Applying Lean Principles to the Back Office

Applying Lean Principles to the Back Office

The Ultimate Lean Back Office Machine: Applying Lean Principles to Vendor Invoices and Customer Sales Orders

For decades, manufacturers worldwide have focused on creating repeatable, highly efficient processes to consistently deliver predictable results. In the world of manufacturing, those predictable results translate into quality products delivered on time, with minimal defects.

Among the principles, methodologies and standards that have evolved from manufacturer’s continued focus on greater efficiency and quality through uniform practices and automation, Lean practices continue to endure and evolve.

Today, those principles and practices are taking on a new life - beyond the manufacturing floor and beyond manufacturing-oriented processes to typical back office operations like accounts payable invoice processing and accounts receivable sales order processing.

Here’s how and why lean principles can benefit your back office processes, regardless of what industry your organization may be focused on.

What makes Lean, “Lean?”

Lean Manufacturing is a systematic method for the elimination of waste within a manufacturing system. It takes into account waste created through overburden and waste created through unevenness in workloads. Lean is centered on making obvious what adds value and reducing everything else.

The relentless focus on adding value and creating standard, repeatable processes has paid huge dividends for manufacturers who must compete in a global marketplace. Those same principles apply to all kinds of processes that can impact an organization’s ability to compete - especially back office operations like sales order processing, where opportunities to standardize practices and produce better results, faster abound.

Applying Lean to the Back Office

Once an organization has viewed a process through the lens of lean principles, it’s difficult NOT to examine and re-evaluate other processes in the same way. That’s why many leading edge manufacturers are taking Lean principles and applying them to their core business processes.

Whether it’s accounts payable, sales order processing, employee onboarding or some other process that involves multiple stakeholders and numerous steps, most companies tend to tolerate and suffer from inefficiencies and process bottlenecks that have real dollar and opportunity costs.

Applying lean to vendor invoices or customer sales orders is a natural journey for most manufacturers - or for any company that may have tackled transforming other business process using the same principles. Once one process has been modernized , organizations tend to question all the “unstructured” information and manual steps that clog their processes.

Manufacturers, as an example, distribute, track, and archive countless documents, including planning documents and engineering change order (ECOs), in addition to invoices and receipts generated throughout the development and manufacturing process for every piece of equipment, part, and assembly.

All of this information and supporting documentation must be integrated with multiple core manufacturing systems (e.g., MRP/ERP Software, Product Lifecycle Management Software, Supply Chain Management Software, Manufacturing Execution Systems, and Production Scheduling and Control Systems).

With systems in place that have been properly integrated to support a single, standardized process and a mindset that embraces standardization and automation, the back-office suddenly has the potential to go from a cost center to an opportunity for added competitive advantage.

Lean AP Vendor Invoice Processing

AP vendor invoice processing encompasses the data, documents and actions by which orders are placed and paid for by customers. Documents and data managed as part of this process include vendor proposals, quotes, collateral and correspondence, in addition to purchase orders, credit applications, tax certificates, invoices, shipping documents, proof of delivery, and correspondence. Each of those documents reflect specific decisions and actions that have to be monitored and managed, along with unstructured data that has to be captured and maintained in systems that are critical to maintaining visibility and control over the enterprise as a whole.

Lacking standardized practices, integration systems and automated processes, applying lean principles to vendor invoice processing and payment can be a real challenge. In that sense, manufacturers can have a leg up on other companies seeking to transform their operations and achieve greater productivity - they ALREADY have gone through the thought process and implemented the right tools to support their manufacturing process.

Luckily, for non-manufacturers, creating an efficient sales order process machine doesn’t have to involve reinventing the wheel.

A Small Leap to Making AP/Procure to Pay Lean

In many cases, companies today already have the right systems in place to automate invoice processing. What’s missing is the ‘connective tissue’ to turn the enterprise resource systems (ERPs) and Enterprise Content Management Systems (ECMs) they may have in place into the engines of truly intelligent, fully automated processes.

Digital Transformation Platforms, like Artsyl’s docAlpha, integrate with existing business systems to transform the unstructured data in documents stored in ECM systems into structured data that can be stored and managed in ERP systems - automatically, with minimal human intervention. For employees, this translates into the elimination of routine tasks like data entry and document filing. For executives, it means that data and documents are transformed into information instantly, resulting in greater visibility to critical business information. For customers, this can translate into greater responsiveness and better service at a lower cost.

That’s just the beginning. Transforming documents and data into actionable information can then drive automated processes for routing data/documents for transactional processes like sales order processing and automatically creating transactions within ERP or other business systems in a way that is fully transparent and instantly auditable.

Beyond transactional processes, smart process automation platforms can support better business decisions by providing more timely, accurate access to the data that informs the organization’s key performance indicators.

The Time for Automated Back Office Processes Has Come

Lean principles are hardly new, and neither is business process automation - the vision of intelligent, integrated systems to deliver real time access to critical data and automate processes has been around for well over a decade. What’s changed is that technology has evolved and practices have been refined enough to make business process automation easy and affordable enough for companies of all sizes. Today, more flexible, adaptable and affordable solutions that can support real world business challenges are available without requiring continuous coding and customization.

To explore how Digital Transformation can help automate and accelerate your back office operations, contact your Artsyl Technologies representative.

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