OpenText recently sponsored a survey on B2B integration maturity which was conducted by SCM World. We were interested in learning about what constituted B2B integration maturity and what impact that might have on a business. The results, available in this blog, lay out a path to maturity based on answers to the survey from 115 participants from all over the globe.
For many organizations, B2B integration is just a means of doing business, a requirement to work with certain suppliers or customers. The survey revealed that companies who have achieved some level of B2B integration maturity have justified their B2B integration investments because it encourages collaborative business growth among partners. (Page 23 of the report)
More importantly, the survey showed that the viewpoint of these companies was correct. Those companies who had mature B2B integration programs experienced tangible business benefits over those who did not.
Here is an excerpt from the report:
Initially, business need for B2B integration is understood, but often companies have yet to see sizeable improvements in business performance. For example, at the beginning of the B2B integration path:
- 61% have monthly inventory turns of one, or less
- 66% of companies at the lowest step have 61 days of sales outstanding (DSO), or more
- 33% are shipping outside of standard process by expediting at least 10% of orders
As companies begin their advancement, they are accompanied by metrics improvements, (as shown in the chart below in this blog post).
The trajectory of these metrics suggests that performance metrics are positively impacted as B2B integration matures. As companies advance to the analytical (step 3) and relational (step 4) steps on the B2B integration path, key improvements drawn from the study include:
- 72% of respondents experience savings of at least 20%, as compared to the costs of manual transactions
- More efficient order management, with 54% of companies expediting 5% of orders, or less
- Faster inventory turns, with 68% of companies achieving at least two inventory turns per month
- Better cash management, as 78% of companies at the highest step have 60 days of sales outstanding, or fewer
Improvements in stock-out rate and perfect order percentage are also beneficial for advancing companies, as these metrics are reflective of supply chain agility and efficiency. This data coincides with decreased expediting costs, but more importantly creates revenue and profit opportunities by minimizing lost sales and optimizing product flow throughout the value chain.
Where metrics have the potential to prove significant value to the business is in calculative metrics such as cash conversion cycle (CCC). The CCC is a conventional metric that, according to Investopedia, “indicates how efficiently management is using short-term assets (e.g. inventory) and liabilities to generate cash”. This is an especially important measure in volatile market conditions, as organizations are under intense pressure to maintain healthy balance sheets and strong cash flows.
Ideally, a company’s CCC is as low as possible, with exceptional companies operating at a negative value, by effectively leveraging their supply chains to convert sales to cash prior to the actual transaction. Historically, only a few supply chain stalwarts have sustained a long-term negative CCC – among them Dell, Apple and Amazon.
Using SCM World study data, the CCC is calculated for each step of the B2B integration path, based on the range of company responses. The results are quite clear: with each progressive step on the B2B integration path, there is an associated 2-3x improvement in cash conversion cycle.
If you missed Part 1 of this series, read 5 Stages of B2B Integration Maturity.