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An AP Head's Perfect Recipe to Fix the Sizzling Dilemma of Edible Oil Companies

By Annapoorna

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Updated on: May 27th, 2024

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9 min read

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You got a whiff of culinary pride – India, the world's third-largest producer of cooking oil! But before you could do a victory dance in the grocery aisle, Mrs. Kamini had a reality check waiting for us. 

She revealed that our country still meets nearly 60% of its consumption requirements through imports! The Accounts Payable team claims it’s been a while since the Indian edible oil companies have been crippled by several supply chain bottlenecks, especially global. Higher freight rates due to the Red Sea crisis add more fuel to the existing problem. It has affected the smooth and timely procurement of raw materials and, in turn, the accounts payable (AP) process.

Continue reading the story on how her team suppressed the supply chain challenges through technological interventions and policy revamps.

How Supply Chain Bottlenecks & Inefficiencies Became an AP Problem

Companies that source ingredients globally often face complexities in currency exchange rates, customs regulations, and international trade agreements. Their procurement teams navigate these global trade challenges. These supply chain bottlenecks result in production delays, stockpile inefficiencies, and frustrated suppliers.

Supply Chain Bottlenecks

Mrs Kamini's edible oil company also encountered a significant supply chain problem, particularly as they were dependent on importing raw materials.

"There is high volatility in procurement of oilseeds in the cooking oil industry. We witnessed a shortage of oilseed supply due to global supply chain issues arising from a mix of natural disasters, geopolitical events, or global crises. Things got complicated for my Accounts Payable team." ~ Mrs Kamini

Other issues that crippled the company were delays in supplier deliveries, quality control issues, and complex invoicing and payment processes. These resulted in an increasing workload for their AP team. 

Further, the company had manual processes that added fuel to their existing issues, giving rise to potential errors and hindering the team's efficiency. Complexities in these financial transactions added an additional layer of difficulty to the procurement process. These led to delays in settling accounts with the vendors. They faced challenges in aligning payment schedules with delayed deliveries. This strained relationships with suppliers and led to potential late payment penalties.

Kamini’s Outlook on the Supply Chain Problem

"Invoices arrived much before or after the expected time, requiring adjustments in payment processing timelines. Inefficiencies in stockpile management meant that our AP team had to manage payments for varying quantities of raw materials. We required flexibility in payment processing to align with the fluctuating production demands. We had to balance accounts payable with stockpile levels to avoid overpaying for excess inventory or facing production delays due to insufficient raw materials." ~ Mrs Kamini

The team had to navigate the implications of delayed deliveries on cash flow management, as payments needed to be synchronised with the availability of raw materials. To overcome those challenges, Mrs Kamini knew revamping her enterprise's supply chain and accounts payable processes was necessary.

Streamlined Procurement & Automated Accounts Payable led the way

"Automating Accounts Payable addressed our vendor payment bottlenecks and reduced the time and effort to process invoices and release payments. Our AP team can now dynamically adjust payment schedules based on receiving raw materials. Moreover, we have real-time visibility into the payment status for suppliers" ~ Mrs Kamini

The automated accounts payable systems promote flexibility, allowing AP teams to have predefined rules to trigger payment processes. Furthermore, real-time visibility into inventory levels enabled their AP team to align payments with the raw material availability, reducing the impact of delayed supplier deliveries.

automated accounts payable systems

Invoices could be matched automatically with corresponding delivery and quality control reports, reducing the likelihood of errors. The exception reporting feature in the AP solution allowed the AP team to ensure that payments reflected the agreed-upon quality standards.

"Not to forget, AP automation eliminated manual data entry, automatically capturing and processing invoice data and reducing chances of errors drastically!" ~ Mrs Kamini

Like icing on the cake, their automated AP systems were integrated with inventory management software, enabling the accounts payable team to reconcile payments with actual stockpile levels. So, dynamic payment terms and schedules with automation allowed the AP team to adjust payments based on the fluctuating production demands, contributing to better stockpile management.

Transformative Impact felt across Kamini’s Enterprise

The AP head recalls how the transformational measures positively impacted their cooking oil business. I have summarised it in three levers.

  • Production Efficiency: Delays were minimised, allowing for smoother and more efficient production and reducing stockpile inefficiencies.

"My AP team saved 30-40% of their productive hours with accounts payable automation." ~ Mrs Kamini

  • Supplier Relations: Suppliers became reliable partners, ensuring a steady flow of raw materials. 
  • Cost Savings: Automation streamlined accounts payable, reducing administrative costs and late payment penalties.

AP automation for Cooking Oil Industry

Three AP Lessons from the Cooking Oil Industry

Where Indian cooking oil companies are highly dependent on imports of raw materials, it becomes crucial that they follow best practices in supply chain and accounts payable management. The three accounts payable lessons we could learn from this story are-

Embrace AP Automation with AI: It’s the way forward

Integrate AP with inventory management to streamline the supply chain

Real-time visibility & flexibility in payment processing is crucial to avoid disruptions

The interviewee's journey from supply chain bottlenecks to efficiency demonstrates that even a staple industry like cooking oil can evolve to address significant supply chain and accounts payable challenges. 

By embracing technology, supplier collaboration, and automation, Mrs Kamini’s team created a perfect recipe for a more resilient and efficient supply chain, ensuring their edible oils continued to delight kitchens worldwide.

Also Read
India’s Beer Supply Chain: Fizzing Finance Formula from Farm to Fridge
Tech Made in India: A CFO’s Story of Streamlining Manufacturing Supply Chain

About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more

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