December 2020 | Commentary | COVID-19

Supply Chain 4.0 Needs Order-to-Cash 4.0

Tags: Finance, Technology

Industry 4.0 has been given a renewed sense of urgency following the pandemic. Industry 4.0 refers to the massive changes we see across every industry as a result of new technologies, such as smart sensors, predictive analytics, and artificial intelligence (AI). By extension, we see a technological shake-up with supply chain 4.0 and cash management 4.0.

Rob Harvey, Chief Product Officer, Sidetrade, +44 203 608 9852

The pandemic has exposed the weaknesses of the traditional order-to-cash process across the supply chain. Credit management teams found themselves working from home, often for the first time, without the right hardware, software, or communication channels to do the job.

Under such circumstances, customer relations and collection become a nightmare. With offices shut during a pandemic, who can you phone about an overdue invoice? Where do you send reminder letters? You quickly lose visibility of who is willing and able to pay.

A Coordinated Effort

Supply chain 4.0 has to go hand in hand with order-to-cash 4.0. For example, the digital supply chain is more efficient because it uses predictive analytics to anticipate customer demand.

A similar approach can be applied to digitized cash management. By using AI, finance managers can reduce collection time (also called DSO).

The latest AI technology can prioritize overdue accounts and recommend the most appropriate dunning strategies. What's more, this powerful technology can be accessed remotely, even by staff working from home.

Show Me The Money

Just as supply chain 4.0 creates greater visibility across the whole chain, order-to-cash 4.0 provides greater visibility around cash, with benchmark insights into credit terms and customer payment behavior. For example, AI technology can reveal how quickly one customer pays you compared to others.

These insights help to better manage credit terms and payment delays across the chain—creating a better payment chain, synchronized with the digital supply chain. Going one step further, the future could see use cases where digital supply chain management and digital financial management systems are integrated to model correlation between payment behavior and demand for goods.

Creating a Cash Culture

The financial benefits of digitalizing the supply chain go hand in hand with a more efficient digital order-to-cash cycle, creating a "cash culture" across the board.

A May 2020 PwC survey carried out in the midst of the pandemic found that 48% of business leaders say they will accelerate automation and new ways of working. In the same month, industry analysts at Gartner found similar results. Forward-thinking business leaders know that digital transformation is essential for business survival.

The road beyond a crisis requires forward thinking. Now is the time to capitalize on the lessons learned from the pandemic, and harness new technologies in order to weather future crises.

Supply chain 4.0 and order-to-cash 4.0 are the way ahead.






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