Business Process Management (BPM) Archives : Planergy Software

Services Procurement: What Is It and How To Manage It

Rob Biedron — Fri, 21 Jul 2023 11:42:24 +0000

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

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Services Procurement: What Is It and How To Manage It

Category

Spend Management

Written by Rob Biedron
15 min read

Tags

Business Process Management (BPM)Process & Procedures Procurement

Last edited

July 2, 2024

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What is Services Procurement?

Services procurement is acquiring services from external vendors or suppliers to fulfill organizational needs.

It involves procuring services from outside sources and managing the relationship with supplier or service provider.

This type of procurement can be used for virtually any service, including IT, consulting, legal advice, web design, marketing services, engineering support, etc. It typically is project-based and relies on a statement of work, or SOW.

For example, you could hire a contingent workforce of freelance writers to handle your company’s website content rather than hiring for the position in-house.

You set the budget and deliverables, then work with various freelancers with a test assignment. You hire the freelancer (or freelancers) you feel do the best job, and they follow your processes to provide what you need.

This contingent labor allows you to optimize your marketing without fully engaging an internal marketing department or marketing agency. Marketing procurement is a common case where services procurement is required.

You don’t pay for the service if no content needs to be created, so there’s no need to keep a retainer or spend money on unused services, allowing for better control over spend management.

Types of Procurement and How Services Procurement is Different

Direct Procurement
Direct procurement is the process of obtaining items necessary to produce a desired end product. This typically includes raw materials and components.
Indirect Procurement
Indirect procurement involves purchasing items essential for day-to-day operations but not necessarily related to the company’s final product. Examples include office supplies or advertising campaigns.
Goods Procurement
Goods procurement primarily entails obtaining physical items and usually consists of direct and indirect procurements.
Services Procurement
Services procurement focuses on acquiring people-based services such as hiring contractors or security services, which could also involve direct and indirect procurement.

What Is The Difference Between Goods and Services Procurement?

Goods procurement involves the buying of tangible goods, while services are non-tangible services provided by vendors.

Goods have fixed prices, whereas services usually involve negotiation between buyers and sellers to reach a pricing agreement.

Goods can generally be bought off the shelf, but most service procurements require custom contracts to meet specific requirements.

Services procurement is a complex task that involves finding the perfect individual or organization to complete the job.

It’s more than just selecting the service that best fits a need; it requires writing a job description of someone who may never be seen during the selection process, making a judgment call on estimating demand for services, and then ensuring the quality of those services.

Quality assurance can also be challenging since conversations between procurement and suppliers are more direct and personal when sourcing services.

Technology solutions are incredibly helpful in dealing with goods, but they must have an agile stance to maximize value creation as they are applied to service category sourcing.

Fitting skills and requirements into a single box is undeniably one of the most intricate components of services procurement.

Steps in the Services Procurement Process

Before beginning any services procurement process, you should establish goals and requirements for what you are looking for in terms of service delivery.

This helps ensure you get what you need the first time instead of having to go back and renegotiate contracts or change vendors mid-way through your project.

Once your requirements have been established, it’s time to search for potential vendors.

Here are some key steps to consider when developing a services procurement plan:

Requirements Gathering
Determine precise specifications for what type of service is needed and set expectations regarding quality, cost, and timeline.
Vendor Selection
Research potential vendors and compare each one against your criteria before selecting a few finalists with whom you can negotiate contracts.
Send multiple requests for proposals (RFPs) to learn more about each business partner and what they could offer you.
Contract Negotiation
Finalize agreements with selected vendors, considering budget constraints and legal considerations.
Doing Business
Once you’ve started working with a vendor, having a clear statement of work and adequate contract management is key. There should be purchase orders and milestones to ensure your project remains on course.
Whether you work with a small business or enterprise-level partner, strategic sourcing is key because you want to keep stakeholders happy.

Services procurement may be more complex, but when done correctly, it can make a world of difference for an organization.

Benefits of Services Procurement

Services procurement offers numerous advantages for businesses, particularly when done effectively by experienced professionals who know how to find the best deals while maintaining quality standards.

Here are some major benefits of utilizing services procurement:

Cost Savings

By leveraging existing partnerships or getting competitive bids from multiple vendors, companies can save money on specific projects or ongoing activities such as employee recruitment or training programs.
Improved Quality

Choosing reputable companies with proven track records ensures that businesses get high-quality services from experienced professionals who understand their industry and specialize in delivering effective solutions to clients’ needs quickly and efficiently.
Faster Time To Market

By outsourcing certain tasks related to new product launches or marketing initiatives, businesses can significantly cut down on development time and maximize their return on investment (ROI).

All of these benefits provide businesses with a competitive advantage over their competition.

Money savings can be funneled into other business areas to fuel further growth.

Improved quality boosts the user experience and customer satisfaction levels, and a faster time to market ensures businesses can sell quicker for higher profits.

Challenges in Services Procurement

Although many advantages are associated with procuring external services for business operations, organizations also face some common challenges during this process.

Inadequate Budgeting
Without a budget, a business may not be able to negotiate favorable terms with providers.
Without sufficient funds, businesses may be unable to pay for the necessary components of their service, such as technical support or maintenance fees, leading to reduced quality and performance.
Unclear Requirements
Without fully understanding what a business needs from the service they’re looking to procure, it’s easy for businesses to purchase services they don’t need or hire vendors that don’t have the necessary skills and resources to fulfill requirements.
That’s why it’s critical to have a comprehensive and detailed list of requirements before engaging with potential suppliers.
Lack of Appropriately Skilled Personnel
This can prevent businesses from finding the right providers.
Without the necessary expertise, businesses may be unable to evaluate and compare potential vendors correctly and make informed decisions.
Without the right level of skill in-house, businesses may not accurately define their requirements when engaging with potential vendors.
Difficulties Managing Relationships
Managing supplier relationships in services procurement can be difficult as several parties are involved, including the business and its vendors.
Without effective communication and collaboration between these parties, it may be hard for them to work together to meet the service requirement.
Maintaining strong relationships with vendors can be tough due to changing market conditions, increased competition, and different expectations from both sides.
Establishing clear objectives at the outset and constantly improving understanding and trust between the various parties is essential.
Wasted Spend
Without adequate supply chain management, organizations risk wasting a lot of money.
Oxford Economics and SAP research shows that external service providers account for 42% of external workforce spend.
Statista reports that approximately 31% of sourced projects are not completed on time, within budget, or do not meet the company’s original goals.
limited visibility into these service providers can wreak havoc. If nearly one out of every 3 projects goes south, that’s a lot of lost time (and money.)
Security Risks
Without effective oversight, organizations face increased security risks. In a world of digital transformation, service providers are often entrusted with sensitive data and customer information.
Organizations risk unexpected outages or data breaches if supplier compliance is not properly managed, especially when it comes to applicable regulations such as GDPR or HIPAA.

Tips For Successful Services Procurement

The following tips will help ensure successful services procurement:

Set Realistic Expectations
Both parties must enter into an agreement knowing exactly what they expect from each other so as not to be disappointed later down the line if something goes wrong or an unexpected expense arises due to unforeseen circumstances beyond either party’s control.
Leverage Existing Relationships
If you already have strategic partnerships with certain suppliers/providers, then use those connections instead of starting from scratch when sourcing new vendors & negotiating contracts.
This will enable you to take advantage of better terms due to pre-existing trust between buyer & seller.
Have an Experienced Team Member Lead the Negotiations
Having someone knowledgeable oversee negotiations ensures smoother transactions since they will be able to anticipate issues before they arise and craft strategies based on collected data points that maximize savings while ensuring compliance with company policies.

Services procurement is an essential part of running any successful business today.

By understanding what it entails and properly managing relationships with suppliers through clear objectives, ongoing communication, and tracking payments/invoices, businesses can ensure they get exactly what they need from these external sources while remaining profitable in the long run.

With careful planning and management, services procurement doesn’t have to be daunting; instead, it should be seen as another tool for success within any organization’s operations strategy.

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Read our case studies, client success stories, and testimonials.
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The post Services Procurement: What Is It and How To Manage It appeared first on Planergy Software.

Supplier Tiers: What’s The Difference Between Tier 1, Tier 2, and Tier 3

Mary Girsch-Bock — Thu, 12 Jan 2023 11:49:12 +0000

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

Download Free Copy

Supplier Tiers: What’s The Difference Between Tier 1, Tier 2, and Tier 3

Category

Vendor Management

Written by Mary Girsch-Bock
14 min read

Tags

Best Practices & Tips Business Process Management (BPM)Supplier Relationship Management

Last edited

July 2, 2024

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What is Supplier Tiering?

Supplier tiering is the practice of classifying suppliers based on their performance and importance to your business.

This allows you to easily evaluate which suppliers are performing well, which ones need improvement, and which are essential for your operations.

You can manage suppliers by breaking them down into different tiers more efficiently.

The Benefits of Supplier Tiering

Supplier tiering offers numerous benefits for businesses that use it.

It allows companies to develop relationships with key suppliers who provide the best value for money and services, allowing for easier supply chain management and lower supply chain risk.

It also gives organizations greater negotiating power because they know what services they need and how much they should pay for them.

This process also helps create transparency within the supply chain so that everyone involved knows what’s going on at all times, leading to better communication and collaboration between all parties involved.

Supplier tiering also helps reduce costs by eliminating inefficient or unnecessary processes in the supply chain.

What Are Supplier Tiers?

Tier 1 Suppliers

Tier 1 suppliers are the top-tier suppliers within your supply chain. They provide high-quality products and services that meet strict specifications and are typically considered the most reliable options available.

Tier 1 suppliers are the most significant in terms of supply chain setup, they can also represent direct suppliers to the end customer or original equipment manufacturers (OEMs).

These suppliers tend to have long-term relationships with their customers and often provide additional consulting or technical services in addition to product delivery.

This type of supplier also has access to large volumes of resources, so they may be able to deliver goods faster than other tiers of suppliers.

Tier 1 can be the direct suppliers of your final product – like cotton t-shirts – or the fully built components that will be combined to create the final product. This is true of any finished product.
Tier 2 Suppliers

Tier 2 suppliers are known as secondary suppliers or second-tier suppliers. They supply components or assemblies derived from raw materials by Tier 1 suppliers.

