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Cornerstone Communications |
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Lean Manufacturers Are Not Really Lean |
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What can paper-laden document processes do to margins?
Many manufacturers today are feeling squeezed to maintain margins in today’s global economy. The cost of doing business continues to rise due to many factors such as healthcare costs, energy costs, compliance regulations, etc. However, market pressure will no longer allow companies to pass along these increased costs in the form of higher prices. Coupled with a sluggish market, most businesses are being forced to discount or offer special promotions to encourage customers to buy.
All these reactions result in margin compression, a very serious trend in corporate America. As a result of this fatal trend, companies are being forced to sharpen their focus on running more lean and efficient organizations. They are being forced to look deeper into their organization for new opportunities to streamline business processes and reduce costs.
Most, however, miss the ball by only reviewing their manufacturing and distribution processes. Few examine front office waste in the form of outdated, inefficient, paper laden document processes. As a result of this oversight, some American companies spend up to 15 % of annual revenues managing their documents.
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Enterprise Document Management Solutions
 Contact us today for more information on how we can help your business! |
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Are documents really a problem?
According to a leading researcher, The Gartner Group, in corporate America 60% of the office worker’s time and 45% of the office payroll expense is consumed by documents. That is a huge problem.
Why are documents so expensive?
The answer is simple. First of all, 90% of corporate intelligence is stored in documents. Secondly, virtually every business transaction generates a document. Quotes, sales, purchases, invoices, statements, shipping documents, etc, are just a few examples of these transactional business documents.
In 2003, Corporate America created 4.8 trillion documents. That reflects a 22% annual increase in the volume of documents created over the last five years. That means the number of documents and document related expenses double every five years.
The major contributor to excessive document related expense is labor. Traditional document processes are fraught with needless labor expenses. According to Pellow & Griffin, for every $1 spent on a final document, $10 is spent managing the process. While American business has spent millions automating manufacturing, distribution, and accounting processes, only about 1 in 4 has invested in document automation.
However, it doesn’t have to be that way. Truly lean organizations have found solutions to automate document processes and save hundreds of thousands of dollars. In the process all business functions such as purchasing, production, distribution, and accounting have become more efficient, putting a positive spin on market share, cash flow and profitability. A well-planned document strategy can reduce document costs 60-90% and impact the bottom-line as much as 2%. According to Kevin Crain, author of Designing A Document Strategy, “The way we manage documents has a lot to do with the way we manage business.”
Why haven’t more lean manufacturers and businesses automated their document processes?
The answer is twofold. Document related expenses are unmanaged, and anything that is unmanaged is uncontrolled. Documents expenses are typically spread across several departments and never appear as a line item expense. If they did, most CEO’s would be shocked, and we would see documents become an executive level responsibility. We would see a document strategy put in place to insure that business documents supported and drove the overall company objectives of increased revenues, increased profitability, and improved customer satisfaction. A document management solution is the foundation for achieving all three objectives.
Secondly, companies have been slow to adopt document management technology with the absence of government compliance issues. However, under Sarbanes-Oxley, HIPPA, ISO900 etc. policy, businesses are now required to provide all the critical documentation to support their financial and procedural claims. Failure to provide this substantive information may result in significant financial penalties or other penalties.
How are Document Management and Lean Methodologies similar?
Lean is defined as “A systematic approach to identifying and eliminating waste through continuous improvement, flowing the product at the pull of the customer in pursuit of perfection.” Consequently, Document management is defined as “A software system that allows businesses to control the production, storage, management, and distribution of electronic documents yielding greater efficiencies in the ability to reuse information and to control the flow of the documents.” One will notice a common link with both systems through workplace improvement.
Some common Lean methods are 5S, Six Sigma, Krizen or Workplace Organization. These methods focus on effective work place organization, simplifying work environment, and reducing waste while improving quality and safety. The basic premise is a workplace needs:
- To remove items that are not needed
- Items arranged for efficient and effective retrieval
- A top condition work area
- To set standards
- To maintain standards by keeping employees educated
Lean applies to the entire organization and while they have individual components they can only achieve maximum effectiveness by using them together and applying them cross-functionally through the system. Again, Document management has this common link. Document management and Lean have similar attributes and benefits:
- Systematic method to organize and standardize the workplace
- Applicable to every function within an organization
- Crosses all industry boundaries
- Reduction in order processing errors
- Streamlining of customer service functions
- Reduction of paperwork in office areas
- Documentation and streamlining of processing steps
Organizations that implement these systems are able to be more responsive to market trends, deliver products and services faster, and provide products and services less expensively than their counterparts.
Where do you find help?
Cornerstone Communications specializes in document management and cost reduction strategies for the manufacturing and distribution industries. We help our clients gain a competitive advantage and become more profitable by streamlining document processes and reducing the costs associated with creating, distributing, and storing business documents. We have helped over 800 clients including Goodyear, Ingersoll-Rand, Heinz Frozen Foods, and Mattel Toys save hundreds of thousands of dollars.
Cornerstone employs a simple but thorough document assessment process at the beginning of every client relationship. The purpose of the analysis is to map every step in the life cycle of every critical document and to identify all document related costs. Armed with this data, Cornerstone will then customize a document management system designed to eliminate all waste and create a totally automated document management system that delivers maximum efficiency.
With every recommendation is a financial model comparing current document costs with projected document costs utilizing Electronic Document Management (EDM) solutions from Cornerstone. The model will include a cash flow analysis and return on investment/payback timeline. In every case, there is a positive cash flow in the first 30 days and the total system payback usually occurs in six months or less.
What Next?
Contact Cornerstone to discuss how we can help reduce the expenses of your document processes and streamline your business processes – receive a free document analysis.
Call: 1.888.427.5663
Email: sales@cstoneindy.com
Proven Document Management and Cost Reduction Strategies
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