The Components of Order to Cash Systems: An Introduction
Date Posted: January 27, 2023
Publisher’s Order-To-Cash (O2C) systems today contain many components, especially with an integrated solution such as knkPublishing. In addition, each of these different components take on varying degrees of importance depending on the vertical in which the publisher operates. For example, the O2C system in a B2B Media Publisher is more heavily reliant on subscription management (and all the subsystems that are necessary to support subscription sales), whereas a Trade publisher typically relies more consistently on large orders from retailers and distributors, and less on subscriptions.
Both publishing sectors are considered in this article. In all cases, the systems must be capable of operating on-premise or Cloud, and because customer data is involved, good data security is essential. The key components are:
1. Order Processing – On-Line Retailers (such as Amazon etc.)
In the trade business today, a sizable proportion of consumer orders are placed through Amazon and similar on-line retailers’ websites. This is true for books that are delivered in both print and digital formats (including audio). From a publisher’s perspective there are benefits and drawbacks to using on-line retailers. The benefits include access to a large global marketplace. The drawbacks include a chunk of the margin that is eroded by commissions paid to the retailer, in addition to lost control of the customer data. The publisher is required to provide and maintain book metadata to Amazon to have the book “discoverable” on the retailer’s website.
2. Metadata Management
This is a subject unto itself but suffice it to say that for a book to be discovered on whatever website it is sold, the publisher must invest in rich metadata maintenance so that the book is presented to the consumer in the best possible way on each website. Retailers’ demand conformity to industry metadata standards, particularly Amazon, who have single-handedly driven the industry to the ONIX 3 metadata standard.
3. Order Processing – Direct-To-Consumer (D2C)
As stated above, a serious drawback for trade publishers in relinquishing order processing activities to on-line retailers is that much of the valuable consumer data is collected and controlled by the retailer and not by the publisher. This is a problem for the many publishers who are attempting to build community with their consumers. And so, in response, large and small publishers alike are investing in Direct-To-Consumer systems where the on-line buyer can browse a publisher’s catalog and buy directly through discovery and shopping cart facilities on the publisher’s website, thus capturing all that data previously lost to the on-line retailer. D2C demands strong integration between the publisher’s website, the CRM (Customer Relationship Management) system and the publisher’s other downstream supply chain and ERP (Enterprise Resource Planning) systems. knk’s status as a Gold Microsoft Partner also means we can provide seamless integration to Shopify, the leading third-party e-commerce platform.
4. Order Processing – Manual Order Entry
Gone are the days when a publisher’s customer service department handled most of the incoming customer orders. Much of that activity has been replaced, in the case of consumer orders, by online websites as described above, or by EDI (Electronic Data Interchange) systems in the case of replenishment orders from distributors and retailers. Nevertheless, publishers still need to enter a small proportion of orders through this channel even today, and so an important part of O2C is the ability to enter, manage and change orders in the publisher’s customer service department, often during a conversation with an ordering customer. A common component of order entry processes are simple credit-limit checks, requiring access to the customer’s credit history, and payment terms.
5. Order Processing – EDI
Electronic Data Interchange (EDI) is the preferred method of entering frequent, large orders from a known customer. This may be an on-line retailer or a publisher’s distributor, among others. It is an automated method of managing orders and related transactions (such as PO’s, invoices, acknowledgements, etc.) between two business partners who have previously shared and contracted most of the ordering, invoicing and delivery data so that bulk orders can be handled more efficiently at both companies.
6. Consumer Portals
B2B Publishers frequently provide end-consumers with web-based access for account management, orders, and payment status information. The publisher is invested in onboarding, developing, and maintaining a strong and permanent relationship with the reader to encourage retention and follow-on sales. These systems track sales, reader messaging and are a key component of targeted marketing campaigns. They allow consumers to self-service their account in their own way. This includes cart management, registration, the ability to merge, split, auto-renew, reprice, and adjust orders for instance, in addition to the related territory and compensation systems for internal staff.
7. Fulfillment and Outsourcing
Fulfillment includes warehousing and delivery of print and digital products, and integration to POD (print on demand) systems where required. Some publishers outsource the whole or part of O2C to third parties, who manage various portions of the process, for a fee, depending on the publisher’s needs. Obviously, these outsourced subsystems must be integrated at some point, back into the remainder of the publisher’s systems. Publishers typically do not outsource any processes that are part of their core competence. For example, for all B2B Media publishers and many trade publishers, customer service is kept in-house to retain control of the vital relationship and the customer journey data. On the other hand, pick, pack, and ship (warehousing) and printing are frequently not regarded as core activities and so are outsourced to companies that often (but not always) specialize in the publishing industry.
Customer Relationship Management (CRM) systems are a key area of control and automation for all publishers today. It is required for B2B Media publishers, who are typically focused on campaigns to build strong and lasting relationships with the end consumer for retention and upselling purposes – audience building. CRM includes several subsystems that manage consumer and satisfaction metrics, including mailing lists, messaging on rebates, renewals, trials, and access codes for example. CRM can personalize interactions with customers and prospects based on data and parameters already in the system, by automatically assigning them to specific customer journeys or segments. CRM is important for trade publishers, in lead scoring, recommending next best actions (NBA), and for tracking the many relationships and roles played between internal staffers and their counterparts at the customer.
9. Billing, Accounts Receivable (AR) and Payment Collection
Once the order has been delivered (physically or virtually), O2C systems must include processes that bill the customer, track AR, and collect payments. These typically include methods of communicating with and measuring the customer on collections, DSO (Days Sales Outstanding) metrics, automated payment posting systems, credits and returns allocations, chargebacks, adjustments, bank reconciliation, and when necessary, Dunning and bad debt facilities. There is a need for integration to payments service and tax management software providers. In the case of physical stock returns, there must be integration into the inventory management systems, and from there to the integrated general ledger. In the case of subscription businesses, it is easier to think of these systems as revenue management, as payment is made up front or over time for a series of deliveries.
10. Reporting and Business Intelligence
As the publishing industry becomes more data driven, the presentation of data from all sources to the publisher becomes an even more critical component of any O2C system. This is particularly true for B2B and Media publishers who need to see information on customer clicks and interactions on the website and from all communication systems that gather audience intelligence. With an integrated solution, O2C can provide critical information on customer profitability and creditworthiness. It provides for the regular delivery of on-line reports to management to monitor and respond in the appropriate way to changes that vary from routine low-level alerts to business threats that demand escalation and attention at the highest level.
11. Backlog Management
Most industries need to carefully manage backlogs of orders and trade publishing is no exception. The allocation of incoming and existing orders for an item where inventory is backlogged needs careful consideration in order processing. The system needs access to planned and scheduled replenishment orders from vendors. In extreme cases, the allocation of any newly available inventory may not always be on a first-come-first-served basis for all customers, and override capabilities are required.
12. ERP (Enterprise Resource Planning) Integration
And lastly, the O2C system must be connected to the rest of the publisher’s ERP system. This includes the basic systems of product and content identification and management, including the monitoring of available inventory (print and digital) of each title or bundle. Consequently, O2C must be integrated, directly or indirectly, with all supply and demand subsystems such as book production, purchasing, returns, and shipping. Integration is key. It provides real-time data access between all interested subsystems whether it be replenishment data for an item or the passing of customer data between CRM and check-outs on the website, for example. Without it, the publisher is not capable of providing accurate and timely information to customers.
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