Tier 2 suppliers provide the OEMs with sub-assemblies and basic parts to complete a final product, such as construction vehicles or mobile phones.

Both tiers play an essential role in supply chain processes. However, it is often the responsibility of tier 1 suppliers to guarantee quality products and services meet all requirements — both in terms of design and specifications.

Tier 2 suppliers are usually smaller companies specializing in specific supply chain areas.

They offer more cost-effective solutions than Tier 1 suppliers but may not have access to as many resources or the same level of expertise as those at higher tiers.

As such, they may be able to provide good quality products or services but may not be able to accommodate customers who require large orders or complex requirements.

In the case of the cotton t-shirt physical product example, tier 2 is the cotton fabric mill – the company that makes the fabric from the cotton plant.

Tier 2 suppliers are sub-suppliers or subcontractors of your tier 1 suppliers.
Tier 3 Suppliers

Tier 3 suppliers are typically small businesses that operate on tight margins to keep costs low for their customers. They often focus on one specific area and specialize in delivering certain goods or services quickly and inexpensively.

While these suppliers can provide cost savings for businesses, they typically don’t have the same levels of expertise or resources as those at higher tiers and may not be able to accommodate larger orders or more complex requirements.

In the case of the t-shirt company, tier three is the raw material – cotton from a plant farm. Remember that tier 3 isn’t always a raw material, but in this example, it is.

In any case, your tier 3 suppliers are suppliers or sub-suppliers for your tier 2 suppliers.

Why Do Supplier Tiers Matter?

The main reason why supplier tiers matter is because it helps you prioritize which suppliers should be managed first.

For example, if you have limited resources available for managing your supply chain, then it makes sense to focus on your tier 1 suppliers since they’re providing products and services that are critical to your operations.

It also helps when deciding which products or services to outsource—you may outsource a product from a lower-tier supplier simply because it’s not as important as something supplied by a first-tier supplier.

Why It’s Important to Know Your Different Suppliers

Companies need to know who their suppliers are and what services they provide. Knowing your suppliers can have far-reaching implications for a business, from quality control to legal ramifications and ethical concerns.

First and foremost, knowing your suppliers helps to ensure product quality. If you’re working with multiple faraway vendors, it isn’t easy to maintain control over the materials being used or processes that take place in manufacturing.

Quality assurance is especially important when it comes to food safety.

Ensuring that all ingredients are sourced from reputable suppliers is vital for maintaining a product’s health and safety standards.

Another key consideration is how ethical a supplier’s practices are, especially because today’s consumers are focused on social responsibility.

Does the supplier employ fair labor practices? Are there any cases of human trafficking or other unethical activities associated with them?

Companies should aim to form relationships with suppliers that uphold ethical standards and regulations to avoid becoming complicit in any wrongdoing by association.

Legal issues can also arise when dealing with suppliers if they fail to comply with relevant labor laws or other regulations related to their business operations.

Companies need to have an understanding of their liabilities regarding third-party contractors so as not to be held responsible for any infractions on their part.

Considering environmental sustainability is another factor when vetting potential vendors.

Companies need to determine how much energy suppliers use, whether they produce waste responsibly, and whether they commit resources toward reducing emissions or developing renewable energy sources like solar power or wind energy generation.

Additionally, businesses should look into a prospective supplier’s ESG Index score, which measures its ESG performance across different industries—an important metric when selecting partners who subscribe to sustainable practices and values.

Cybersecurity is another point worth mentioning here: no matter how secure your internal systems may be, if you’re working with an insecure third-party vendor, you could still be at risk for data breaches that could damage your reputation or lead to financial losses due to stolen information or ransomware attacks.

Suppliers must have robust security protocols that meet industry standards for companies to feel safe working with them digitally.

Understanding who you work with as a company is essential for ensuring compliance with legal regulations, maintaining ethical standards, protecting against cyber threats, and contributing toward more sustainable business operations—all while maintaining high-quality products and services according to customers’ expectations.

To ensure these aspects are taken care of properly, businesses need knowledge of their supplier networks to properly vet potential partners before engaging in any contracts or agreements.

Defining Your Supply Tiers

The first step in categorizing suppliers is to define your tiers according to your specific needs. Each company will have different criteria for what makes a tier 1, 2, or 3 supplier based on their unique requirements.

Some factors that should be considered when defining levels include price points, quality standards, delivery times, customer service ratings, and payment terms. It’s important to define these criteria upfront so that all stakeholders know what they are looking for in each tier.

Depending on your industry and end product, it’s possible to have more than three tiers.

No two businesses are alike, so supply tiers should be customized your needs.

Evaluating Your Suppliers

Once you have defined your tiers, it’s time to evaluate your current suppliers against those criteria.

This is where data analysis comes in handy – collecting the right data, and running reports can help you make informed decisions about which suppliers should move up or down a tier based on their performance over time.

Ensure you gather information from multiple sources, such as customer surveys and financial statements, to get an accurate picture of each supplier’s performance.

Creating Strategic Partnerships

Once you have categorized all of your suppliers into tiers, it’s time to start creating strategic partnerships with them.

Tier 1 suppliers should be highly prioritized – focus on building strong relationships with these key partners so that you can get the best possible pricing and terms without sacrificing quality or delivery times.

For Tier 2 and 3 vendors, establish clear guidelines for working together but don’t forget about them altogether – they may be able to provide valuable services at lower prices or with shorter lead times than Tier 1 vendors.

Understanding how to classify suppliers into different tiers is essential for effective procurement category management.

By understanding how each tier works and what criteria should be used for assigning them, you’ll be able to manage your supply chain better to ensure maximum efficiency and cost savings for your organization.

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What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our Vendor Management Solutions page to see how Planergy can help strengthen relationships with keys vendors, monitor performance, and ensure vendor compliance. .
Learn about us, and our long history of helping companies just like yours.

2. Download our “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Supplier Tiers: What’s The Difference Between Tier 1, Tier 2, and Tier 3 appeared first on Planergy Software.

Hyperautomation: What Is It and Why It’s Important

Lyle Del Vecchio — Thu, 06 Oct 2022 08:48:56 +0000

Download a free copy of "Preparing Your AP Department For The Future", to learn:

How to transition from paper and excel to eInvoicing.
How AP can improve relationships with your key suppliers.
How to capture early payment discounts and avoid late payment penalties.
How better management in AP can give you better flexibility for cash flow management.

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Hyperautomation: What Is It and Why It’s Important

Category

Business Strategy

Written by Lyle Del Vecchio
15 min read

Tags

Business Process Automation (BPA)Business Process Management (BPM)

Last edited

July 2, 2024

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What Is Hyperautomation?

In the context of automation, hyperautomation is the practice of identifying and automating as many business processes as possible.

While many organizations mistakenly believe that hyperautomation can be achieved with just one technology, it is a combination of technologies, orchestrated in an optimal manner.

Examples of such technologies include artificial intelligence, machine learning, robotic process automation (RPA), and low-code tools.

Automation vs. Hyperautomation

With the increasing importance of customer experience in the insurance industry, businesses must implement technologies that make customers’ lives better.

Hyperautomation has helped the finance and banking sectors transform many of their core processes, enabling them to meet stringent compliance requirements and remain competitive.

The retail industry has seen great improvements with AI-based hyperautomation, including the ability to streamline order processing and customer recognition. Hyperautomation also reduces errors and improves overall processing time.

The key to hyperautomation is to standardize business processes.

Without these, automation is only a convenience, and businesses will find themselves limited.

A process that runs 30 or 40 ways cannot harmonize with other processes, and enterprises will suffer from significant instability.

For this reason, a well-designed process is critical for the ROI of hyperautomation. Moreover, a well-developed strategy will ensure the effectiveness of automation.

The goal of digital transformation is to automate as much as possible, but if you don’t have the necessary resources to do so, you may end up spending a lot more than you have.

This is why automation is important for digital transformation, but hyperautomation is an additional layer.

It builds upon automation to make processes easier and more effective. Companies that invest in automation should consider investing in software that helps visualize current states and modernize BPA.

How To Get Started with Hyperautomation?

One of the common misconceptions about hyperautomation is that it’s too expensive.

Whether you’re building a new software system or automating an existing process, you must choose the appropriate tools and technologies to maximize your ROI.

For example, while hyperautomation can help you reduce operational costs, it can also create risks, ranging from brand and compliance risks to the cost of errors.

It’s, therefore, crucial to invest in training your team from the very beginning.

RPA is the cornerstone of hyperautomation. This is a method of automating tasks by a bot or software program that mimics human activity.

These programs can replicate the steps that a human user would take to access data and complete a task, including logging into a system, retrieving data, and entering information into a database.

However, a single bot can only do a particular type of task. Using a network of bots can perform several repetitive tasks at the same time.

In addition to combining RPA and AI technologies, hyperautomation is an entire framework that can automate any business process. By combining these tools, it is possible to achieve end-to-end automation.

The process of hyperautomation begins with RPA and continues with a series of tools to scale and augment its automation capabilities. With this kind of advanced automation, you’ll be able to automate even the most complex and difficult processes across business operations.

Start with Analysis
Before you do anything else, use process mining and process discovery to get insight into your current business processes, workflows, and environment. This will help you understand where your gaps and bottlenecks are, to ensure you rebuild better business process management with your automation tools.
To get the best view of your existing processes, create a digital twin, or a duplicate model of your process. The digital twin will use technology to duplicate the ecosystem for improved process visualization so you can more easily see areas of improvement to create more efficiency moving forward.
Identify Structured and Unstructured Data
Determine the inputs and data you’ll need to accomplish the processes.
Predict Outcomes
Make predictions about outcomes in terms of return on investment (ROI) and efficiencies.
Research Automation Platforms
Determine the platforms and automation technologies that will best serve your digital process automation needs. Leverage as many tools that already exist as possible, such as machine learning, optical character recognition (OCR), and natural language processing (NLP).
Implement Automation Initiatives
Once you know what you’re going to do and the tools you’ll use to do it, it’s time to implement your chosen hyperautomation technology to see it in action. As you see results, you can further scale automation for more process optimization.
Use AI Tools
Employ artificial intelligence tools to handle your chosen tasks, using technology such as low-code or no-code software. This can reduce the challenge of setting up the workflows, requiring lesser technical knowledge and quicker deployment.

