How small efficiency gains make a big impact on the bottom line – part 1

[Former Member]

In this series of short blogs, I would like to refute the conventional wisdom that only big projects result in bottom-line relevant results. While big initiatives do have big potential, they also carry big risk and companies often overlook opportunities to optimize what they already have. Introduce small efficiency gains that have tangible bottom-line impact. In these blogs we will explore some real life examples of organizations that have done just that. The focus of this blog is the AP (Accounts Payable) business process, but in future I will provide similar case studies for other key business processes.

Tax and freight processing automation in AP at a leading industrial manufacturer in the US

One of the goals of business process automation and optimization initiatives is to capture and consolidate an individual's memories of the process execution into institutional memory. In a process like Accounts Payable that historically has very low turn-over, this can be a daunting task. During the new process blueprinting, you frequently hear statements such as "We can't really explain this through a process map; Debbie has this in her head and she has been doing this for 25 years. She just knows what's taxable and what's not."  Such situations are neither good for Debbie, the example knowledge worker, nor the organization. It creates a process risk for the company and hinders that knowledge worker from moving up or across the ladder or share the work load. For organizations, this also means inability to leverage new technology to bring efficiency or introduce organization changes such as shared service center in different geographies.

Recently I came across such a scenario at a leading industrial manufacturer in the US where its Accounts Payable organization recently introduced automation through introduction of OCR and eInvoicing technologies. They were already using Dolphin’s imaging and workflow solution within SAP system that had substantially cut down on invoice lead time compared to old paper-based manual process a couple of years earlier. During a health check of the system, we learned that they were not getting level of automation that was expected out of the system. and the main reason was their choice to disable automatic posting of indirect PO based invoices. When we dug deeper we found that this was done so that AP users get a chance to review vendor specified tax with expected tax for each invoice line and take certain corrective actions if things don't match. They had a list of those steps laid out on a cheat sheet that was developed by a knowledge worker who had been on the job for a very long time. This was our moment to capture that individual's knowledge and turn it into institutional memory and introduce that in to the automation process.

Working with the AP team we further refined the steps that were manually taken by the AP user and came up with a set of business rules that would be applied by the system automatically when the vendor specified tax did not match the expected tax that came out of the external tax software. The possible outcomes included actions such as short-payment of invoice with special notes on check or accrual of the taxes. Within days of activating those rules in the production system, the auto-posting rates for indirect PO invoices went up by 80% and the company was able to finally realize, and exceed, savings that were expected when they began the automation initiative - a clear example of how small efficiency gain has tangible bottom-line impact!

Keep tuned for more such examples in this series.