A recent article in Industry Week on 5 Ways to Maximize Profits from Supplier Automation had some good tips on how to maximize your return from your supplier automation, provided they are implemented properly. This post will explain how to get maximum results from Industry Week’s tips.
- Avoid the 80/20 trap
When you only automate 80% of your suppliers, what happens is that the remaining 20% consume 80% of your procurement staff’s time and effort who have to enter data, track down errors, and deal with inquiries that would be avoided with an automated system. In other words, 80% isn’t enough. You have to keep automating until the return isn’t worth the investment. While this number will vary from company to company, generally, you have to insure that at least 90% of all document exchange is automatic, if not 99%. You keep going until the ROI (annual savings / annual cost) of automating the next supplier is less than c, for c between 2 and 3.
- Make it Affordable and Beneficial
Not only does it have to be affordable, but it has to make your suppliers’ lives easier. If not, it won’t be adopted.
- Beware the Middle Man
As the article says, another unnecessary, and completely avoidable, cost, for both you and your supplier, are the recurring monthly fees charged by “Value Added Networks” (VANs) or other such middle party service providers. Let’s face it, you know who your suppliers are, and your suppliers are quite willing to make their catalogs available to you for free because they want your business. Don’t pay an extra fee for what you already know and have access to.
- Make Supply Chain Data Actionable
Automating document transfer enables transaction savings by significantly reducing processing costs, but it doesn’t provide strategic savings unless you act on it. Make sure the tool allows for event driven, alert-based workflows that allow you to detect unexpected events and patterns as they happen so that you can make course corrections “mid-stream”.
- Measure and Respond
Continuously benchmark tool usage and process times and take action if the benchmarks don’t continuously improve.