“Using RPA and AI, organiztions of all sizes across all sectors can automate the customer journey from end-to-end.”

Benefits of Hyperautomation

With the adoption of this technology, organizations can scale their operations according to customer and employee demand.

This translates to improved work quality and increased employee engagement.

The technology also facilitates digital transformation of organizations and increases their return on investment.

The benefits of hyperautomation extend to government agencies, where the lack of automation is causing them to rely on disparate legacy systems and slow decision-making processes.

While RPA enables people to automate tasks, hyperautomation allows bots to perform these tasks.

Not only is this technology future-ready, but it also allows machines to read into business processes and improve them.

In addition to reducing human error, hyperautomation also keeps an enterprise’s technology infrastructure up to date, ensuring that business processes continue to be profitable. In fact, hyperautomation is a business necessity.

Another benefit of hyperautomation is that it enables business users to automate long-tail tasks with minimal technical knowledge. Hyperautomation tools democratize bot development and enable non-technical employees to automate simple as well as complex processes.

Not only do they increase productivity, but they also increase consistency, freeing up IT staff.

By eliminating human error and reducing the need for human intervention, hyperautomation also increases efficiency, improves quality, and frees up valuable time.

Challenges of Hyperautomation

Organizations should not make the mistake of assuming the latest automation technology is a one-size-fits-all solution. They should be strategic about their automation investments and realistic about the impact of emerging technologies.

To begin, an organization must develop a comprehensive list of business processes. To do so, it should also determine which processes are more important than others.

Hyperautomation relies on a siloed architecture. If the enterprise doesn’t have a digital strategy, hyperautomation will likely be a burden instead of an asset.

For example, a siloed architecture can lead to technical debt, unsustainable IT architectures, and data issues.

Ultimately, hyperautomation is a means to break down siloes and improve the quality of services and products provided to users.

Another challenge of hyperautomation is that employees may be wary of being replaced. In addition, organizations may feel ill-equipped to support a hyperautomation strategy, due to limited resources and poor quality data.

To address employee concerns, businesses can offer training programs in the use of hyperautomation and share best practices in the implementation of this technology.

Further, organizations can consider hiring additional human resources to help implement hyperautomation throughout the organization.

Common Use Cases of Hyperautomation

Healthcare

Automation can make the healthcare industry more profitable. It can significantly improve the patient experience data collection accuracy.

Healthcare organizations can hyperautomate cycle times, patient interaction, document collection, and data processing making it easier to gather more precise data for treatment plans.

It’s also possible to automate:
- Medical record and data management
- Operational analytics
- Patient preauthorization
- Claims processing
Life Sciences

Life sciences organizations can easily automate:
- Back-office productivity
- Regulatory compliance
- Product safety issue tracking
- Supply chain management
- Clinical trial data
- Lifecycle management
Banking and Finance

Banks can reduce costs and improve efficiency by automating:
- Customer service
- Loan origination
- Customer onboarding
- Regulatory compliance
- Data migration
- Credit decisions
Insurance

Insurance companies can reduce costs while improving the customer experience with real-time automation of things such as:
- Claims processing and administration
- Claims prioritization and assignment
- Audit management
- Enrollment and eligibility
- Report Automation
- User information updates
Supply Chain and Manufacturing

Automate tasks such as:
- Purchase to pay cycle
- ERP processes
- Inventory management
Public Sector

Businesses in the public sector can automate:
- Mission processes
- Financial processes
- Procurement
- Human resources
Retail

Retail, with ecommerce in particular, is a prime industry for intelligent business process management with plenty of automation opportunities.

With automated order processing and custom loyalty programs, hyperautomation with AI can help streamline a variety of previously time-consuming tasks, such as targeted email marketing, social media ad placement, customer service, and facial recognition when customers enter a brick-and-mortar store.

Business owners can also use hyperautomation to track and analyze marketplace data to keep prices competitive and address customer feedback quickly, for faster decision making, better revenue, and more profitability.

The Future of Hyperautomation and Its Impact

The future of hyperautomation is bright, and it will have a profound impact on businesses and workers.

Intelligent process automation will enable businesses to increase efficiency, accuracy, and productivity.

It will also enable businesses to reduce costs and compete more effectively in the global marketplace.

Workers will benefit from increased job security and higher wages as businesses compete for their skills.

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What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our Workflow Automation Software page to see how Planergy can digitize and automate your processes saving you time and money.
Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Preparing Your AP Department For The Future”

Download a free copy of our guide to future proofing your accounts payable department. You’ll also be subscribed to our and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Hyperautomation: What Is It and Why It’s Important appeared first on Planergy Software.

Robotic Process Automation in Finance

Lyle Del Vecchio — Tue, 07 Jun 2022 14:08:38 +0000

Download a free copy of "Preparing Your AP Department For The Future", to learn:

How to transition from paper and excel to eInvoicing.
How AP can improve relationships with your key suppliers.
How to capture early payment discounts and avoid late payment penalties.
How better management in AP can give you better flexibility for cash flow management.

Download Free Copy

Robotic Process Automation in Finance

Category

Finance

Written by Lyle Del Vecchio
18 min read

Tags

Business Process Automation (BPA)Business Process Management (BPM)Technology & Software

Last edited

June 24, 2024

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Whether in response to an industry shift, market hiccups, or a single competitive threat, finance leaders and professionals are stepping back to reevaluate their accounting and finance systems, operations, and business processes.

Leaning on technology, companies are engaging in digital transformation by employing Robotic Process Automation or RPA to automate and simplify processes; drive greater efficiency; and leverage data to inform smarter and faster decision-making.

Like other areas of business, finance is filled with repetitive manual tasks that are ripe for automation using technology.

Defining Robotics Process Automation

Although there are various software platforms on the market designed to help ease finance and accounts payable challenges, many tasks are still done manually.

This may be a result of a lack of strategic solutions, a fear of trusting tasks to tech, or budget concerns.

However, global events and market shifts have provoked an expressed interest and need for digitization, including automation, leading to the adoption of robotics process automation.

Growing as a popular solution in finance and accounting, RPA refers to software technology or “software robots” with artificial intelligence (AI) and machine learning (ML) capabilities, allowing it to autonomously emulate human behavior; the “software robots” have the ability to learn and complete a high volume of rules-based, repetitive tasks and business processes.

Software bots, like people, can interact with any application or navigate any systems.

They just have the capacity to operate much faster, with 100% precision and reliability, around the clock – without the need for bathroom or coffee breaks.

Along with RPA, finance professionals should be aware of both business process automation (BPA) and digital process automation (DPA) – two commonly used automation technologies that robotics process automation can be paired to optimize and streamline a digital transformation.

Other Process Automation & AI

RPA vs BPA

BPA refers to the use of technology to automate complex, multi-step workflows, typically very specific to a company’s core business functions. As one step of a workflow is completed, the next step is automatically initiated.

Further, business process automation has the capability to work across numerous enterprise systems and applications to get the job done.

BPA and RPA are similar in that both technologies aim to lessen the manual processes, offloading the work to computers.

An important difference to note is that a RPA deployment typically has a lower cost, given its narrow scope of automation (tasks vs multi-step processes).

Also, when it comes to complexities, BPA involves coding and development (ie. integration, database access, APIs), often requiring the role of an IT department. RPA uses minimal to no–code features, empowering users to create their automation tools.

Overall, the good news is RPA and BPA can work in tandem to boost efficiencies and enhance digital transformation initiatives within the financial space.

RPA vs DPA

Often confused with BPA, digital process automation technology, offers dual power by automating processes from end to end, and optimizing common workflows that involve external human interactions (ie. sales, management).

From purchase orders to loan and credit approval, to collections, DPA is used to eliminate friction, increase speed, create rich customer experiences, and augment efficiencies within companies.

In contrast to robotics process automation, DPA is generally used for longer, more complex processes that contain a number of decisions that RPA bots would find difficult to handle.

Moreover, just as the case with BPA, companies can couple a RPA platform with DPA deployments – RPA bots would be responsible for the routine, laborious tasks within the larger DPA-focused processes.

RPA vs AI

Separately, RPA and AI are quite powerful, but leveraging them together is undoubtedly advantageous to any financial institution or accounting department – from streamlined AP workflows to accelerated efficiency, to cycle time reduction.

Robotics process automation software, as mentioned above, performs monotonous tasks, at a level of accuracy, speed, and scale that humans can’t compete with. However, it is strict in its capabilities; RPA bots can mimic human behavior, but they have no decision-making or judgement abilities.

Hence, the need to implement AI to do the thinking.

When deployed together, artificial intelligence is the “brains” behind RPA’s bots.

With a growing CAGR of 30.9% from 2021 to 2030, it is clear that the benefits of RPA or potential benefits speak for themselves. In fact, Gartner says 80% of financial leaders have implemented or have intentions to implement robotics process automation.

RPA in Finance

According to Deloitte’s December 2020 Global Intelligent Automation survey, 73% of global organizations have adopted the use of automation technologies, up from 2019’s 58%.

While there are subtle nuances and major differences in purpose, requirements, capabilities, and outcomes regarding automation technologies, the word “automation” has become a buzzword to include all computer technologies that enable machines to perform human tasks.

Despite their distinctions, the finance space continues to adopt automation and remains ripe for disruption. In Analytics Insight’s latest survey, over 55% of BFSI companies (banking, financial services, and insurance) identified RPA as a key driver to improve process efficiencies and service quality, and have plans to deploy it by 2025.

While RPA is being implemented, hyperautomation for most organizations is not yet on the horizon.

The Benefits of RPA in Finance

Mirroring the upward growth of global finance automation adoption, the RPA market within the financial services industry is set for tremendous growth over the next decade.

More specifically, the global RPA in financial services market size is forecasted to reach nearly $5 million by year 2030 (valued at $341 million in 2020), per a recent report by Allied Market Research.

With a growing CAGR of 30.9% from 2021 to 2030, it is clear that the benefits of RPA or potential benefits speak for themselves. In fact, Gartner says 80% of financial leaders have implemented or have intentions to implement robotics process automation.

Due to the high-volume of routine, repetitive, and mundane tasks in finance; RPA’s usage can have a vital impact on increasing the effectiveness of finance functions and accounting practices.

