Doing away with sticky notes
When we talk about technology empowering a shipper’s logistics operations, sometimes it’s easy to forget that even in 2013 the evolution from manual processes to those which are automated is still a required first step.
It’s not always about upgrading an existing system, or moving from a hosted platform to one operated in the cloud, or integrating diverse systems. Sometimes it really is as basic as going from analog to digital.
The multinational supplier of mining and construction supplies Metso recently spoke to me about how it uses a freight payment and procurement optimization vendor called RateLinx.
The logistics manager of Metso told me how RateLinx had empowered his company to choose the best less-than-truckload (LTL) carriers for its cargo at the best rates through RateLinx’s online platform, and then later automated its freight payment and audit process.
Two things stuck out in the conversation. First was how this manager admitted that RateLinx was pushing them on the technology side, urging the shipper to consider new ways to manage its rates, not just on the LTL, but on its international shipments as well.
But second was this frank admission when I asked him about how invoice exception levels differed before and after using the vendor.
“The old process we used was sticky notes,” he said, meaning the company would physically take a stack of invoices, compare it to the booking and put a sticky note on the ones where there were problems. Metso would then compile a so-called “green sheet” with all the invoices that bounced.
In every one of American Shipper’s series of benchmark studies on the procure-to-pay process, we include this caveat about the definition of manual and automated: “‘Automated’ does not mean human interaction has been eliminated. Likewise, ‘manual’ does not mean these firms do not use e-mail, fax and other technologies.”
Yet this sticky note process might just qualify as one that is well and truly manual.
“It took us a long time to clean up invoices,” the manager told me. “Now the exception rate is way under 1 percent. But you have to work at it. Anything that’s not resolved over 90 days is a process issue. It used to be either Metso was wrong or the carrier was wrong. Now, it’s not Metso that’s wrong.”
The manager had a tough time telling me what the exception rates were under the old process, precisely because the time it would have taken to figure that out using the sticky note process was beyond what the company could manage. It already had staff spending inordinate amounts of time sifting through stacks of invoices to find the discrepancies — spending more time to calculate the error rates wasn’t really an option, never mind figuring out who was at fault.
“It was over 10 percent and less than 50 percent,” he said. “But we had no feeling. I’d come to a meeting and there was a stack of invoices. I have a Master’s degree. I didn’t go to school to go through a stack of invoices.”
This example is not specific to Metso and certainly not to freight payment. One could switch out Metso and RateLinx for any shipper and vendor relationship that helps automate this process, and you come to the very first step of IT-enabling logistics sophistication.
Look, if you need encouragement to jump on the IT bandwagon, I’m not sure this column is enough to provide the impetus. And the reality is that most shippers of a certain size will have made investments in operational automation, from their enterprise resourcing planning system down to more granular areas like transportation management and procurement.
But conversely, there still remain shippers who have yet to automate functions that eat up a lot of man-hours.
Metso’s logistics manager told me one of the biggest benefits of his company’s relationship with RateLinx was it freed up staff that was previously occupied with manual processes — either dealing with invoices or, on the procurement side, finding suitable carriers for its loads.
By tapping into RateLinx’s network of carriers, Metso not only finds better rates with contracted carriers, the staff that was previously charged with those responsibilities are liberated to deal with other tasks.
It’s sometimes not an easy sell. Employees ensconced in their positions often fight the idea of automation doing their job. A person who spends the bulk of his day sorting through paper invoices, looking for discrepancies with bookings, is going to dig his feet in to preserve that position, even if he is assured by his company that another (presumably more compelling) task awaits.
This is where the idea of change management affects the decision to automate processes that were once manual. Systems are relatively easy to plug into these days, whether they are purely cloud-based or on premise, the harder part is often convincing internal resources that automation is not meant to displace jobs, but rather to allow the company to grow its business without expanding its existing staff footprint.
Metso moving from the sticky note process to an up-to-date payment engine didn’t reduce the company’s headcount — it made those staff, in fact, more valuable. Now they have more important roles, like looking at the analytical outputs that RateLinx provides and figuring out how to better optimize other areas of the supply chain.
Forgive the pun, but those roles are much stickier, more intrinsically difficult to replace, than the person who sorts through stacks of invoices. As the Metso manager said, that’s not what they teach in grad school. It’s the harder things, like analyzing freight spend and feeding the data back into the procurement process, that yields the bigger rewards.
Automation seems so yesterday, so obvious, and yet some companies (or more correctly, some departments within companies) never got on the train. But it’s never too late. There’s always another train coming.