Are you stressed out? Companies that compete on the basis of their supply chain are definitely feeling the stress right now. You only have to look at recent headlines of the tragic disasters in Japan and the unrest in the Middle East to understand the disruptive pressures being placed on lean supply chains. It makes sense to turn to technology to help relieve the pressure and supply chain leaders are doing just that. I think that case management -- a technology that has already demonstrated its usefulness in the financial services sector -- has tremendous potential as a new form of stress relief for the supply chain sector. In this article in my adaptive case management series, I share some examples of how business process and case management are being applied to improve the financial flows over the supply chain.
Changing the Economics of Supply Management
The previous decade saw improvements in supply management using tools such as EDI (Electronic Document Interchange), ERP and other packaged applications. For the sake of full disclosure, I led an EDI software and network services business at the time and was proud of the business benefit delivered to the customer. However, these tools do NOT significantly help where documents and decision making must span system and organizational silos, and straight-through processing is not possible or practical. In those circumstances, we see untamed processes form to fill gaps along the primary end-to-end business processes and act as bridges between the silos. These untamed process areas are a perfect target for applying both process and case management to focus on delivering value to the business.
For example, most invoices in the supply chain ecosystem start life in order management applications and end up in accounts payable systems. Yet many invoices still exist as paper in between, as do critical supporting documents such as supplier SLAs and Trade Promotion deal sheets. Many of the tasks and decisions along the way are still dependent upon human beings. Companies have negotiated favorable terms, trade promotions and prompt payment discounts from their vendors, but fail to give the worker necessary guidance to match all this information to invoices and prioritize and process the invoices within the designated time period to qualify for discounts.
Companies such as CIBA Vision have applied process and case management technology to improve their AP invoice processing, eliminating errors that cause delays and unnecessary adjustments, such as goods being received for which no invoice has been generated, or vice versa. This shortened turnaround from 5 days to less than 24 hours and supports self-service for inquiry requests. With this technology, companies can let cross-system automation take care of the majority of the situations and provide guardrails for knowledge workers to handle the exceptions, avoiding situations where the human involved in the process needs to track down the information they need to make a decision, delaying the process and possibly missing time-sensitive vendor discount terms.
While you might not be able to stop your supply disruptions with case management, you can better manage your supply environment to take cost out without affecting order flow. Case management helps you to be organizationally responsive. First, the ability to see the problem is important, and then it is necessary to route the problem to get it addressed via a compliant process that includes human task and workflow progress. This can have a significant impact on improving your cash flow. Estimates from a U.S. Institute of Management and Administration Survey indicate that, on average, 10% of invoices are processed too late to be paid within discounting terms. Something to think about the next time you’re asked to take cost out of an already lean supply chain.
Resolving Customer Order Disputes
In supply chain circles, achieving the “perfect order,” the right product delivered in full, on time, every time, is considered Nirvana. Gartner’s annual look at some of the world’s best supply chains found that companies that rank in its Top 25, such Johnson & Johnson, Nike, and Publix, carry less inventory and have shorter cash-to-cash cycle times. How do companies achieve this level of performance? Certainly they are continuously improving their supply chain processes to achieve the “perfect order.” However, effective exception handling is one of the most important competencies a company can gain, especially to make significant advances in demand-driven performance.
The true test of a high-performance supply network may well be what happens in exception handling "when good orders go bad." Profit margins on customer orders can suffer via downstream execution problems where excessive costs are incurred. Shipments delayed due to data inaccuracies cause manufacturers to expedite delivery and sacrifice margin in the process. This behavior comes from increasing competitive pressures and the lack of visibility into what is occurring from the first point of customer contact to when the order gets shipped and billed.
Because case management’s focus is on unstructured processes that involve human judgment, applying case management can improve how knowledge work is performed when exceptions occur and ensure that better business decisions are made throughout the entire value chain.
Case in point is the claims dispute and settlement process between consumer goods companies and their retail customers. This “untamed” process area is a perfect target for applying lean disciplines along with business process management (BPM) to focus on value to the customer. With this approach you can combine relevant document content in context and organize tasks to create an effective decision-making environment for both the structured and unstructured work elements.
For example, before applying process and case management technology, Revlon struggled to keep up with the workload of its high claims volume. The financial impact was significant with chargebacks amounting to 20% of gross revenues. Credit claims processors were overburdened and were often unable to review claims or contest them if appropriate. The document collection process by itself took 30 minutes on average per claim. After implementing its solution, Revlon reduced processing time by two-thirds, giving the company the opportunity to process all claims at a net reduction of employee time of over 50%.
These are just two examples of improvements that are being achieved today in the financial flows over the supply chain, but clearly this same approach can be used to manage risk and improve the flow of products. For example, better order fulfillment and build-to-order capabilities are a natural application. And, as companies reassess their global supply chain in the face of current challenges, they should consider case management to help them implement better supply and contingency models and improved rapid response management -- areas where unstructured knowledge work and better decision making will be critical to success.
Watch for my next article when I’ll look at how case management is serving the public sector.