Here are seven major benefits of implementing finance automation:

Saves time and money: Accenture estimates RPA can minimize the time it takes to complete specific tasks up to 90%. Likewise, robotics automation may realize a cost-savings up to 80%.

Minimize human errors: Humans are simply prone to mistakes, especially when manually processing invoices or sorting Excel spreadsheets. Because financial RPA is very systematic and streamlined in the way it handles tasks, it eliminates errors.

Scalability: RPA enables companies to scale operations seamlessly. RPA bots can manage and respond to volume requests or any other programmed tasks in record time – without needing a break.
Low cost startup: Implementing RPA in finance does not require any significant modifications in infrastructure, as it’s a layer that sits on top of existing applications (UI layer). Therefore, companies are not faced with excessive startup costs.

Better decision-making: Robotics process automation can be leveraged to collect real-time data (extracted from legacy and new data from existing systems), which offers deeper insights about problems, inconsistencies, and opportunities for growth.

Compliance & risk reporting: In finance, remaining compliant requires a high level of detail. Robotic automation solutions allow companies to generate full audit trails for every process to ensure accuracy, and decrease business risk.

Transparency: Typically, financial processes are often manual, and involve multiple channels and people. Many times, the left hand is unaware of what the right is doing, and vice versa. Mistakes are made and the ball is dropped with no one claiming responsibility. RPA’s structured processes change that.

Use Cases for RPA in Finance

Here are six opportunities highlighting the use of RPA to automate labor-intensive finance processes; all demonstrating an almost immediate ROI.

Accounts payable: AP is a critical, repetitive function of finance teams, which is time-consuming when done manually. Not only do employees need to validate the fields, they have to digitize vendor invoices, then process the payment.

When RPA is utilized in AP Automation Software, incoming invoices are distributed to the appropriate recipient automatically. As well, late payments can be avoided by scheduling reminders.

Data management: Data is vital in every industry, especially finance and accounting. Robotics process automation is a great solution to improve data management. RPA bots can be tasked to easily move, collect, and transfer data between systems to execute processes, conduct analysis, and generate insightful reports.

Know Your Customer (KYC): Becoming more prevalent in the digital age, finance departments and institutions are enlisting KYC to verify customers’ identities, and assess and monitor customer risk. Not only is KYC costly in time, many companies are faced with compliance sanctions.

Leveraging and incorporating RPA into KYC protocols will accelerate customer onboarding and minimize errors, while enhancing overall customer UX.

Reporting: Financial reporting requires preciseness, particularly when providing reports and forecasts to stakeholders.

From P&L, income statements, and variance analysis to balance sheets, regulatory/management, and reconciliation reports, RPA can efficiently gather and analyze data from diverse sources, present it in a coherent format, and generate highly accurate reports.

Discrepancies & inaccuracies: Bad data can spread across multiple systems like a wildfire, inviting the need for significant data cleaning.

Robotics process automation has the capacity to scan data, identify issues across systems, and alert an employee to review.

What’s more, the RPA bot, by utilizing multiple rules-based processes, can determine the source of inconsistencies and correct the issue programmatically, across all the affected systems.

Combat fraud: In accordance with recent statistics, the anti-money laundering process is “highly manual”. Analysts are said to spend only 10% of their time on analysis, while up to 75% goes towards collecting data and 15% is allotted for data entry and management.

Because bringing money laundering activities to a halt is time-sensitive, RPA technology would be a great solution.

For instance, rules could be designed to reduce analysts’ time – freeing them to focus on more pertinent tasks.

Data entry can be automated using data capture and input, as is the case with AP Automation software. Or, the rules could be set to flag a potential threat, if a specified number of transactions were made within a specified period of time.

RPA in Finance Best Practices

Investing in finance automation may yield unexpected opportunities to outperform competitors, improve employee engagement, reduce costs, and scale.

Follow these steps to get started with RPA implementation:

Audit & assess: In order of priority and complexity, list all of your high-volume, recurring processes that require human intervention.

Identify & document: Refer to the list, omit anything useless, then document every single step involved in each process, along with the person(s) responsible.

Research & choose: Consider the type of robotics process automation you require. Do you need a basic level of automation or an advanced RPA software that includes ML capabilities? Is there a dedicated software for the tasks you are looking to address? Create a list of vendors and reach out with your questions and concerns, or for additional information.

Be sure to choose a reputable vendor with experience in your industry and preferred RPA tech stack. Make sure you are 100% onboard with moving forward.

Be patient: Automation can be time-consuming upfront; it’s a gradual process. It could take a few months to automate simple processes from scratch, and up to a year for more complex processes.

Also, keep in mind legacy systems may be a challenge to automate.

Be practical: It is common practice to start small with parts of selected processes, and allow employees to intervene when automation isn’t applied yet.

As RPA implementation continues, employees can be phased out.

However, they may still need to monitor the results and take over from time to time.

Enhance Your Finance Processes With RPA

The age of robots is here, as the future is now.

The companies that take the time to educate themselves on the benefits of process automation technologies and invest in software like RPA, will be the ones that will future-proof their growth and remain competitive in the marketplace.Fac

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1. Use Planergy to manage purchasing and accounts payable

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Visit our “Solutions” page to see the areas of your business we can help improve to see if we’re a good fit for each other.
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2. Download our guide “Preparing Your AP Department For The Future”

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The post Robotic Process Automation in Finance appeared first on Planergy Software.

The Challenges of Business Process Automation And How To Face Them

Lyle Del Vecchio — Wed, 20 Apr 2022 15:36:09 +0000

Download a free copy of "Preparing Your AP Department For The Future", to learn:

How to transition from paper and excel to eInvoicing.
How AP can improve relationships with your key suppliers.
How to capture early payment discounts and avoid late payment penalties.
How better management in AP can give you better flexibility for cash flow management.

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The Challenges of Business Process Automation And How To Face Them

Category

Business Strategy

Written by Lyle Del Vecchio
13 min read

Tags

Best Practices & Tips Business Process Automation (BPA)Business Process Management (BPM)

Last edited

June 24, 2024

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Business process management (BPM) is a relatively complex but necessary undertaking for companies of all sizes.

Part of the way to get the most bang for your buck is to invest in business process automation, or BPA.

BPA can be broken into three phases:

Phase 1: Getting Started
Phase 2: Aiming for Success After You’re Up and Running
Phase 3: Reviewing and Adjusting

Most businesses are within the first two phases because of different challenges that come up during the digital transformation. It’s only when properly implemented that you can truly reap all the benefits of business process automation.

Let’s take a look at 9 of the biggest challenges businesses face with BPA.

Automation Won’t Fix Poor Processes

BPA and procurement automation will do wonders for your organization. It can help you make things more efficient, save money, and free your staff for more value-added activities.

But, if your processes are broken, to begin with, it won’t do you any good at all.

Automating a bad process still leaves your business vulnerable to all kinds of issues.

To be successful, you must focus your efforts on your long-standing processes that have established rules and data inputs.

Put your attention on the processes that don’t need extra coordination between multiple departments and teams. This way, you can deliver real results in a shorter period of time.

Limited Adoption Throughout the Company

For the adoption of new technologies to really work to better your company, you need to get everyone on board to use it. But more importantly, everyone must use it consistently. Change is difficult, but not impossible.

Before diving into the implementation stage, make sure you have executive buy-in. Getting key stakeholders on board with the process is key to full adoption. Your stakeholders are the real evangelists here, to help you spread the word and get individual departments involved. They will also help make sure that your initiative is aligned with your overall business strategy and goals. They’ll also help you with change management as you work through process optimization.

Keep the change management process transparent and put your people first. Talk with your employees to make sure you’re addressing their concerns. This also helps them feel like they are part of the project’s success, which strengthens engagement and adoption.

Deploying Confidently

Technology deployment is where many businesses spend a lot of their time. It’s somewhat ironic that the technology intended to free up time and boost productivity poses the greatest challenge.

Before you make any changes, it’s crucial to know the payoff you can expect. It’s a good idea to use technology that allows you to simulate processes based on your data. Using this, you can see the exact value you can bring to your business, along with any potential downstream bottlenecks and other issues that could come up as a result of the automation. These simulations can help you make changes with confidence before you push the first automation live.

Your business needs will always evolve. Before you begin process automation, examine your actual processes to ensure you build efficient workflow automations.

Using a One-Size-Fits-All Solution

Automation is sometimes used as a catch-all when it refers to multiple types of tech. For instance, there’s robotic process automation or RPA, intelligent workflows, execution management systems, and low-code or no-code application and integration platforms. There’s also process mining that powers intelligent automation.

Using a one-size-fits-all approach can set you up for failure before you even get started. Take the time to match the automation technology to the need.

Technology like RPA is great for taking care of your basic repetitive tasks, but it is often not enough for more complex, time-consuming tasks.

If you’re automating tasks that are part of larger processes, make sure to examine the underlying processes beforehand. If not, you’ll just be automating the inefficiencies in your current system, which won’t solve anything.

Slow Adaptation for Remote Work

As the pandemic took hold, we saw a major increase in automation across manufacturing and supply chain companies. Though the world is starting to resemble “normal” as we navigate the pandemic, many people are still working remotely. That leaves many companies that are still adapting collaboration practices alongside the core activities their businesses rely on.

If working remotely has significantly affected your business processes, then you need to find opportunities to implement automation within content services. Prioritize ease of use for each employee.

Law firms, for instance, heavily rely on the ability to share, review, edit, and sign documents. Automated workflows that pull documents from DocuSign and send push notifications to Slack help to keep everyone up to date with what’s going on with each contact and agreement without additional work.

Tackling Too Much at Once

Acquiring powerful automation tools is often the result of an equally powerful wish to solve complex, large process issues, or to overhaul everything at once. This temptation often proves to be too much for many companies, leading to too many projects getting mixed up in complicated workflows that frustrate everyone.

If this happens, a company’s enthusiasm and support for automation and more widespread digital transformation will dwindle, and fast.

To keep things moving, start small, but think about the bigger picture. Start with one simple process so that your business can understand the challenges of business process automation. Learn the lessons quickly, make the changes quickly, and you’ll find yourselves becoming experts.

After you’ve done that, and found ways to overcome the most common pitfalls associated with introducing BPA into your organization, you can move confidently to transforming the bigger, more complex processes.

