Many companies already have mature business processes in place and core systems such as ERP/MRP and HR/Payroll systems installed to help automate such processes. These companies are now asking the questions of what to do with those processes during digital transformation. The good news is that even the most mature business processes will have Process Bugs and exceptions. The bugs and exceptions can be quality issues, compliance issues, data issues, and performance variances. Fixing the process bugs and addressing those exceptions using technology typically increase companies’ overall operational efficiency by 15-30%. This is a no-regret way to further digitize business processes.
Many companies have stable business processes in place today. Systems such as ERP and MRP and Finance/HR systems have been deployed to enable day to day business processes. Customers are placing orders digitally and customer relationship management systems such as Salesforce are being used to drive customer value management. The question is what to do next? How can the companies with stable business processes continue to leverage technology to further improve the business processes?
How about Process Bugs? Computer bug is a term that is often used when the application is not performing to the specification or requires. The same term Bug can be used to describe the various exceptions that business encounters in their business processes. Exceptions, by definition, are deviations from the standards or the norms. Process Bugs or business process exceptions typically require human intervention to restart the processing or to correct the issues midstream. The manual interventions not only would create production disruptions, they would also increase the operations cost. Leveraging technology to address the bugs and exceptions automatically would significantly improve processing speed and improve ongoing operations efficiency. For example, for a pharmacy chain, when prescriptions can’t be filled because the drugs are out of stock, it would typically cost 10 times more than average to process the incomplete orders. The remediation to handle the out of stock exceptions would involve placing additional purchase orders to suppliers, receiving the purchased products, dispensing the medicine again according to the prescription, and delivering the drugs to the customers. Addressing those so called prescriptions owes/partials automatically enabled the company to improve its operations efficiency by 15%.
Echoing back to the question raised at the beginning of this blog on where companies can apply technology next, I would say that the good news here is that the business process exceptions can be a fantastic way for many companies with stable business processes to continue to deploy technology and achieve impact.
How should companies get started with fixing the process bugs? To address those bugs and exceptions, a company should start with identifying all the exceptions. There are at least four different types of business process exceptions:
- Quality exceptions, which are the processing errors or manufacturing process issues that have launched outputs that don’t meet the original target. The owes/partials that the pharmacy company had to deal with out of stock drugs were good examples of quality exceptions.
- Data exceptions, where different types and values of data were being recorded or when data updates only happened to certain data stores but not the others. The data exceptions become data quality issues and they often render data analytics challenging.
- Audit/compliance policy exceptions, where current policies can’t be effectively conformed, and workarounds must be performed to address such exceptions.
- Event exceptions – Those exceptions often happen when systems were not designed to handle uncommon events. For example, the recent “social distancing” and work from home can be categorized as event exceptions.
- Performance variance exceptions: While the above types of exceptions have typically been on the top of people’s minds when they think of exceptions, the performance variance exceptions are probably the biggest opportunities for most companies. Those exceptions happen when individual units have large performance variances. For example, salespeople might have big variances in regards to their sales performances. Individual locations/branches and plants might have different performances across different metrics.
Technology can be a great way to fix the process bugs and remove the exceptions from the business processes. Specifically, technology can be applied in a number of ways:
- Automation: Tools such as robotics process automation can be leveraged to automate human interventions. While many of the major processes have been automated at many companies, various data entry and data consolidation activities might still be manual. A good indicator of the maturity level of automation is the number of Excel spreadsheets that are floating around. Excel, while ubiquitous at most companies, most often represents manual data extraction and manipulation. The number of Excel spreadsheets, in my experience, often is a good indicator of opportunities for automation.
- Augmentation with Intelligent Process Assistants: Given that a lot of the exceptions are caused by errors and/or unforeseeable events, people who are involved in such exception handling might not have the skills and capabilities to deal with them efficiently. Intelligent business process assistants can be created to help humans handle the exceptions. Imagine there is an Amazon Alexa who listens constantly and wakes up when the exceptions have happened. The Alexa-alike intelligent assistant will then inject itself into the business processes and deal with the exceptions. This approach allows companies to automate the exception handling without drastically changing the core systems.
- Advanced Analytics: Analytics can also be a great tool to help companies identify the root causes of exceptions and use technology automation and augmentation to remove and remediation the bugs and exceptions. In the past, there were limited data available for process improvers to deal with the methodologies such as LEAN and Six Sigma. Hence sampling tools were often used to define the value of average and companies must choose from a small set of metrics to improve upon. With Big Data and Advanced Analytics, companies can easily go beyond the dark data and quickly and holistically identify all relevant metrics and use the metrics to identify the most important levers that can be pulled. This technique is particularly critical for performance variances. In the past, it’s often difficult to ping down which metrics were causing the performance variances. Now that we have Big Data, we can do this so much quicker.
Fixing the process bugs and addressing those exceptions using technology can create significant impact, as the pharmacy chain company was able to demonstrate. Removing the process bugs typically increase companies’ overall operational efficiency by 15-30%. It will also improve customer satisfaction since customers’ interaction with the companies will become more real time and more seamless. Lastly, the process variances and exception processing, if done manually, would often imply potential compliance issues down the road. By automating the exception handling processes, companies can also achieve better compliance with policies and regulations.
The beauty of fixing process bugs and using exception handling in business processes to digitize business processes is that companies can get started immediately. Every company would have bugs and exceptions in their business processes, be it quality issues, data issues, compliance issues, or performance variances. Using tools such as automation and augmentation can not only achieve better service level compliance, but also improve the operations efficiency. The savings from the human productivity improvement can in turn pay for more automation of exception handling. A flywheel will then be in place to help companies move technology and business process efficiency forward.
In addition, given that many companies have existing staff well versed in LEAN and Six Sigma already, these people can be readily deployed to learn how to use technology to drive process improvement and handle exceptions.
For the Pharmacy chain, as we discussed, they used the service quality as a trigger to deal with the exceptions. By looking at a metric that no one can say no to, they were able to leverage tools such as RPA and analytics to improve the overall productivity by 15%.
This is a no-brainer move!