to increasing customer satisfaction.   

6. Optimize cash flow 

O2C is closely related to company cash inflows since the firm should issue an invoice and check for payment to complete the O2C. Any payment delays or mistakes at this phase can create problems for liquidity, such as payroll or accounts payable. 

Process mining dashboards illustrate the firm’s cash flow and identify potential root causes for occurring delays in invoicing or accounts receivable functions. By doing so, process mining facilitates strategists, business analysts and audit teams’ efforts for understanding, optimizing and monitoring company cash flow. 

7. Continuously monitor O2C performance

Analysts must constantly monitor their O2C performance to discover improvement areas and estimate the success of implemented changes. Constant monitoring without the help of an intelligent tool can be time-consuming and complicated because analysts pull data and calculate performance metrics every time. 

Process mining can facilitate performance monitoring by offering customized dashboards and process KPIs for O2C. By using process mining, analysts can gain insights on:

  • Lead time between O2C steps
  • Delivery time
  • Rate of order changes 
  • Cost
IBM process mining dashboard shows an order-to-cash process model with important performance KPIs, such as cost, delivery time etc.
Figure 2: O2C process model and process KPIs by IBM Process Mining, Source: IBM 

8. Mitigate risk

Almost all companies utilize ERP systems, such as SAP, to perform their O2C processes. However, these systems can bring consolidation risks or system migration issues. 

Process mining brings visibility to ERP systems and can be useful in managing the entire ERP deployment process. As a result, it helps reduce the risk in ERP deployment, eliminates migration issues, and decreases ERP implementation costs.  

Further reading

Explore process mining applications and use cases in other processes, business functions and industries:

If you believe you can deploy process mining for your O2C process, then start looking for a tool from our data-driven and comprehensive process mining vendor list.

Assess different vendors with a transparent methodology yourself by downloading our checklist: 

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And, if you need more help, let us know:

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Access Cem's 2 decades of B2B tech experience as a tech consultant, enterprise leader, startup entrepreneur & industry analyst. Leverage insights informing top Fortune 500 every month.
Cem Dilmegani
Principal Analyst
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Hazal Şimşek
Hazal is an industry analyst in AIMultiple. She is experienced in market research, quantitative research and data analytics. She received her master’s degree in Social Sciences from the University of Carlos III of Madrid and her bachelor’s degree in International Relations from Bilkent University.

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