order to payment - REENGINEERING Order to payment More and...

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A SK TOP MANAGERS where the order-to-payment process lands among their strategic priorities, and most will tell you it doesn’t even make the list. Oƒten, order to payment is delegated to a middle manager with responsibility for operations eƒfectiveness or logistics management. But as companies realize that strong brands and good products are no longer enough to ensure success, and as they begin to see limits to growth in their primary (and even secondary) channels of distribution, the strategic importance of the order-to-payment process is growing. Most industries are experiencing intensifying cost competition, rising customer sophistication and fragmentation, and converging product performance. Product life cycles are shrinking, and demand is becoming less and less predictable. In such an environment, delivery performance and customer service are becoming as critical as product performance and brands. The way companies make, adapt, sell, and distribute their products is turning into a major source of competitive edge. REENGINEERING 38 THE McKINSEY QUARTERLY 1996 NUMBER 1 More and more, this process distinguishes winners • The challenge is to link material, information, and monetary flows • But international organizations cannot be reengineered only from the top • Building “microcosms” with an action perspective may be the answer We would like to thank our colleagues Felix Brück, Peter Freedman, Thomas Kratzert, and Perttu Louhiluoto for their contributions to the development of this article. Bill Hoover is a director in McKinsey’s Copenhagen oƒfice; Magnus Tyreman is a principal in the London oƒfice; and Joakim Westh is a principal and Lars Wollung All rights reserved. William E. Hoover, Jr Magnus Tyreman Joakim Westh Lars Wollung Order to payment
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Consider Benetton, which changed the game in fashion retailing – not through its designs, but through a completely new approach to making and distributing clothes. Fast, responsive, and accurate, its order-to-payment process allows it to compete with higher margins than the rest of the industry. a replenishment order as soon as an item is sold. Not only does this improve the eƒfectiveness of the order-to-payment process, boosting profits for the two companies to share, but it has also created a special relationship between the partners. When a company’s superior delivery service makes it the preferred supplier, it may reap signif- icantly more volume than the second or third supplier. Despite the growing importance of the order-
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order to payment - REENGINEERING Order to payment More and...

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