Systems and Infrastructure Integration

Implementing automation initiatives isn’t something you can do without a scalable and flexible infrastructure. Integration and automation go together because most business processes will touch multiple systems. You must be able to seamlessly connect systems across your workflows.

Avoid on-premises infrastructure that limits you with automation roll-outs, ease of use, and scalability. You’re much better off using cloud-based solutions. Not only are they easier to scale as your business grows, but you save time, money, and hassle compared to an on-premise version.

Look for an automation solution that makes it easy to integrate with your current systems. Whether you’re connecting APIs or apps, ideally, you need to be able to make the connections with a few clicks, rather than code. It should be something where you can easily visualize your integrations and workflows.

Success Isn’t Defined Ahead of Time

When you’re excited about making changes and streamlining your business processes, it can be easy to dive into implementing it. But if you don’t take the time to define what success looks like ahead of implementation, how will you ever know that you achieved success.

Even if your project seems to be going well and your team is feeling the positive impact of automation, if you don’t have success metrics in place, it will be hard to demonstrate the ROI to your stakeholders. That will come back to bite you if you want support for future automation projects.

Take time to define your specific success metrics – whether it be risk reduction, cost savings, increased productivity, or better customer satisfaction – or a combination thereof. This gives you a way to quantify how much value the automation efforts add to your business.

For instance, if you use automation software to handle procurement and invoicing, you’re capable of processing a high volume of purchase orders and invoices without human error. Because of this, success metrics could be things like:

AP department time savings
Cost-savings from early payment discounts
Reduction in maverick spend

Not Planning Ahead to Scale

If you’re too focused on the short-term, it can be difficult to implement process automation solutions that will scale with you as you grow. You run the risk of building the project for s certain number of users on your current IT structure and ending up with something that lacks flexibility.

Yes, it’s true that business leaders want to see quick returns on their investments, but if those quick wins prevent you from reaching your long-term objectives, they won’t be happy.

In the beginning, create a plan for how you will scale the project as your company grows. That’s another reason to use cloud-based solutions. You can scale them up and down as you add or remove team members, based on your current business needs.

By being aware of these eight challenges, you can adjust your implementation plans according to your use case. You can create a plan of action to address each potential challenge you face, working methodically to implement process automation in a way that keeps everyone happy.

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What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our “Solutions” page to see the areas of your business we can help improve to see if we’re a good fit for each other.
Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Preparing Your AP Department For The Future”

Download a free copy of our guide to future proofing your accounts payable department. You’ll also be subscribed to our and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post The Challenges of Business Process Automation And How To Face Them appeared first on Planergy Software.

Supplier Management Best Practices

Lyle Del Vecchio — Thu, 24 Mar 2022 13:28:05 +0000

Download a free copy of "Preparing Your AP Department For The Future", to learn:

How to transition from paper and excel to eInvoicing.
How AP can improve relationships with your key suppliers.
How to capture early payment discounts and avoid late payment penalties.
How better management in AP can give you better flexibility for cash flow management.

Download Free Copy

Download PDF

Anyone responsible for a business’s procurement knows that supplier management is a major part of the job.

When done well, it can make you a company superstar. But when managed poorly, it can add an extra layer of stress.

Poor supplier management can cause a number of issues such as:

Missed savings opportunities
Supplier performance issues as a result of unclear requirements and a lack of oversight
Incapable of adapting to change within the organization or scale quickly enough
Unable to anticipate and react to price changes and market fluctuations/volatility
Heavier workload because of ineffective and complex processes

Working to build a strong supplier management process enables a company to mitigate the risks and ensure their supply chain operates smoothly while meeting KPIs.

As you work to build the right supplier management system for your business, consider these best practices.

Determine Business Requirements

Procurement is about more than cutting costs and trying to find the least expensive deal. And the ideal World, procurement needs to be business-driven and work alongside your overall company strategy.

This involves smart asset utilization, making efforts to mitigate risk, and working to ensure undisrupted supply so that your company can continue to grow.

To execute this well, cross-team communication is essential.

The only way you can answer your procurement strategy is properly aligned with the rest of your business to accomplish goals is by getting input from all teams.

It’s only when their procurement team understands what the business needs that they will be able to avoid mistakes in choosing new vendors and negotiating deals.

By properly aligning your business goals, you can also help with measuring vendor performance and prioritizing them.

Develop a Vendor Management Policy

A vendor management policy is a document that tells senior management and the board members about all of your vendor management activities.

The more comprehensive your policy is, the better as it serves as the foundation of strategic and robust management practice.

The best way to ensure you have a solid vendor management policy is to form a purchasing committee.

This committee should be made of people such as the vendor manager and executive, unit managers, and any other key stakeholders.

The committee should regularly discuss policy, performance, and refocus in response to any changing conditions.

The policy must outline who’s responsible along with a general outline of how the department works, and the oversight standards.

Your vendor management policy should be written as a form of document.

Management needs to improve approve the policy which outlines how you will keep stakeholders informed.

Your company’s purchasing strategy must be aligned with your overall strategy in order to keep your company competitive.

The vendor management policy document should also outline the ideal number of vendors based on the categories you established.

Consider risk factors, how diverse your requirements are, and how Dynamic your Market is. After you make this calculation, your vendors will give you a competitive advantage.

The document should also outline a process for vendor review and selection. It should include the parameters that make sense for your company so that you can move forward when planning site visits and auditing requirements.

Your vendor policy should also help to establish your risk assessment principles including Financial, legal, and information security risk.

As you verify vendors, look for independent documentation such as bank statements and tax records. Depending on how big your company is, you may need to invest in a risk assessment professional or establish a risk assessment committee.

This policy will also include the metrics you want to monitor.

These KPIs should include data that you capture and measure objectively as well as contextual factors and qualitative observations.

Start Business Relationships Off with a Solid Contract

When you create vendor contracts, you need to make sure they clearly outlined responsibilities.

As you draft these contracts, make sure they follow your vendor management policy guidelines.

Define your scope of work (SOW) or service-level agreements (SLAs) outside of your boilerplate policy document. You need to include vendor-specific agreements that outlined the details to prevent issues in the future.

SOWs and SLAs document established the thresholds your vendors are required to meet.

They also include performance expectations, data breach management details, compliance requirements, and corresponding penalties for failure to operate within those confines.

Your contract should also include information-sharing expectations so that you can effectively work collaboratively with your vendors. You need to share information and priority as part of the agreement.

You should include your vendor strategies, objectives, plans, organizational details, and information about your tech stack.

You may also wish to include your organizational structure, your interest in and commitment to your customers, and your challenge areas. You may also include the vendor’s capabilities and investment areas.

Your contract should also include clearly delineated payment terms that describe the cost of services and products, the payment schedules, payees, and any late payment penalties.

Any U.S.-based vendors you do business with have to have to prove that they have a minimum of two types of insurance coverage.

They must show proof of worker’s compensation insurance, which provides wages and medical benefits to any employees injured while on the job.

They must also show third-party insurance or liability insurance to protect your organization from lawsuit liabilities and the insured vendor if someone sues it for claims under the policy coverage.

Your contract also needs to include information about fourth-party stipulations as vendors may subcontract work to others to supply products and services.

The move forward confidently, ensure that your third party identifies any fourth party subcontractors they may work with and monitors that party’s compliance with your contractual agreements.

Create and Maintain a Supplier Database

It’s crucial to own a detailed and current supplier database as this will help in planning, reducing costs, choosing new vendors, and promoting strong supplier relationships.

This database should include the following information on each supplier your company uses:

Contact details
Information on supplier capabilities
Proposals and contracts
Supplier locations in shipping coverage
Invoices and transactional information
Supplier performance data and feedback
Other deemed crucial to your business

Segment Suppliers

Take some time to develop a set of criteria to segment your suppliers to prioritize them.

This will help you determine which suppliers are most crucial for your business success so you can focus efforts on those relationships.

There are a number of ways you can prioritize your suppliers for segmentation including:

Size and type
Quality of service
Potential future value
Speed of delivery
Risk factors

Use the Kraljic Matrix to sort suppliers based on leverage items, strategic items, non-critical items, and bottleneck items. The suppliers who provide your raw materials are among the most crucial because without them, you cannot move forward with production.

After you’ve implemented your supplier segmentation, you’ll be able to choose the best supplier for every situation based on your business goals and objectives.

Use Continuing Education for Your Team

For the greatest success, you must identify areas of potential improvement and growth inside your procurement team.

Then you can devise a plan of improving individual competencies.

You can do this by setting up an in-house training program or paying for courses and creating a positive environment that encourages people to share what they know and help each other.

Clearly Define Team Member Responsibilities

Since supplier management involves multiple decision-makers and calls for cross-team cooperation, it’s easy for roles and responsibilities to get confused and blur together.

If there isn’t a clear reporting sequence, decision-making becomes difficult or impossible.

Because of this, it’s crucial to set up a concise, clear reporting chain along with a transparent workflow.

This way, each team member becomes aware of their responsibilities and how much they need to be involved.

Having a document on hand to reference can clear up any potential confusion can how to avoid internal conflicts and keep things running smoothly.

By mapping responsibilities and workflows, you can easily identify your team’s capacity and determine if you need to hire any additional staff.

Implement a Supplier Management System

Using technology and the power of Automation in your purchasing process can help improve efficiency while minimizing communication issues.

For instance, with an advanced purchasing tool like Planergy, your procurement team can quickly produce purchase requisitions and purchase orders that are automatically routed to the appropriate supplier.

You can also use Planergy to:

Store your supplier information along with their product catalogs
Order items directly from supplier catalogs
Store contracts and purchase agreements in a central location
Control budgets
Create spending reports
Control purchase approval processes and workflows

Effective supplier management is about more than strategic sourcing. It also involves risk management, supplier relationship management (SRM), and contract management.

Monitor and Assess Supplier Performance

To build successful and long-term supplier relationships, you must manage your vendor performance.

That means you need a structured and transparent evaluation system. it helps to keep your vendor relationships objective while also minimizing risks.

You can easily provide your suppliers with feedback and prompt them to act on things you need to improve their service.

