What businesses can do in 2017 to increase productivity
Amazon recently announced that through its Fulfilment by Amazon (FBA) service, the company delivered more than two billion Marketplace items worldwide. The FBA programme has helped growing businesses accelerate and handle the work of packaging and shipping orders to customers over busy periods such as Black Friday and Cyber Monday.
2016 was indeed the year of the seller and Amazon has helped many businesses to achieve more than 100 percent growth in sales. At the end of 2016 many businesses were hit with the biggest retail weekend of the year with Black Friday, followed by Cyber Monday. However, it wasn’t just Amazon which saw an increase in sales over the holiday seasons. Visa reported that UK shoppers spent £2bn on their Visa cards on Black Friday alone!
To be successful, both the traditional and e-commerce retailers rely heavily on their supply chain and the transport and logistics companies who ensure purchases arrive on time and in good condition. This success is underpinned by significant investment in finance, logistics and document capture solutions that ensure everything is tracked, invoiced and shipped smoothly.
Packaging and shipping orders can be demanding but there are also major purchasing challenges. These include visibility and control of over spending, as well as the amount of time and human resources consumed by the process; the ordering and then receiving and paying for goods and services. Maintaining a balance between control, visibility and efficiency is a critical success factor in the purchasing process. There are a few lessons that can be learnt.
Lesson 1: Control
Black Friday is all about searching around for that great bargain and, in some cases, purchasing items without a clear view of how they will be used in the future. Such well-meaning, off plan expenditure can also occur in businesses particularly where there are no formal purchasing systems and/or budgetary controls.
Businesses generally gain a lot of credibility with stakeholders, suppliers, customers, employees, bankers and shareholders if they are seen to be in control of their expenditure. A purchasing system requiring staff to make requests that are approved by budget holders before a purchase commitment is made will significantly improve control over business expenditure.
Lesson 2: Visibility
We often read about people who have been surprised by their level of credit card debt when the credit card bill turns up a month or so after they have made their purchases. No doubt some of the £2bn spent on Visa cards on Black Friday will become part of a nasty surprise in January 2017 when it needs to be paid off.
In the business world we also hear of a sudden cash flow crisis impacting the ability of a company to trade. This occurs for similar reasons to the personal debt issues above. In the absence of a system that recognises financial commitments when they are made, records the receipt of goods and services when they are received and allows the efficient processing of supplier invoices, the arrival of a customer statement demanding immediate payment of overdue invoices can be a nasty surprise. Seasonal events like Black Friday, which cause a significant rise in expenditure, can make this a very serious issue for a business if there is a lack of visibility over expenditure.
Purchasing systems that allow early visibility of commitments and future cash flows spare such surprises, enabling either action to be taken to stop the problem arising or plans to be put in place to deal with the coming cash outflow.
Lesson 3: Efficiency
Black Friday is a perfect example of the way in which it is easy as an individual to be efficient at spending money in a world where credit is easily available. Lesson 1 and 2 above have identified that there can be consequences for individuals if there is a lack of control and visibility over their spending.
Businesses are generally aware of these risks and often spend a lot of time and manual effort implementing controls to counter them. These efforts can often lead to counterproductive results and a sub optimal use of resources.
Purchasing in business is generally more complex than transactions carried out by individuals, involving many more players in the process and many human touchpoints elongating the process between request, commitment and payment.
Expected changes in 2017
In 2017, the time (human resources) consumed by the process of ordering, receiving and paying for goods and services will be decreased by the digitisation of documents. Savvy businesses should look more at how they can take their whole business forward and benefit from the sophistication of the digitisation of documents.
There are many more benefits digitisation will bring than just “digital documents”. Daily functions such as opinions will be driven and underpinned by data. The ‘keep everything’ culture will move to a ‘keep only what I need’ and computer space will be freed up as people begin to see the benefits of central rather than local document storage. Cloud technology will no longer be considered just ‘nice to have’, it is becoming the norm for IT departments for all businesses. Even mid-size companies are moving towards Infrastructure-as-a-Service.
When technology becomes more developed our human input is reduced, particularly at an administrative level. As these trends develop and become more accepted, document digitisation will help businesses to save time and frustration whilst increasing productivity through busy periods such as those of upcoming festive seasons.
By Ian Smith, General Manager at Invu Services
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