Daily Archives: November 21, 2016

The First Rule of Any Technology …

… used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.

Bill Gates

So many companies forget this in their rush to implement new S2C / P2P / S2P systems after finally getting budget approval. If you just automate what you have, you’ll simply amplify your mess and your problems.

Take sourcing. If, all of a sudden, a buyer can go from 50 mini-RFX events to 250 mini-RFX events, this is not always a good thing. What if the buyer is always using the suppliers she favours, who recommend custom SKUs for every project? In this situation, all that will happen is the buyer will proliferate SKUs throughout the system, often adding SKUs for products that were already supplied by another supplier (that the stockroom clerk ordered from), that was not invited to the RFQ as it was not one of the buyer’s favoured suppliers.

And while this theoretically increases Spend Under Management (SUM) as it gets the spend in the system, this just increases Spend Under Record (SUR) as, instead of properly managing the spend — which in this case would have resulted in SKU standardization instead of proliferation and category-based supplier rationalization based on a collective stakeholder scorecard and not just buyer preference — all the buyer did was add more chaos to the spend.

As another example, take invoice processing. As the purchasing wizard regularly laments over on Purchasing Insight, many organizations still think invoice automation is OCR and automatic field extraction based on keywords or relative location in the document. This in a time when most suppliers have EDI or the ability to send some form of standard XML, and when just about every decent e-Procurement or Source to Pay platform allows smaller suppliers without these abilities to “PO-flip” to an invoice. Some platforms even allow virtual printer drives to be distributed (for Windows and Mac) that will allow a supplier to “print” an invoice from their AR software straight to the e-Procurement platform — there are so many options that don’t require erroneous OCR, why would anyone in their right mind* even consider it.

Before automating anything, be sure to do a formal process review, identify any areas that are inefficient, and any areas that could be improved by technology. Then identify what the processes should look like. Only then do you automate. And be sure to measure whether or not the automation is delivering the planned results. This means that you should have, and be reading, throughput/efficiency metrics before the conversion, and throughput/efficiency metrics after the conversion. And the metrics should improve in the right direction. If they don’t, stop and figure out why. Automation should help, not hinder.

* We know, we know. Many MBAs aren’t always in their “right mind”. ;-)