This means taking the time to build supplier scorecards. A solid scorecard incorporates:

Tangible metrics to measure performance
A list of requirements for the supplier
Alignment to your compliance and policies
Alignment to your business goals

Regularly Perform Risk Assessments

You must always account for potential supply chain disruptions. As a lockdown and covid-19 pandemic has shown us, there is always room for uncertainty and volatility.

By identifying potential disrupting factors as early as possible and listing them according to their severity, your business can develop a plan of action to work around them.

Take time to identify your strategically crucial suppliers, goods, and services.

Develop a set of contingencies that can help you keep business running as usual if there are any supply chain interruptions.

Inform your team on how they need to act in those situations so they can make quick and informed decisions.

It’s smart to develop a supplier risk assessment program and evaluate the pliers with the listed mind.

As you develop your supplier risk assessment program, you should:

Assess suppliers based on risk, spend, and geography. Globalization of your supplier base can be a good thing, but it may also introduce more risk.
Validate all documents you collect on your suppliers
Adjudicate data for false positives
Consistently report on measurable compliance standards
Continually monitor your supplier performance with ongoing third-party verification of supplier information

No matter the size of your business, supplier performance management is a crucial part of your success.

Even if you’re only dealing with a handful of suppliers now, as your business grows you may need to add more options into the mix.

Nailing down a process early on helps to increase profitability by finding cost savings and helping to streamline your business processes.

Even if you’ve been in business for years and have a lot of supplier data on hand, taking the time to evaluate your current supply chain management practices can help you find ways to improve efficiency which will pay off in the long run.

Download PDF

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our “Solutions” page to see the areas of your business we can help improve to see if we’re a good fit for each other.
Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Preparing Your AP Department For The Future”

Download a free copy of our guide to future proofing your accounts payable department. You’ll also be subscribed to our and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Supplier Management Best Practices appeared first on Planergy Software.

Benefits of Business Process Automation (BPA)

Keith Murphy — Thu, 03 Feb 2022 15:59:47 +0000

Download a free copy of "Preparing Your AP Department For The Future", to learn:

How to transition from paper and excel to eInvoicing.
How AP can improve relationships with your key suppliers.
How to capture early payment discounts and avoid late payment penalties.
How better management in AP can give you better flexibility for cash flow management.

Download Free Copy

Benefits of Business Process Automation (BPA)

Category

Business Strategy

Written by Keith Murphy
13 min read

Tags

Business Process Automation (BPA)Business Process Management (BPM)Productivity

Last edited

June 18, 2024

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Benefits of Business Process Automation (BPA)

Business process automation or BPA is using technology to replace human manpower for high-volume, time-consuming, and repetitive tasks. Relying on automation in business means moving the responsibility for certain activities from humans to machines to minimize manual effort. As a result, business processes are consistent, cost-efficient, and error-proof. The time you save on these repetitive tasks can then be diverted to more valuable activities.

Business Process Automation vs. Business Process Management

BPA is a type of business process management (BPM), but not all business process management is business process automation. BPM aims to streamline workflow and improve the efficiency of each activity, whether manual or automated. Companies can use one or both Concepts to increase their revenue potential, find and reduce and efficiencies, and ultimately grow their business.

Unlike business process automation, business process management doesn’t identify specific systems, fools, or software used to improve workplace processes. Instead, it outlines strategies that businesses can use for specific tasks and policies.

BPA vs. Robotic Process Automation (RPA)

Both BPA and RPA are meant to execute business functions with automation. RPA is meant to replace human tasks with software, like robots that use rules-based tasks. RPA can be implemented as part of BPA – since the key difference between the two is that BPA addresses the end-to-end process with a more holistic approach. BPA aims to streamline all work processes within an organization for faster and more accurate decision-making. RPA is meant to help, but not disrupt existing business processes.

Benefits of BPA

Once you see the benefits of automation, you’ll want to use it wherever possible in your business. Take a look at what it has to offer.

Saves Time

Automation in business saves a lot of time. One study found that office workers spend an average of 2.12 hours a day on administrative tasks like approving paperwork, processing documents, and searching for information. BPA solutions help complete these tasks without errors and faster. Relying on BPA means that employees can use those 2.12 hours every day on other more important and more valuable tasks.

Saves Money

Did you know that organizations lose up to 30% of the revenue every year as a result of inefficient processes? that lost profits can make a huge difference in your overall bottom line. Changing to Automated Business processes where possible allows you to minimize errors so you don’t have to spend any time or money on fixing issues.

How do you know it works? businesses that have an automated process is reduced overall costs by 10 percent while also increasing their overall profits by 8% which demonstrates that BPA can effectively reduce operational costs.

Reduces Human Error with Standardized Processes

Manual processes involving multiple people can become complex quickly. Everyone has their own method, habits, and things to keep up with. If a process is to be effective, it needs to be designed correctly in the beginning.

With automated processes, everything is performed in a consistent workflow with steps that follow each other systematically until you achieve a standard outcome every time. If your business needs standardization, automation can help.=

That said, you can make changes for each individual business workflow. It ensures that no critical steps can be missed and no documents are lost. With standardization, you can reduce human error and avoid costly mistakes.

Improves Efficiency

Your processes are efficient when you achieve the best possible outcome with minimal effort. Using a series of predefined steps that are consistently performed, you have no room for deviation. Automation improved quality, communication, then visibility for more efficient task management.

You won’t have to rely on notes, emails, and calls, to share information as you can replace them with more modern solutions found in business process automation software. When your team has a dashboard that allows them to check all of the progress of their tasks, it becomes easier to manage deadlines and streamline collaboration. As a result, no details are lost in translation.

Better Scalability

As your business grows, and you hire more employees to accommodate the workload, the scope of work also grows. Manually sending 10 invoices isn’t the same as sending a thousand. The same applies to all other business processes from onboarding new customers to hiring new team members and so on.

As your business needs shift and regulatory requirements change, you can address them effortlessly with automation. This makes it easier to grow and scale your business without sacrificing quality and performance.

Creates Auditable Records

Every phase of an automated process is recorded with an audit trail. This makes it possible to keep track of who is doing what, monitor the document involved, check the time and date of when each action happened, and so on. This level of control and proves reliability and accuracy and also ensures the organization has auditable records of all business workflows. If the need ever arises, these records are easily accessible for replying to customer inquiries and demonstrating regulatory compliance.

Promotes and Ensures Compliance

Automation is about more than creating rules for document routing. It also involves setting up the appropriate security measures to protect and retain personal data and protecting confidential information.

With automation, everything operates under controls and all activity is traceable. This ensures your organization remains compliant with all relevant regulations.

Cultivates a Better Customer Experience

Your customers want convenience and quick access to what they’re looking for. With automation, you get better quality, faster, and more accurate services for clients. It’s also easier to help customers when you can easily access their information instead of chasing down paper records. Automation makes it easier to under-promise and over-deliver to improve customer satisfaction. When you have higher customer satisfaction rates, you build loyalty, trust, and ultimately give yourself a competitive advantage.

Process automation tools can take care of many daily tasks for small business. If the artificial intelligence comes across something that’s not right, it will flag it for human intervention.

Examples of BPA

To better understand how BPA can help improve business operations and operational efficiency, let’s take a look at some examples of manual tasks BPA can simplify.

Purchase Order Approval Workflows

When it comes to purchase order approval, manual processes and paper document can spell disaster. When your business is small and only has a handful of purchase orders, this approach may not seem like a bad idea. However, when you’re dealing with high volume, things will inevitably slip through the cracks and paper will get lost.

BPA steps into automatically route purchase orders to the necessary people for approval, based on the pre-established workflows. For example, if your business allows employees to request items as long as the total is under $100, the purchase requisition can automatically be approved and sent directly to the vendor. But, if a purchase order over $100 must be approved by the department head, that purchase requisition is automatically routed to the appropriate approver once submitted.

If higher PO amounts required multiple approvals, those get routed to the necessary People based on the workflow. You can also set rules so that if someone is out of the office, it goes to another person to handle approvals temporarily until the original employee returns.

With Planergy, You can build workflow automation according to exactly what your business needs with a variety of steps, dollar amount thresholds, departmental spending budgets, and so on.

Payment Processing

It’s easy to pay a single invoice, or maybe even 10. But when you’re dealing with thousands of invoices every month, manual processes just won’t cut it. You could cost yourself money in duplicate payments, late fees for missed payments, etc.

BPA solutions like PLANGERY helps in optimizing payment processing with technology like three-way matching. It will match your original purchase order against the goods received document, and against the invoice. This way, you’re only paying for what you ordered and received. If there are any discrepancies, an employee can look at them and take the appropriate action.

Employee Leave Requests

When you have a large number of employees, processing vacation and leave requests can become quite time-consuming and repetitive. With an automated system, employees can easily submit an electronic request via a web portal, which is then automatically routed to their supervisor for approval. It also makes it easy for the employee to see their current requests and available leave allowance.

You can also use business process automation solutions to take care of things like employee onboarding, client onboarding, customer support, and more.

BPA is part of the digital transformation and can help you get rid of a lot of bottlenecks in your business for improved productivity across the board. If you add cross-functional collaboration to the equation you can reach for hyperautomation as a goal.

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What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

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Visit our “Solutions” page to see the areas of your business we can help improve to see if we’re a good fit for each other.
Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Preparing Your AP Department For The Future”

Download a free copy of our guide to future proofing your accounts payable department. You’ll also be subscribed to our and notified about new articles or if have something interesting to share.

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The post Benefits of Business Process Automation (BPA) appeared first on Planergy Software.

What is Business Process Outsourcing (BPO)? Advantages and Disadvantages

Lyle Del Vecchio — Tue, 20 Jul 2021 14:40:29 +0000

Download a free copy of "Preparing Your AP Department For The Future", to learn:

How to transition from paper and excel to eInvoicing.
How AP can improve relationships with your key suppliers.
How to capture early payment discounts and avoid late payment penalties.
How better management in AP can give you better flexibility for cash flow management.

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What is Business Process Outsourcing (BPO)? Advantages and Disadvantages

Category

Business Strategy

Written by Lyle Del Vecchio
16 min read

Tags

Business Process Management (BPM)Finance Collaboration

Last edited

June 5, 2024

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Business process outsourcing, or BPO, is the practice of hiring a third party to take care of specific work processes for your business.

