Boost efficiency and cut waste with supply-chain automation
- 26 September, 2008 10:42
Every week, I feel like I'm discovering new ways for companies to reduce the amount of paper and ink they use each day -- not to mention the amount they spend shipping pieces of paper hither and yon for signing, processing, and filing (by no means a trivial cost, either, considering that a single 6 oz. large envelope shipped via USPS Express can cost around US$19.50 or $4.80 if it's sent Priority).
My most recent conversation on the subject of reducing printing and mailing waste was with representatives of GXS and Verizon, who talked up the environmental and efficiency benefits of SCA (supply-chain automation). The companies just so happen to offer, jointly, a supply-chain management solution called GXS Trading Grid that runs over Verizon Business' Managed Network Services. The idea behind SCA is to securely convert manual, paper-based processes into automated electronic transactions among vendors, partners, and customers. In doing so, companies can reduce the use of paper and expensive printer ink, as well as shrink their monthly postage expenses.
The concepts behind supply-chain automation should be familiar to anyone who has ever ordered a product from, say, Amazon.com. There, you go online and place an order electronically, then make your payment, again electronically. Amazon sends you an order confirmation via e-mail. You'll also receive an e-mail notice when your package ships. No paper is used except the receipt you receive with your package.
Yet in the business world, many companies continue to rely on paper documents for all those aforementioned transactions, manually mailing out order confirmations, order-status updates, bills, and payments. All that paper means more time spent internally processing invoices, too. In fact, according to Aberdeen Group, for a company that processes 500,000 invoices per year, the cost to process a manual invoice can be reduced by 60 percent or more when automation is implemented.
On top of the efficiency gains from SCA, GXS and Verizon cite potential environmental benefits of automating the estimated 40 billion business-to-business transactions undertaken worldwide each year. Those figures are as follows -- and reflect savings just from eliminating the paper and energy necessary to print documents but not the resources that go into shipping them to and fro:
- 2.3 billion pounds of CO2, the equivalent of taking 206,672 cars off the road for a year or reducing gasoline consumption by 434 million gallons or 8.9 million barrels of oil
- 1,386,667 tons of wood, the equivalent of 9.6 million trees
- 15.3 million BTUs of total energy consumption, the equivalent of about 168,633 homes per year
- 7.6 billion gallons of wastewater, the equivalent of about 11,553 swimming pools, and 911 million pounds of solid waste, the equivalent of about 32,548 garbage trucks
Yet another incentive to move toward SCA: Steve Kiefer, vice president of industry and product marketing at GXS, says that SMBs are feeling pressure from their larger partners, the Wal-Marts and GEs of the world, to make the transition. "The most common scenario is you've got a large buyer with a huge procurement budget that's interested in getting as many suppliers as possible to interact with them electronically," he says. "Generally, large buying organizations will have a program in place and will typically ask suppliers to make an investment in one of [the SCA] technologies," which include EDI-, XML-, or a Web-based approach.
As with any new technology, adopting supply-chain automation requires both a technology investment and a change in processes. The former, according to Kiefer, isn't too significant. He estimates that an SMB could get up and running with SCA services at a rate of $50 to $100 per month -- which isn't much if you consider that, by his account, an SMB pays around $35 today to process a single invoice. Most companies already have the technology infrastructure in place, he adds: "It doesn't require more than a PC and an Internet browser."
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