The extended economic downturn is driving all of us to wring as much cost as possible from our processes. This has created an opportunity to automate as many business processes as possible. But what types of processes are the best candidates for business process automation, or BPA?
Niel Nickolaisen
Over the years, I’ve put together a set of guidelines that I use to identify BPA candidates. My list of the top contenders for business process automation includes:
Business processes that
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are repetitive
If the way we configure a new computer or handle an employee reimbursement is the same every time, let’s find a way to automate this process. In my experience, automating repetitive processes not only saves time and money but also improves quality. Automation allows us to ensure that we perform the process the best, safest and easiest way each and every time.
Processes with few exceptions
BPA breaks down pretty quickly if we have to contort our process management to meet a wide range of exceptions. The more standard the business process, the better. Of course, this also means that we can make a strong business case for reducing exception handling in all of our repetitive processes.
For example, I was once assigned to find ways to reduce our days' sales outstanding (DSO), usually a good indicator of our credit-to-collections process. The smaller the DSO, the better the job we're doing of managing our credit accounts and getting our customers to pay their bills.
As we mapped out our credit-to-collections process, we found that it was riddled with exceptions. Certain customers got certain terms and conditions that others did not, and before our accounting staff could attempt to collect a past-due invoice, assigned salespeople had to give their approval -- another exception-driven business rule.
We standardized the process by establishing one rule: If you are a good customer that pays your bills, you get standardized but enhanced terms. Otherwise, you get standardized, baseline terms. Once we made these changes, automating this process was incredibly simple. We created some triggers that flagged the status of our two customer types well before an invoice was past due. Our DSO dropped like a rock, cash flow improved and life got better for our accounting staff.
Processes we use all the time
I have never been able to justify a BPA project for processes that we use only on certain occasions. For instance, my accounting staff once asked that we automate the process we use to generate 1099 statements for contractors we had hired. The manual process took about eight hours a year, so BPA made no sense. Compare that to processes like demand planning or data backup that are in almost-constant use. Automating such processes can yield nearly immediate business value.
More on business process automation
Business process automation for the business' sake
Business process automation vs. business process management: A primer
Processes that are bounded by business rules
If we can define a simple, standard set of rules for a process, we can probably also automate that process. I once led a project to reduce inventory levels. In some categories, our inventories were too high because our buyers were basing their decisions on very weak planning assumptions. Our solution was to develop rules that were based on sales velocity. If a product was not selling very well, our automated rules decided how much inventory to buy and placed the order. If the sales of a popular product were starting to slow down by a certain percentage, another rule slowed down the associated buying. This freed our buyers to focus on making sure we were never out of the growth products and also helped our product managers better manage product lifecycles. But if we had not been able to define such rules, automation would not have worked.
We are fortunate to live in a time where our organizations need technology and, as a result, need us. At the same time, we have the responsibility to make sure that technology actually provides meaningful value.
Niel Nickolaisen is CIO at Western Governor's University in Salt Lake City. He is a frequent speaker, presenter and writer on IT’s dual role enabling strategy and delivering operational excellence. Write to him at nnick@wgu.edu.
This was first published in November 2011
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