This can include things like your website content, your payroll, accounting, customer support, social media marketing, and many more.

BPO is most commonly used to take care of supplemental business functions, rather than core business functions. Services can either be technical or non-technical.

From the youngest of startups to the largest Fortune 500 companies, businesses of all shapes and sizes outsource processes. Demand continues to grow as new services are introduced to the market and businesses are constantly looking for advantages to help them get ahead of the competition.

BPO is usually classified as either front office or back office, depending on the kind of business process it takes care of.

Front office: These are customer-facing tasks like customer service and support, marketing, and sales.

Back office: These are also known as internal business functions. They are tasks associated with keeping a business operational, but they are things that customers do not see.

The BPO industry is classified into three categories, based on the vendor’s location:

Offshore Outsourcing: These vendors are outside a company’s own country. For instance, U.S.-based companies could use developers located in India.
Nearshore Outsourcing: These are vendors that are located in a neighboring country. For instance, U.S.-based companies could contract another organization in Canada or Mexico.
Onshore Outsourcing: This refers to vendors who are in the same home country as the contracted company. However, they can be located in different states or cities. If a company based in Jacksonville, Florida, works with vendors based in North or South Carolina, they are working with onshore vendors.

You may also see BPO classified by the types of BPO services provided. These classifications are:

Knowledge process outsourcing or KPO: The outsourced service provider isn’t just hired for its ability to handle a certain business function or process. They’re also hired to provide expertise about it.
Legal process outsourcing or LPO: This is a type of KPO specific to legal services. This can include anything from drafting legal documents to offering legal advice.
Research process outsourcing or RPO: This is another kind of KPO that is specific to research and analysis. Marketing agencies, biotechnology companies, and investment firms often use RPO for market research.

Commonly Outsourced Processes

Many of the things you can handle in-house, you can also outsource. Some of the most commonly outsourced processes include:

Customer Service: Routing calls to a call center or help desk tickets to a 24/7 support team. The goal is to provide a consistent, strong, customer experience.
Human Resources: Onboarding employees into the company system for benefits, etc. Some companies may even outsource finding people to fill positions to recruiters.
Accounting and Payment Processing: This handles a company’s financials.
Procurement: This handles helping a company get access to the products and services they need to operate.
Online Marketing and Social Media: This supports a company’s marketing and growth efforts.

Advantages of BPO

Businesses choose to outsource processes for several reasons. Some people choose to believe that businesses outsource only for the tax break, but this isn’t the only reason.

Yes, there are tax breaks for American companies that choose to relocate – whether they move to another state or a different country. But, there are no specific loopholes or tax breaks related to outsourcing.

The U.S corporate income tax is one of the highest in the developed world, coming in at 39.1%. As such, American companies can benefit from outsourcing some operations outside of the United States because of lower taxes in those countries. The U.S. pays the tax rates of their host country.

Aside from this, however, there are plenty of reasons why businesses outsource processes. Benefits of BPO include:

Decreased Costs

Outsourcing reduces costs for labor, generally when it comes to staffing and training. It reduces office space costs because the business doesn’t have to accommodate the employees.

Outsourcing means that businesses can use variable cost models rather than fixed cost models that are required when employees are part of the plan.

Able to Concentrate on Core Competencies

By outsourcing, companies can focus their resources on the main business functions.

They won’t have to stress about how well the bookkeeper and accountant are doing their jobs. Instead, they can focus on tasks that set them apart from the competition.

They can focus efforts on growing the business. These efforts ultimately increase the company’s competitive advantage and improve actions across the value chain. Focusing solely on the core business functions improves customer satisfaction and increases profit.

Improve Results in Non-Core Functions

When you work with an outsourcing organization, you’re working with experts in that particular function.

Even though it’s a non-core function for you, it is a core function for the outsourced company. They invest in top-of-the-line technology and resources, specific to their core business offering.

For instance, graphic design companies have the best technology available for graphic design.

Payroll companies offer the best solutions on the market today. This means they can deliver stellar results for many of their clients. And as their client, you get the best of the best across multiple industries, without having to invest in the tools and software yourself.

Increased Flexibility

A company that outsources functions can act faster and efficiently when it comes to risk management for adding new offerings to customers.

These companies can also adjust their internal resources so that more critical functions are covered effectively.

Expand Global Presence

Some outsourcing organizations can help customers in more than one language, 24/7.

The main company doesn’t have to take on this responsibility but can ensure customers are taken care of regardless. Outsourcing companies can help local businesses establish a presence outside their local country, too.

Improved Speed and Efficiency

Organizations that outsource tasks allow specialists to handle them. This saves time, increases productivity and capacity, and ultimately, improves accuracy.

For instance, a BPO that specializes in web design and search engine optimization (SEO) takes care of ensuring a local company’s website is built with the latest technology, best practices, and customer preferences in mind.

The local company doesn’t have to worry about getting leads because that’s what the outsourcing company does.

The local company can then handle more leads and website traffic than if they were handling all the web design and SEO tasks, too.

BPO vendors are throughout the supply chain for many industries. When used correctly, they can help a business grow.

Disadvantages of BPO

As with everything else in business and in life, there are some downsides to consider.

The outsourcing market is expected to reach $140.3 billion by 2022. For U.S. companies, businesses in the Philippines and India handle a lot of outsourcing services. India is a leader in BPO for the United States because India has a highly educated, skilled, English-speaking workforce that’s economical.

Hiring outside vendors to take care of any of your business processes comes with risks, particularly related to quality and efficiency. The industry has seen a shortage of skilled workers, gridlocks because of politics, and some trade protectionism. Aside from these, there are other risks, including:

Security Issues

If you’re outsourcing something where information systems are involved, there are communication and privacy issues. It’s harder to maintain security over your data when the information system isn’t even in the same country.

As countries have different security requirements, it may be even harder to keep your data secure. Hackers can use the internet to enter servers the same way you use the internet to access your data.

Communication Issues

Language barriers are a real issue if your company chooses to hire BPO organizations outside of your country. This can delay new processes and reduce feedback from various departments.

Ultimately, it could shine a light on bigger problems within your processes and operations. If you have customer-facing services, these language barriers may be an issue for third-party vendors.

Underestimating the Costs of Services

Organizations that use BPO to take care of tasks often underestimate their budgets. It’s the running costs that are often neglected.

Even still, there are hidden costs associated with choosing a vendor, currency conversion and value fluctuations, hardware and software upgrades, as well as internal transitions, and the potential for a decrease in productivity among workers.

Depending Too Much on Service Providers

After your company chooses a vendor to handle certain processes within your operations, that vendor becomes part of your workflow.

Your company may be subject to extra costs and decreased productivity if the vendor runs into any issues at work.

For instance, the cost of hiring works may increase. Vendors will replace their veteran employees with less-experienced workers as a way to keep costs down. The quality may suffer as a result.

Other Risks

When you outsource part of your business, there are a number of risks that depend on the structure of your company and the type of business you run.

For a large segmented company, outsourcing the back data entry may not carry much of a risk. However, a small business that relies on BPO for manufacturing will have a much bigger risk. Other risks commonly associated with BPO include:

Quality control/quality assurance
Nonlocal employees
Data breaches
Political instability
Maintaining strategic alignment
Exposure to hacking and changes in technology

Choosing a BPO Provider

When it’s time to choose a BPO company to work with, there are several things to consider.

What’s your main goal? Is it to procure products and services at a lower cost? Is it to hire labor at cost savings compared to hiring another employee?

Are you comfortable with offshore outsourcing? How will this affect your business operations? Are you comfortable with robotic process automation (RPA) being used in operations?

Ultimately, you want an organization that can support your business activities. You need an organization that can help you be more flexible, adaptable, agile, and faster.

If offshoring one or more of your office operations with a particular company won’t help you meet those goals, then it’s not the right provider.

When you make your choice, consider more than the price. Consider whether the third-party service provider can:

Adequately understand your business and industry
Meet your current requirements and scale to accommodate future needs
Meet regulatory and compliance requirements, including information technology (IT) and data privacy.
Deliver reporting metrics to demonstrate how it’s delivering on contractual standards
Work within the required geographic locales to meet your business needs and regulatory compliance.

Working with BPOs is a great way to help your business grow and scale. As you make your choices, carefully consider their impact on your business immediately and in the future.

Download PDF

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our “Solutions” page to see the areas of your business we can help improve to see if we’re a good fit for each other.
Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Preparing Your AP Department For The Future”

Download a free copy of our guide to future proofing your accounts payable department. You’ll also be subscribed to our and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post What is Business Process Outsourcing (BPO)? Advantages and Disadvantages appeared first on Planergy Software.

Business Bottlenecks: How To Identify and Fix Them

Rob Biedron — Fri, 11 Jun 2021 14:57:24 +0000

Download a free copy of "Preparing Your AP Department For The Future", to learn:

How to transition from paper and excel to eInvoicing.
How AP can improve relationships with your key suppliers.
How to capture early payment discounts and avoid late payment penalties.
How better management in AP can give you better flexibility for cash flow management.

Download Free Copy

Business Bottlenecks: How To Identify and Fix Them

Category

Business Strategy

Written by Rob Biedron
16 min read

Tags

Best Practices & Tips Business Process Automation (BPA)Business Process Management (BPM)

Last edited

June 4, 2024

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Whether it’s on the production line, part of a special project, or simply one of your everyday business processes, business bottlenecks can damage your company’s productivity, profits, and competitive performance.

Every bottleneck is a blockage cutting off the flow of your business’ lifeblood. And to deal with it effectively, it’s important to review your methodologies and workflows to identify and resolve the root causes so you can get back to business.

What Are Business Bottlenecks?

Any blockage or setback that delays your business processes can be considered a bottleneck. The term refers to the restrictive effect the neck of a bottle has on the flow of its contents.

Like their literal counterparts, business bottlenecks constrict flows. Except instead of wine or water they choke the flow of materials, data, assembly line production, and employee labor, keeping them from being used to optimal effect.

The term is generally applied to manufacturing, logistics, and information technology, but it can be used to describe any business process or workflow where capacity is exceeded by demand.

Like their literal counterparts, business bottlenecks constrict flows. Except instead of wine or water they choke the flow of materials, data, assembly line production, and employee labor, keeping them from being used to optimal effect.

