How To Build A Business Case For Supply Chain Automation
Supply chain automation has a lot to offer. But it is never only about selecting a provider and implementing a solution. Before a Supply Chain Automation project can take off, one critical step must be taken: getting buy-in from directors and other key senior management with a compelling business case.
WHY BUILDING A BUSINESS CASE?
The business landscape is in constant change. Technology is enabling new players to access the marketplace and launch new products in weeks instead of months.
A growing competition landscape, together with more and more products introduces in the market at speed, means that companies determined to grow while being profitable must pay more attention to their ability to serve customers efficiently while spending less than their competitors. Hence the strategic relevance of achieving excellence in Supply Chain management
UNDERSTANDING THE BOARD OF DIRECTORS’ CONCERNS
In a previous article, I covered the benefits of automation for the Supply Chain team similarly, the board of directors can benefit from more automation. But different priorities require different approaches when presenting the case for purchasing automation tools.
OPERATIONAL SUPPLY CHAIN BENEFITS:
Automation in the supply chain means different types of benefits:
Reduced processing time
Elimination of errors due to manual data processing
Enhanced data analysis
All the above are operational gains. As a Supply Chain or Ops executive, you can already see how the benefits listed could apply to your team. But those are not strong arguments for the board. Time management is rarely a case of concerns for company directors just like speed and accuracy in data processing.
Operational excellence is often seen as given, a minimum requirement. For some, Supply Chain and operations must always be able to achieve total quality.
STRATEGIC SUPPLY CHAIN BENEFITS:
Unlike operational gains, strategic benefits are what the board of directors is more concerned about, here are a few examples of strategic gains:
Increase operational capacity
Enhance data security
Reduce direct costs
STATE OF TRADITIONAL SUPPLY CHAIN MANAGEMENT
As one of the core elements of business success, Supply Chain has always been viewed as a critical element. An efficient Supply Chan is key to gain a competitive advantage and can determine the success of a company over its competitors. Running effective operations however has never been more difficult due to the growth of multi-sales and delivery channels, the increase of customer demands and complex global supply chains. More than ever, the responsibility of Supply Chain performance is less about fulfilling orders and more about maximizing business resources and driving continuous business improvements.
ADDRESSING MANUAL DATA PROCESSING IN SUPPLY CHAIN MANAGEMENT
LIMITATION OF THE COMPANY'S ECOSYSTEM
One of the primary reasons why SMEs have been slow to adopt Supply Chain automation is because not all partners have the desire or ability to exchange documents electronically. In most delivery channels, fax and email orders are still the most common.
Not only does printing out and manually entering fax and email orders into an ERP system lead to more errors and slower fulfilment, but it also prevents the Supply Chain team from providing high-quality customer service due to the limited time left after data processing.
THE PROBLEM WITH ENTERPRISE TECHNOLOGY
Implementing a cloud applications infrastructure that integrates with the company’s ERP can help reduce the amount of manual work through capturing and processing data per channel, without the need to force partners to change how they work which is almost always the case with enterprise technology.
Enterprise technology is also associated with higher costs, slow support response time, and a host of other negative effects like slow learning curve and adoption time. Left unchecked, they can impede business progress and the ability to gain a competitive advantage.
AUTOMATION CANNOT FIX BROKEN PROCESSES
Automation though cannot function well under cumbersome processes. Complexity and exceptions can create a new batch of problems to resolve for both the Supply Chain and the IT department. Traditional methods of automation are associated with higher costs, slow support response time, and a host of other negative effects like slow learning curve and adoption time.
GET THE TEAM TO USE IT
In the worst case, when automation is badly designed it leaves the company with a shiny state-of-the-art software capable of wonderful things that nobody uses.
