It is no secret that the ongoing COVID-19 global pandemic has severely strained supply chains around the world. From the meat packing industry to medical equipment/PPE suppliers, several industries have endured the virus’s effects. With about 95% of the surgical masks and 70% of the respirators used in the US manufactured overseas, this pandemic has exposed our dependence on other countries as well as glaring inefficiencies within our domestic supply chains (US Department of Health and Human Services). According to a 2020 global survey, 73% of buyers and users of freight transportation and logistics services reported the coronavirus having an impact on their supply chain operations (Statista). How far do these inefficiencies extend? How can businesses across the country collectively correct their course? These are pivotal questions with answers that have been overshadowed by other issues. In short, automation helps companies cut costs and maximize their potential, particularly the digitization of documentation involved throughout the supply chain.
To understand the depth of this issue, inventory errors, missing paperwork, inadequate visibility, incorrect pricing, incorrect invoice payments, inventory delivery delays through manual receiving processes, and more cost an average of $120 to $150 per purchase order in shipments to distribution centers and retail stores (SPS Commerce). Moreover, businesses waste 6,500 hours per year, on average, on inefficient payment practices (chasing purchase order numbers, processing paper invoices, and responding to supplier inquiries) equating to over $170,000 in losses annually (SourceToday). Despite these losses, the average supply chain only has a digitization level of about 43 percent (McKinsey)!
Businesses have more to gain from digital accounting practices than they are aware of with only 2 percent of surveyed executives mentioning supply chain as the focus of their digital strategies (McKinsey). Meanwhile, they have the most to gain from updating this segment of their business; on average, companies that aggressively digitize their supply chains can expect to boost annual growth of earnings before interest and taxes by 3.2% — the largest increase from digitizing any business area—and annual revenue growth by 2.3 percent (McKinsey).
The increased earnings are a result of the savings and productivity enhancements made by automation technology. Cloud computing reduces labor costs by 50% (Forbes), while automation delivers an average of 29% reduction in invoice processing costs (SAP Concur) and allows businesses to produce a range of 15 to 30% increase in transaction volume (cvision).
Considering the overwhelming benefits of automation within the supply chain, it has never been a better time to introduce this technology into more businesses nationwide. Amid the current economic crisis, companies can still manage to reduce labor costs without losing productivity by automating document processing and related inefficiencies. This is simply the first step to more stable and dependable domestic supply chains that will support the future of our country.