Far from taking jobs, process automation eliminates tedious tasks that hold your teams back.
Distributors are putting process automation in motion to improve their businesses – from streamlining the laborious returns process to optimizing the supply chain. What have we learned so far?
Distribution Strategy Group’s Ian Heller interviewed experts on process automation in distribution.
Our panelists included:
- Alex Witcpalek of Continuum
- Nick Schwalbach of SPS Commerce
Did you miss the webinar? Watch it on-demand.
Understanding Process Automation in Distribution
Witcpalek said process automation can be viewed two ways:
- Top-down automation, which optimizes a department, team or process. You may discover employees keystroking invoices or spot a decline in overall departmental productivity. The goal is to remove manual tasks that bog down teams and replace those with computer functionality.
- Bottom-up innovation is a newer evolution of process automation that uses technology to change entire business processes. Instead of improving fleet management, for example, distributors can innovate with drones. It’s a completely different way of looking at a very traditional business model.
“The one piece I would add is that technology is only as good as education,” Schwalbach said. “So, we back up a lot of the process automation with education.”
This helps distributors take a fresh look at the technology they have to maximize functionality.
“We just wrapped up a project with a distributor, and by using one of their inventory planning systems differently, they took $60 million of inventory out of their supply chain last year. That’s a big number,” he said. The point is that bottom-up innovation doesn’t necessarily mean new technology; it can mean looking at existing tools with a fresh eye for utilization.
Witcpalek agreed. “Automating a bad process is not a great outcome.” He advocated an evaluation of each workflow to maximize its value. Sometimes, just asking the question “Why are we doing it this way?” can get companies into the mindset of change —whether or not a change requires technology.
The Role of Data in Process Automation
Schwalbach said AI is incredibly useful for summarizing data into key points that shape business processes. “I think you’re starting to see some companies use AI to inform a different way of thinking. So, how do I put AI on top of a current process today? How do I analyze all my data to understand my most important suppliers, and how do I work with them differently? Revolutionizing processes for the future versus just putting it on top to do what I do today.”
Witcpalek sees AI working well with process automation as long as there’s quantifiable data within these workflows — for example, how CSRs fill out fields in your ERP.
AI can spot outliers that may indicate a broken process. Witcpalek said returns are the perfect area to apply AI to spot vendors with a much higher percentage of returns or defective products. AI lets distributors go down their product lines to compare customer sales volume versus returns. It helps distributors ask the right questions about installations, for example, which leads to a higher returns rate.
“Once you digitize the process, it has digital exhaust; then you can use AI to glean insights.”
Executing Process Automation
Once a distributor embraces process automation, they must build the right internal team to implement the top-down assessment necessary to implement these tools. The panelists didn’t immediately go to technical acumen for this role – but instead to an attitude that embraces change.
“First and foremost, we need people and talent who understand the role and importance of what distributors do,” Schwalbach said. “Second, they must be willing to step outside the technology world to look at the big strategic picture of what we do. How do the processes we’re trying to automate tie back to the success of our goals? That is an important skill set.”
Witcpalek agreed. “For us, it’s a mindset around the types of people you need. When you think about the DNA makeup of people, I think any process automation comes down to whether you’re intellectually curious, if there’s a better way to do what you’re already doing, and whether you’re curious enough to dig into the details.”
The panelists suggested that it’s only by surrounding yourself with people who are change agents, first, and technologists, second, that you stand a chance of reaching the level of process automation that truly innovates your business.
What’s Holding Distributors Back?
It seems like a no-brainer to consider automation to improve service levels and a distributor’s supply chain. But Heller asked: “Distributors are still lagging in process automation. Some of it seems to be a mindset. Where’s that coming from?”
Schwalbach said the market is segmented and sales is still largely relationship-based. “The margins distributors work with can be smaller. So, the capital to improve some of these things is hard. Remember that I’m constantly changing as a distributor based on my customers’ needs. I’m adding more items and suppliers than any other supply chain segment does at any point in time. I’m so focused on just running my business. How do I get two steps ahead or three steps ahead? How do I progress? That’s where we spend a lot of time, so it’s a little harder.”
The panelists also pointed to the complexity of a distributor’s business.
“I had a conversation with one of Granger’s ex-CIOs, and he said anytime they did an automation project inside their four walls, it had a great outcome,” Witcpalek said. “However, when they engaged a supply chain partner, the value increased 10 times. Yet, anytime you add another layer to your supply chain, you add another layer of complexity. Add another layer in the supply chain, that person now must deal with segmented and fragmented data points of their manufacturer and their customer.
“Take a part number, for example. You’re like, well, my customer calls it this. I call it this, and my manufacturer calls it that. I’m getting it on both ends. I have to deal with pricing discrepancies up here and down here. I’m just trying to keep up with our ever-changing world with my suppliers and customers.”
Missed the webinar? There’s lots more to learn—watch it on demand.
