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Execution Gaps Hamper Supply Chains

March 1, 2021

Business leaders blame rigid systems and technologies as well as broken or inefficient processes for creating execution gaps that damage their business performance, according to the “2021 State of Business Execution Benchmark Report,” released today by Celonis.

The report, based on an independent survey of 2,000 business leaders commissioned by Celonis, found significant execution gaps between average and best-in-class performance in core business functions of accounts payable (AP), accounts receivable (AR), procurement and order management that can cost companies hundreds of millions of dollars in missed opportunities.

In accounts payable and accounts receivable, respondents cited rigid systems and technologies as their biggest obstacle to performing at their full execution capacity.

Execution capacity is the maximum level of performance a company can achieve with its available time and resources. Those surveyed called out broken or inefficient processes as a top 3 obstacle for accounts payable, accounts receivable, and procurement.

The other root causes of execution barriers identified in the research include:

Accounts Payable

  • Rigid systems and technologies (41%)
  • Broken or inefficient processes (39%)
  • Organizational silos (37%)

Accounts Receivable

  • Rigid systems and technologies (42%)
  • Fragmented data landscape (40%)
  • Broken or inefficient processes (40%)

Procurement

  • Lack of executive sponsorship (41%)
  • Fragmented data landscape (41%)
  • Broken or inefficient processes (39%)

Order Management

  • Lack of flexible logistics networks (46%)
  • Lack of visibility into processes (42%)
  • Lack of visibility into supplier performance (41%)

“You can’t run a leading edge company in today’s digital world on ancient transactional systems,” said Alex Rinke, co-founder and co-CEO of Celonis. “The promises of digitization fall short because the core transactional systems that companies have relied on for years are often on premise, rigid, fragmented and hinder innovation. The best companies realize the potential of an Execution Management System that works on top, liberates the transactions and helps businesses execute their core processes using data and intelligence.”

The execution capacity problem

Despite making massive digital investments to transform their business operations, companies continue to face costly execution barriers. By identifying and fixing these problems, they have the opportunity to reach the execution capacity levels of the top-performing companies.

Key performance differences highlighted by the research include:

Accounts Payable

  • On average companies pay on time only 50% of the time, compared to 77% for top performers
  • Processing a single invoice costs $17.42 on average, while top performers reduced this cost by more than half to $6.84

Accounts Receivable

  • Invoices, on average, are 30 days delinquent in being paid for typical companies, while the best ones reduce average days delinquent to just 8 days.
  • The average company scores a collections effectiveness index of 57%, compared to 84% for top performers

Procurement

  • Only 54% of the time do supplier deliveries arrive on time for the average company, compared to 83% for the best-in-class performers
  • A single purchase order costs $15 for an average company, more than 10 times the cost for the most efficient companies, which spend $1.35 per purchase order

Order Management

  • A single sales order costs $29.31 each to process for the average company, about three times the cost versus the best performer who spend an average of $9.94 per sales order
  • Just over half (56%) of orders are touchless for the average company, while the leaders reach touchless order rates of 80%

The financial opportunity

The financial benefits of fixing execution problems can be substantial, freeing up as much as $567 million in working capital and $105 million in cost savings for an average company, according to the report’s analysis.

Costs savings can come from reducing the cost to process a purchase order in procurement or reducing the cost of a sales order in order management to the best-in-class performance found in the research survey. Working capital can be maximized both by improving days payable outstanding in AP and by shifting days sales outstanding in AR to best-in-class performance, which the report benchmarked from non-survey sources.

The financial impact was based on an analysis of an average $5 billion revenue company with an average order price of $1,500, 3.3 million in sales orders, 3 million purchase orders and a total supplier spend of $2.4 billion.

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