RPA in Manufacturing: Optimization Beyond Outsourcing

It is time for manufacturers to adopt the next wave automation, cost reduction and productivity improvements by applying more modern automation techniques to address non-core process issues.

2018 is the breakout year for Robotic Process Automation (RPA), particularly in the manufacturing industry. RPA has gone from being considered a niche technology to a necessary one in this market, supporting product registration, legacy Manufacturing Execution Systems (MES) integration, freight rating, payment auditing and SKU administration, among others. In a nutshell, RPA delivers far greater optimization benefits that every manufacturer should employ to increase competitive advantage, reduce costs and accelerate work.

Every manufacturer has a continuous focus on cost management and this is where automation plays a critical role. While manufacturers have always studied and optimized core processes to drive efficiency and effectiveness through plant and factory automation in the back-office administration, the story is very different for tasks involving planning, scheduling, maintenance and product setup. Manufacturers adopted MRP, ERP and MES in the 1980s and 1990s, but any additional automation enhancement to these systems is an investment that is challenging to justify. Doubly so if you want to completely re-engineer or automate a large number of support processes.

Instead, for the past two decades, manufacturers have relied on outsourcing and temporary contractors as fundamental tools to reduce costs in non-core processes like IT, HR and supply chain management. However, many manufacturers that have done this find additional outsourcing to have diminished value as they don’t address cost areas directly associated with legacy systems, lack of integration and interoperability — all of which become the gating constraints on further system improvements.

The Next Wave of Cost Reduction and Productivity Increase

Manufacturers are also faced with continuing pressure to remain competitive in global economy-- so they must manage to reduce costs while improving overall effectiveness: honing business agility, customer responsiveness and transparency for both commercial and regulatory reasons while minimizing spending. And achieving these objectives can’t only be about core manufacturing activities; they depend on the right supporting processes too.

Outsourcing will always remain a key feature of manufacturers’ operating models, but it is not enough. Manufacturers and their outsourcing providers continue to investigate new ways to optimize the efficiency and effectiveness of their non-core activities that attack today’s “gating constraints.” Finding additional cost savings and productivity improvements becomes even more pressing with the increasing difficulty of sourcing skilled technical resources to help with system maintenance or enhancement.

These gating constraints — legacy systems, integration and interoperability — have become even more important for manufacturers as they seek to leverage digital technologies and the Internet of Things (IoT) to implement a “smart manufacturer” strategy. The allure of using new, open Internet-based technologies and creating smart, connected factories is strong. But unless new machinery (or technology platforms that augment existing machinery or management systems) is connected seamlessly into a manufacturer’s wider portfolio of management systems in a way that enables new insights to be gained and acted on in a timely manner, or in a way that enables customers and partners to gain more transparent visibility into operations and collaborate more closely, then the investment will probably be wasted.

Together, these challenges are creating a perfect storm driving the need for a new approach. Recently, cloud-based platforms and applications that aim to improve the quality of data and work across the management of non-core activities (HR, F&A, IT, etc.) have begun to offer manufacturers on-ramps to improvement without the traditional financial challenges of big capital investments. However, by themselves, these platforms cannot solve manufacturers most pressing problems because without practical integration and automation strategies feeding these platforms with data, they remain disconnected islands.

This is where RPA comes in.

RPA: Digitizing Supporting Processes In a Better Way

RPA is a business and technology discipline that deals with the configuration and management of software “robots” that acts as synthetic application users, automating highly repeatable, highly structured tasks across business software systems such as ERP, F&A, IT management and supply chain systems.

RPA technology drives software applications in the same way that human users do, but it does so automatically. It therefore provides a non-invasive alternative to the creation and use of specialized integration APIs, or programmed integration by other means, such as hooking into underlying databases via triggers or hooking into application code directly.

In comparison to human workers, RPA bots don’t need to rest, can work 24/7 and don’t lose concentration. Looking specifically at RPA project outcomes, it is not uncommon for RPA implementations to lead to 60-70 percent reductions in labor costs in target business processes. Unexpected errors will occur of course but in well-designed RPA systems, error rates on automated tasks can be very low – within the 0.5 percent range.

Manufacturing Use Cases for RPA

RPA is most effective as an automation technology in situations where work is routine and rules-based, when there’s a significant volume of work that’s often processed, and where there are few exceptions. Below are some example RPA use cases for manufacturing:

Business Area: Finance and Accounting

  • Use Cases for this area:
    • Invoice Payment
    • AP Automation
    • Freight Rating and Payment Auditing

Business Area: Customer Service

  • Use Cases for this area:
    • Quote Creation
    • Order Correction
    • Product Registration Approval

Business Area: Operations

  • Use Cases for this area:
    • Inventory Re-ordering
    • SKU Updates
    • Inventory, AP, Sales, Pipeline and Pricing Report Creation
    • MES Integration

Business Area: Compliance

  • Use Cases for this area:
    • GDPR-required Customer Record Updates

Three specific use case examples are also worth highlighting. First, the management of SKUs, which frequently change and where updates often have to be manually applied across multiple systems. Second, freight rating and payment auditing are almost robotic in nature, as highly rule-based matching and verification exercises. Some manufacturers outsource this work but having it carried out automatically by RPA bots will reduce costs while driving data integration benefits. Lastly, driving interoperability between operational management platforms like MES — which often lack modern integration interfaces — and other administration systems has important operating agility and transparency benefits. This is another area where RPA shines.

It is time for manufacturers to adopt the next wave automation, cost reduction and productivity improvements by applying more modern automation techniques to address non-core process issues. This is where RPA has the potential to deliver significant business value, whether by itself or in combination with other elements of a digital business platform.

Sean Riley is Global Industry Director of Manufacturing and Transportation at Software AG