Three ways paper-based supply chain transactions hurt productivity …

Until a company decides to buy a supply chain management (SCM) solution, a lot of paper-based processes must wait to go electronic. Most supply chain documents are faxed, and while you could argue that this is an electronic process, it’s certainly paper-based and manual.

Ditto for printing, collating and filing. The invoice is often mailed, probably because most people count on Canada Post to provide them with an extra week of wiggle room before a cheque is cashed.

But, explains Derek Ritz, executive vice-president and chief technology officer at Hamilton, ONís Obvious Solutions Inc., the urgent nature of the current economy dictates that people just can’t wait for upstream supply chain documents such as requests for quote, quotes, purchase orders or sales order acknowledgements to be sent by fax, or through the postal system.

Ritz says companies can gain a lot by moving to electronic collaboration with their partners and customers. But first, here are the drawbacks of print, collate, fax and file.

  • Paper isn’t free. You have to print your documents. Ritz says companies spend about seven cents per laser-printed page or 11 cents each for each page from an inkjet or impact printer. A multi-part form also costs 11 cents per page for each of the three parts. And these are just consumables costs.
  • Time is money. The bulk of faxing costs are attributable to workflow. Each fax will take an employee (who is being paid between $10 and $20 an hour) somewhere between one and five minutes to get the paper, collate it, key it into a fax machine, send the fax and file the paper form.
  • Got a quarter? Unless you’re faxing somebody down the street, you’ll have to pay long-distance charges to a telephone company. These can add up.

According to Ritz, the three components, depending on whose study you believe, together add up to between $2.50 and $3.50 (US) per outbound document. Unfortunately, most firms and their employees have taken this reality for granted and designed their businesses around it.

Ritz says there are Fortune 1000 companies using the same manual, paper-based processes. The difference is that they might have seven floors of people in their office building doing them.

In a large organization the management of the paper-based workflow is itself a job. At an SMB, an employee might spend two hours of his or her day on it. That’s important: At an SMB, the efficiency improvements tend to become investments, while at a large organization they are often divested. In order words, a Fortune 1000 player that had two dozen people pushing paper but deployed an electronic SCM system might cut the department and use one dozen people. The CEO divests the efficiency improvements for immediate cash in hand. The two employee hours saved by the SMB, by contrast, are re-invested in other areas.

“An SMB owner or manager who’s any good sees this immediately manifest itself as genuine improvements that are identified in the company,” says Ritz. But if they aren’t any good, you get employees at loose ends, and they’ll find something to fill the available time — but it wonít be work.

“The exact same benefit can be enjoyed by two CEOs. One of them puts the cash in his pocket and the other one is growing like Topsy because he just had all of his well-trained, clever staff liberated, out from under their paper.”

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