WHERE AUTOMATION FITS IN THE BUSINESS STRATEGY
By using data capturing technology, automated workflows and digital document archives, supply chain automation can turn a process step into a digital transaction, eliminating non-value activities that kill team productivity including:
Time spent keying-in data
Excess paper usage
Capturing and retrieving data
Low visibility of approvals
Generating analytics and reporting
In the overall business strategy, all the above must translate into these main areas:
Turn data into insights for faster decision-making
Fast road to market for new product development
BUILDING THE BUSINESS CASE
The first part of a Supply Chain automation business case is the objectives. From a Supply Chain and Ops point of view, the objectives can be the budget needed for the overall project, the structural changes required to make the most out of the new features or even the culture shift that the company will go through.
Nothing kills an effort to introduce change like a member of the senior management who does not align to the changes. For an automation project, this can be even small details like the Finance Director who keeps sending large attachments via email instead of using the new SharePoint site.
Here is where the rubber hits the road. Research the status of the end to end process and measure as accurately as possible the key metrics that are indicators of the “As Is” with the end goal in mind. For Example:
Measure the time it takes a user to generate a certain report that can be automated with the new tools; calculate the direct cost by accounting for the admin time required to manually input data in the system. All tasks that will become obsolete with the automation tools proposed in the business case.
CONSULT THE TEAM (REALLY!)
Let us clarify a common misunderstanding: Bottom-up change is not always a democratic process, and that is fine.
Sometimes Supply Chain and Ops executives must step up and lead the changes but that does not mean work in isolation. The team whose job is going to be affected by automation tools must be consulted. Disagreement on what to automate is normal and here is where executives must prove to possess the vision and lead despite the scepticism.
The consultation then is about agreeing on what problems to solve and what pains the team is experiencing. There should be no disagreement here. while disagreeing about how to solve the problems is fine.
Most likely the team response to productivity problems is more headcount, which is not what the board of directors wants to hear if technology adoption is low.
BETTER PROFITABILITY: THE ULTIMATE GOAL OF THE COMPANY BOARD
The perfect business case can highlight all the strategic benefits of the desired changes in great details but the point where it is worth paying more attention to is profitability.
Take the time to craft a strong message about the reduction of direct costs but do not forget the capacity element: With supply chain automation companies can increase the volumes handled without spending on additional resources. Higher volumes without increasing costs equal to better profitability.
Capacity can be measured in many ways: Number of documents or transactions processes by day, the quantity of goods packed by the hour, inventory hold by storage space. Work out the potential to be realised with supply chain automation tools to present a strong case for investment in automation
GETTING THE TECHNOLOGY MANAGEMENT ONBOARD OF YOUR SUPPLY CHAIN AUTOMATION PROJECT
Automation tools can benefit IT teams too. This mainly translates into a reduction of support time. Standalone software suites look effective when operated from a desktop PC, but supporting multiple users requires time and effort. Include savings related to reduction of support time and downtimes due to maintenance in the business case for supply chain automation. No-code cloud applications require virtually no support time.
PRESENT THE END-TO-END VALUE OF AUTOMATED WORKFLOWS
A complete business case for supply chain automation must cover gains across the entire workflow. The right structure that can make the difference between a “maybe in the next quarter” and a “let us do it now” follows the logical flow of the company’s operations:
Start from the origin of the Supply Chain. Gains can be about forecasts accuracy which means less inventory wastage of stock-outs and maximising sales opportunities
Move to logistics where automation can bring faster booking of freight forwarders, better cargo utilization and less admin time which means lower direct costs
An entire business case can be written in the benefits of warehouse automation alone. In your business case you can highlight things like faster picking time, better replenishment, reduced time of returns handling and better stock visibility. All benefits that translate into lower costs and less wastage.
On despatch it is worth mentioning gains about tracking, and similarly to Logistics, freight bookings, space utilizations and overall visibility of stock in transit. All gains that translate in better customer service and lower costs
Supply Chain or Operations executives are aware of the benefits that automation can bring to the organization. To get approval from the board of directors it is critical to identify the benefits that the automation tools will bring to the overall organization and not to focus on operational benefits alone.
How to get started?
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