Tiger Tyagarajan Chief Operating Officer, Genpact
Too often, companies do not run, think and measure processes. They run as separate functions and departments with individual goals and deliverables. They do not apply a standard framework or science to processes and they have very few benchmarks and targets for the metrics to run these processes. The repercussions include ineffective processes that drain available cash but more importantly, impact customer satisfaction – a key measure of success, more so now in today’s turbulent economic climate.
A clear example of where this ‘siloed’ behaviour creates extensive damage is the Order-to-Cash (OTC) process – the sequential steps from acquisition of a customer’s order up to the customer’s money reaching the supplier’s bank account. The OTC process is at the core of any business and yet it is the most difficult to track as a process. Even the smallest error can make the process ineffective, quickly draining available cash.
For instance, the aggression that sales people have is great in terms of getting and growing business. However, aggression and speed can lead to several accuracy issues which might not surface immediately but create even bigger problems at a later stage in the lifecycle of the customer relationship. In the leasing business, for instance, you book an order, push a lease deal out and everything is hunky dory. However, the problem emerges a couple of years later when you realize that the asset details captured were wrong to begin with.
Another example of an ineffective OTC process is when customers do not pay the full amount when billed for a number of reasons; unbudgeted discounts, discrepancies on prices, shortage of order, damaged goods, etc. While some of it can be avoided, some of it can’t. The avoidable percent is 6–12 % and 50% of these can be reduced by reengineering the OTC process. This could translate to business impact of US$ 50–70 million for a typical CPG company of $5 billion!
Fixing these errors and ensuring that they do not repeat is always critical, and more so in today’s scenario with little to no revenue growth in sight. CFOs are turning toward their accounts receivable area to help improve cash flow and a well-oiled OTC process ensures that orders get delivered on time and payments are collected quickly.
However, to be a best-in-class process, the entire OTC cycle for an organization needs to be studied in its granularity and involves far more than tweaking a process here or there. It requires an end-to-end view of the entire process and deep insights that can only come after years of experience in handling this for various organizations, industries and situations.
At Genpact, we leverage thousands of associates working in different parts of the OTC process for numerous clients across at least 10 different industries globally to develop insights and prioritize cash-flow improvement opportunities for our clients.
Over the last 12 years, Genpact has created a science called Smart Enterprise ProcessesSM (SEPSM) that delivers substantially improved financial performance by breaking down organizational silos and making business processes truly effective. Compared with traditional efforts focused on efficiency within individual processes or business units, SEPSM end-to-end methodology can deliver two to five times the impact on improved cash flow, margins, revenue growth or other targeted financial and operating metrics.
SEPSM applies a framework of analytics, technology and reengineering to the key processes that a company uses to manage its business. Through experimentation, testing and rigorous analysis of data from over 200 million transactions across more than 3,000 managed processes, Genpact has determined the benchmarks that best-in-class companies achieve at each level in a process. It has identified the key drivers of improved business results for each process, and developed best practices for addressing those drivers.
Some examples of insights in the OTC process we have developed include:
- A 20% DSO improvement can be realized by designing collection strategies based on a customer’s previous payment habits. Additionally, you can eliminate “self-cure” customers (customers who pay on time with out reminders) from the workload freeing up focus on riskier customers.
- Offering your customers a self-serve (invoice receipt & payment) option will save US$ 5–7 per invoice transaction and US$ 25+ per disputed invoice while improving DSO and customer satisfaction.
- 13% of an average company’s invoices are disputed due to errors such as pricing, quantity, logistics, etc. Time to resolve these disputes and to collect monies owed ranges from 7 to 145 days.
- In the Service Industries, establishing integrated workflow between the sales and billing teams can reduce service to invoice time by 50–75% leading to US$ 50–60MM of cash flow.
But more than the specific insights, the real a-ha! moment that we have found in our experience of drilling through the OTC process and making it effective is that not only does it result in improving cash, but it also drives much higher levels of customer satisfaction that enables growing existing relationships and getting new business.
Smart Enterprise Proceses: Applying Science to Managing Busines Proceses
Smart Enterprise Processes (SEPSM) is a groundbreaking, rigorously scientific methodology for managing business processes. SEPSM delivers substantially improved financial performance by breaking down organizational silos and making business processes truly effective. Compared with traditional efforts focused on efficiency within individual processes or business units, SEPSM’s end-to-end methodology can deliver two to five times the impact on improved cash flow, margins, revenue growth or other targeted financial and operating metrics.
Founded in 1997 as a unit of General Electric Co. and spun off as an independent company at the beginning of 2005, Genpact was one of the first companies focused on the global management of business processes. With SEPSM, Genpact elevates the management of business processes to a strategic tool that can significantly improve a company’s bottom line performance.
Genpact is fully focused on process, with the entire organization of over 37,000 employees engaged in improving its clients’ processes to drive measurable impact. It has the reputation of being a pioneer in the field of business process management and has introduced many of the concepts and capabilities that have driven the industry. Genpact’s culture is uniquely ingrained in Lean Six Sigma, the capability having been driven through the entire organization and leveraged in all it does in a highly visible manner. Its mindset is 100% client-centric, demonstrated daily through its commitment to “destroying” its own revenue to deliver greater client value, the 100% empowerment of its employees to do what is needed for the client and the fact that it will not let a contract get in the way of client success.
With almost 12 years of focused effort in the field of managing business processes, Genpact has amassed the IP necessary to deliver the insights and best practices behind the SEPSM methodology. It has the strength in the core capabilities of analytics, reengineering and IT, all uniquely driven by its deep knowledge of process. Genpact has built the SEPSM-specific tools, trained its teams and continues to innovate to make SEPSM a success for its clients.
SEPSM is a strategic direction for Genpact and it is uniquely positioned to deliver the value of SEPSM and apply science to the management of business processes.
Article by Tiger Tyagarajan, COO, Genpact
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