For supply chain companies looking to stay competitive through performance enhancements and waste reduction, some degree of process automation is critical. Indeed, a 2010 Aberdeen Group survey of more than 1,000 AP departments found that higher levels of AP automation resulted in numerous gains, including 83 percent lower costs, 82.7 percent faster processing, 51 percent fewer exceptions and 50.5 percent fewer late payments.
Despite proven benefits, adoption lags. A recent Supply Chain Benchmark survey showed more than 80 percent had not yet, or had only partially, automated supply chain processes. A 2012 study by the Institute of Financial Operations found that more than a third of the companies surveyed reported that paper-based invoices still comprise 90 percent of their total volume.
For the firms still needing to fully develop supply chain systems, there are five criteria to consider when deciding on the right combination of automation and human oversight:
- Operational cost reduction with increased productivity
- Increased visibility throughout the supply chain
- Improved process efficiency
- Regulatory compliance
- Improved service levels and quality management
Companies considering these factors when making supply chain automation decisions will save money, optimize processes and deliver more value for customers.
Rates and Costs
Manual processes create a lag on productivity, especially in procurement, forecasting collaboration and accounting. The operational cost of a high error rate due to manual processes can be seen in the bottom line and in decreased productivity and customer satisfaction. Begin with some key questions when troubleshooting where automation could generate productivity gains and cost savings.
Companies should gauge reliance on phone, fax, spreadsheets or email to communicate with suppliers, send invoices or forecast commitments. They should calculate the annual cost of late payments and expedited, delayed or late shipments. And they should examine the frequency of supply chain shortages and the annual cost of storing excess safety stock. The right automated processes and centralized databases will save both time and money.
The ability through traditional ERP systems to track products within your own four walls is no longer sufficient for today’s supply chain, which relies heavily on outsourcing networks of multiple locations and partners with varying information systems. In the past, B2B data exchange has been achieved through implementing electronic data interchanges (EDI). However, an array of newer supply chain automation solutions allows you to implement supplier web portals for better visibility on supplier inventory with a simpler and more user-friendly interface.
When determining the best automation solution for your needs, you might focus first on one area, such as purchase ordering. However, make sure that your solution is adequately flexible and robust to later integrate other processes as well as the expanding data that accumulates over time. The benefits of a fully implemented system are many. For example, information entered once on a purchase order can be automatically populated on the invoice, shipping label and receipt. And you and your suppliers can have joint access to order, invoice, and payment history, thus minimizing disputes and enabling quick production of activity reports or compliance audits.
Efficiency and Effectiveness
Building an effective, automated workflow process involves several tasks. Analyze your current process for excess steps or routing/approvals bottlenecks around critical functions like purchase ordering, quality collaboration or accounts payable. Then streamline the process, if necessary, so it is simplified yet effective. Finally, use an automated workflow engine to ensure the improved process is followed correctly every time, with no delays between steps.
Depending on your company’s infrastructure and requirements, the workflow solution may be integrated into the existing ERP or be an external solution. For instance, many companies have multiple ERP systems due to M&A and globalization. Not all ERPs have integrated workflow engines. An external solution that helps the systems seamlessly talk to one another may need to be deployed.
Even if all users are on the same ERP system, integrating workflow processes into the existing ERP can pose other problems, like degraded performance amid increased demands on system resources. Visibility, collaboration and access may all be compromised when users outside of a department do not have access to view or interact with documents or when mobile and web-based platforms are not enabled.
Automated workflow provides email notification for reviews and approvals, including the ability to route to alternate users. Powerful external solutions can provide the ability to customize the workflow engine based on your specific processes and can integrate mobile devices in addition to multiple ERP systems. The primary goal is to optimize workflow, using the appropriate balance of automation and manual oversight so that the right people can review, approve and route supply chain documents anytime from anywhere.
Many businesses must comply with a number of regulations, including global trade, environmental, ePedigree, or Accounts Payable mandates such as Sarbanes-Oxley (SOX). Given this complex regulatory climate, automating processes such as Procure-to-Pay and barcode labeling are more a necessity than an option. Companies that buy, sell and ship goods across borders, for instance, must calculate the correct taxes, duties and freight costs. Automated solutions with international invoicing capabilities eliminate manual calculation errors.
Other sectors, like retail and pharmaceutical operations, face impending legislation for serialization and product tracking and tracing. Solutions using RFID and barcode labeling technology can help automate product scanning, labeling and tracking/tracing in these settings. Automated systems that replace spreadsheets and disparate databases can also help companies needing to comply with mandates around the handling of hazardous chemicals to ensure such components are accurately described and tracked.
Service and Quality
Quality should apply to both products and the data that drives the supply chain operation. Improving both is necessary to keep service levels, customer satisfaction and your company’s reputation strong. The right automated systems can keep your own operation running well and minimize headaches when supplier parts fall short of quality standards or specifications.
Manual processes lack a centralized, electronic repository for all issues to be logged. They rely on phone and email interaction to deal with sub-par supplier quality issues. Automating discovery and resolution functions ensures that the right people address quality issues in a timely manner. The more efficiently product quality issues are addressed, the fewer ripples occur down the supply chain, and the better the odds are that service levels remain stable.
These steps help companies implement the right level of automation for a positive impact on business processes and returns. Today, it is no longer a question of if you should automate, but when and to what degree.
Donna Fritz is director of product marketing for TAKE Solutions