In a 3-part series, Raj will take you from introducing Robotic Process Automation (RPA) for cost take-out, to identifying ROI potential and finally some lessons that have been learnt. Here's Part 1 - using RPA for Cost take-out
Cost Take-Out through Robotic Process Automation: the opportunity
PE firms considering cost take-out have a big opportunity in Robotic Process Automation (RPA). Executives are already familiar with the first generation automation of activities, more commonly referred to as Process Automation. While there may not be much left to take-out with this, enterprise-wide robotic process automation(RPA) can now open doors for huge costs savings.
What is a candidate for RPA? Any repetitive task(s) or routines that fill up a good portion of people’s activities directly qualify. RPA will do repetitive tasks accurately, more efficiently than humans and can run standalone for days without a break. This is clearly an opportunity for cost take-out, with most businesses a candidate for this improvement.
It starts with accounts payable
Process automation in accounts payable is quite standard these days. These tools have the ability to recognize text, templates and make intelligent routing. They can read scanned images, emails and documents and make routing decisions based on scanned information and availability of processing clerks. In the past decade, process automation tools have been at the forefront of transformation in Global Business Services, aka Shared Services.
Moving to business logic from IT-centric solutions
Advancements in these tools have helped companies move from IT-centric solutions to business friendly operations that floor managers can run on-demand to suit the load demands. Learn-and-adapt abilities in process automations have also further helped the managers deal with the business logic, rather than deal with underlying systems or data simplification. Non-standard templates and content build knowledge in the system and let RPA work on the task.
RPA and general process automation should never be considered as a short-term financial transformation tool, particularly for labor cost savings.
Instead, think of transforming core processes first. This is not a short-term mindset: that leads to replacing human beings with technology and results will not stick for long.
Without compromising internal controls and KPIs, processes can be completely transformed and reconnected to get greater returns. For instance, when a new employee offer letter is accepted, companies currently have separate processes with manual handoffs between HR, Payroll, IT and reporting manager. With RPA, process steps to tie his pay check, allocated office space, computer assets can directly come from a single process thread. When an employee gives his or her notice, the last date of employment can propagate to IT for locking the computer, securing the assets, assigning the last paycheck and settlement, replacing manual processes and paper trails.
RPA and Private Equity: potential for impressive ROI
RPA can help PE companies realize significant cost take-out through consolidating of business activities, and SG&A process improvements. Maintaining a process benchmark across the portfolio and cross-learning opportunities to reduce operating cost, are desirable outcomes.
The real winners have been in regulated areas of business. In insurance, health-care, financial services, rigid processes and procedures drive day-to-day business activities. A substantial portion of the workforce directly participates in data entry, scanning, reviewing completed forms, processing transactions. Automating these environments is inexpensive and often returns on investments are quite impressive.
Integrating with overall transformation strategies
PE companies intending to improve SG&A must consider RPA as a part of the overall transformation strategy. Work with the controllers to get monthly metrics –
- volume processed per month,
- core vendors
- invoice templates
- processing rules
and time to process every stage of the Procure-to-Pay process.
Implementing RPA in your portfolio: prototype and prove the concept
The best approach is to run a workshop and identify cost take-out opportunities. Transforming core processes can throw up some surprises.
- Give room for capturing exceptions and deviations.
- Prototype revised processes with RPA tools to determine if cost take-out justifies the investment. Integrate internal controls and compliance requirements as a part of robotic processing.
- Automate in-process groups (procure-to-pay, order-to-cash, hire-to-retire).
- Agree on a continuous improvement plan to improve metrics on periodic basis (at a minimum monthly).
Process automation software and tools have been in existence for decades. Non-human robotic process in transaction processing is also fairly mature. With the introduction of Artificial Intelligence, companies will see monumental cost take-out opportunity.
About the AuthorMore Content by Raj Ganesan