Examples of Bottlenecks in Business

Understanding the root causes of bottlenecks and the places they’re most likely to occur can help you identify and address them in a timely fashion.

The two primary types of potential bottlenecks are:

Short-term bottlenecks, created by temporary circumstances. For example, if the usual supplier for a given material used in production can’t fulfill an order for some reason, having to obtain the material from an alternate vendor whose logistics aren’t quite as efficient can create a temporary delay in the production process, increasing wait times and labor costs.
Long-term bottlenecks, which are encountered more frequently. They’re generally caused by inefficiencies baked into recurring business processes. For example, a company might have trouble harvesting and using actionable insights from their month-end reporting because it’s delayed by a set of complex and time-consuming tasks that must be completed by a specific member of staff.

Each of the two types of bottlenecks can be further categorized based on its likely source: performers or systems.

Performers is a term referring to all people (including management, staff, vendors, consultants, etc.) involved in a given business process or workflow. These bottlenecks can generally be contextualized in regard to how long it takes to complete a specific task.
For example, if you know entering transaction data into the system should take around seven minutes, but the average time required is closer to fifteen, you may have a performer bottleneck.
Another potential example is performer-related, but not necessarily caused directly by performer inefficiency. A common problem for many procurement organizations is approval workflows, where tasks that take very little time actually hold up the whole process for extended periods of time. Let’s say, for example, a purchase order requires approval and is routed to the appropriate manager. However, the manager has a massive backlog of email and the form gets lost in the shuffle. Or maybe they’re on vacation, and there’s no system in place to automatically route the approval to another manager. Whatever the reason, the net effect is the same: delays in obtaining goods and services your team needs to get the job done.
Systems is a term referring to software and other technology used in completing tasks related to a given business process or workflow. While performer bottlenecks are directly related to a specific person, system bottlenecks can be traced directly to application errors, inefficient system processes, or malfunction of some kind that keep processes from reaching their full capacity.
Stressed team members, a large backlog of incomplete work, and long wait times are all strong signs of a system bottleneck.
A fairly obvious example would be a stack of unsorted goods on an assembly line, or raw materials heaped to the side, waiting to be fed into an underperforming production machine.
A more subtle example would be something like outdated or misconfigured servers slowing document processing or failing to execute contingencies for business processes.

Bottlenecks can have a powerful impact on the bottom line as well as production throughput, operations, and general business tasks, since delays significantly increase the time and expense involved.

Short-term or long, performer or system, these blockages can compromise the quality of your company’s goods and services, damage morale by increasing employee stress and frustration, and ultimately cost you precious revenue, cost savings, or long-term value through damage to your reputation, credit rating, or customer dissatisfaction.

How to Identify Business Bottlenecks

Resolving common bottlenecks is easier with the help of two methodologies of bottleneck analysis used to spot and mitigate them.

Process mapping is used to evaluate entire workflows to determine what’s working, what isn’t, and whether delays and inefficiencies are related to the entire process, or just one or two performers or systems.

Flowcharts are very effective in mapping business processes, as they can help you quickly break down even very complex processes to pinpoint the issue.

If you have a centralized software solution like Planergy, you can also use its business process management tools to fully explore and optimize your processes. Running a simulation, with the workload specified for each step of the process, can make it much easier to spot both apparent and not-so-obvious bottlenecks that need your attention.

Another potential tool to consider is the 5 Whys Method. This questioning process is designed to help team members dive deep into a problem to reveal the root causes.

Let’s say you recently had a major production delay because essential raw materials were delayed. Asking “why?” five times can quickly reveal the source of the bottleneck.

Problem: Essential raw materials arrived late.

Why? The purchase order wasn’t approved on time.

Why? The approval was delayed.

Why? The approving manager didn’t sign off until two days after the deadline.

Why? The manager was on vacation. The order hit their inbox and stopped cold.

Why? We don’t have contingencies in place to automatically reroute approvals when the primary approver is absent or otherwise unavailable.

In considering the final “Why?” you can begin to address the root cause of the bottleneck.

If you suspect the whole process is simply outdated or no longer compatible with your overall approach to business process management, a workflow analysis lets you break down the workflow, review and revise the key performance indicators (KPIs) and other metrics you want to use to measure the outcome of the workflow, and then use those metrics to monitor the workflow, making changes (or eliminating/replacing the workflow altogether) as necessary.

Again, having a best-in-class software solution in place will make this much easier and yield more accurate and timely results.

Removing Business Bottlenecks

The key to resolving bottlenecks in business is the effective use of a concept known as the theory of constraints.

Simply identify the most important constraint blocking the successful completion of a goal (e.g., a process or workflow), and then either remove or use continuous improvement to optimize that constraint.

Directly addressing the biggest limiting factor will have the biggest impact on the flow of resources, data, information, labor, etc., helping you get closer to your goal as quickly, efficiently, and accurately as possible.

To revisit our delayed shipment example, the process of evaluating the current bottleneck can actually help you prevent future ones.

Automating the approvals process with alerts and contingencies will address the biggest current constraint on the process. But let’s say your bottleneck analysis also revealed that most of the purchase order data was still being entered into the system manually.

Automating approvals for forms that might have typos or incomplete information doesn’t make much business sense, so automating the data collection, entry, and verification process in addition to the approval workflows is a smart way to kill two bottlenecked birds with one stone.

Whatever type of bottleneck you’re dealing with, you can “unclog” it in one of two ways:

Improve efficiency at the bottleneck. For example, business process digitization using a comprehensive, cloud-based procurement solution like Planergy can give you access to not only automation, but data management and analysis tools you can use to eliminate human error and boost process speed, accuracy, and efficiency to levels far beyond human capabilities.

A few of the ways you can further improve the efficiency at bottlenecks include:

Ensuring your input for the process is as high-quality as possible. Clean and accurate data for data analysis, best available materials for the manufacturing process, etc. This minimizes the risk of waste and needless repetition.
Automation is no longer merely “nice to have.” It’s become an essential strategic tool in optimizing business processes to lower costs, increase value, and boost competitive performance.
High-volume, repetitive processes that require minimal human thought, creativity, or decision making are ripe for automation. Data entry, invoice matching, and approvals are just some of the ways to clear the blockages and improve efficiency and performance.
Automate, monitor, and revise processes through continuous improvement whenever and wherever you can.
Leverage the skills of your team members to resolve process bottlenecks. Put your “A team” on the job for optimal productivity and results.
Increase capacity to increase throughput. Adding staff, updating hardware, or radically increasing process efficiency using digital tools can widen the neck of the bottle considerably.

Reduce input at the bottleneck. Reducing the complexity of the tasks leading up to the bottleneck is one way to accomplish this. Another is to find a way to eliminate the bottleneck step altogether. For example, using business process automation, you could eliminate the need for manual purchase order approvals below certain dollar amounts, speeding the purchasing process while still adhering to internal controls.

Alternatively, if a given workflow or process is producing more output than you actually need, you can redirect resources to their underperforming kin.

For example, if your production team has reached a high level of efficiency and is stockpiling a given component at levels higher than you need for assembly (generating excess inventory while they’re at it), you can adjust the process by reducing the amount of time dedicated to production of that component, or reassign staff to another assembly line where they’re struggling to keep up with demand.

Keep Your Workflows Clear of Costly Bottlenecks

They can be minor clogs or major blockages, but either way, bottlenecks are robbing your company of productivity, profits, and competitive performance.

Analyze your workflows, map your processes, and invest in the tools that will help you make and keep them free from business bottlenecks. With a proactive approach, you’ll keep your workflows running clear so you can focus on building value for your business.

Download PDF

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our “Solutions” page to see the areas of your business we can help improve to see if we’re a good fit for each other.
Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Preparing Your AP Department For The Future”

Download a free copy of our guide to future proofing your accounts payable department. You’ll also be subscribed to our and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Business Bottlenecks: How To Identify and Fix Them appeared first on Planergy Software.

Business Process Management (BPM) Archives : Planergy Software

Services Procurement: What Is It and How To Manage It

What's Planergy?

Cristian Maradiaga

King Ocean

Download a free copy of "Indirect Spend Guide", to learn:

Services Procurement: What Is It and How To Manage It

IN THIS ARTICLE

What is Services Procurement?

Types of Procurement and How Services Procurement is Different

Direct Procurement

Indirect Procurement

Goods Procurement

Services Procurement

What Is The Difference Between Goods and Services Procurement?

Steps in the Services Procurement Process

Requirements Gathering

Vendor Selection

Contract Negotiation

Doing Business

Benefits of Services Procurement

Cost Savings

Improved Quality

Faster Time To Market

Challenges in Services Procurement

Inadequate Budgeting

Unclear Requirements

Lack of Appropriately Skilled Personnel

Difficulties Managing Relationships

Wasted Spend

Security Risks

Tips For Successful Services Procurement

Set Realistic Expectations

Leverage Existing Relationships

Have an Experienced Team Member Lead the Negotiations

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

2. Download our “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Related Posts

Supplier Tiers: What’s The Difference Between Tier 1, Tier 2, and Tier 3

What's Planergy?

Cristian Maradiaga

King Ocean

Download a free copy of "Indirect Spend Guide", to learn:

Supplier Tiers: What’s The Difference Between Tier 1, Tier 2, and Tier 3

IN THIS ARTICLE

What is Supplier Tiering?

The Benefits of Supplier Tiering

What Are Supplier Tiers?

Tier 1 Suppliers

Tier 2 Suppliers

Tier 3 Suppliers

Why Do Supplier Tiers Matter?

Why It’s Important to Know Your Different Suppliers

Defining Your Supply Tiers

Evaluating Your Suppliers

Creating Strategic Partnerships

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

2. Download our “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Related Posts

Hyperautomation: What Is It and Why It’s Important

What's Planergy?

Cristian Maradiaga

King Ocean

Download a free copy of "Preparing Your AP Department For The Future", to learn:

Hyperautomation: What Is It and Why It’s Important

IN THIS ARTICLE

What Is Hyperautomation?

Automation vs. Hyperautomation

How To Get Started with Hyperautomation?

Start with Analysis

Identify Structured and Unstructured Data

Predict Outcomes

Research Automation Platforms

Implement Automation Initiatives

Use AI Tools

Benefits of Hyperautomation