Study shows the financial upside of digitising supply chains
Eighty-five percent of American manufacturers expect digitisation to improve cash flow, profitability and revenue
A year-long study from DiCentral and Lehigh University found that 95% of US manufacturing companies surveyed have initiated a process to digitise their purchase order engagement activity with customers.
The same percentage of respondents had started their journey to digitise invoices sent to customers.
The reason behind this is the considerable potential for savings in undertaking digitisation. The average annual cost tied to manually entering data into Enterprise Resource Planning (ERP) and back-end systems was over $1 million, and over $600,000 was the average annual cost associated with manually entering invoices from suppliers.
The research noted that companies whose supply chains are not fully digitised have buried manual data entry activity in numerous departments throughout their organisation, which is leading to these costs and that few companies have a true understanding of the actual cost associated with the manual data entry processes.
The survey also showed that 40% of buying organizations pay manufacturers digitally. However, 80% of the respondents said they would increase their cash forecasting frequency if reconciliation times were improved. Nearly a third of the respondents would aim to move from monthly cash forecasting to weekly cash forecasting if the process were more digitised.
"Throughout this study, we have taken an in-depth look at supply chain collaboration and digitization, covering many different aspects such as when revenue is initially recognized, integration efforts with customers, suppliers, and banks, and even companies' stance on electronic payments," said Zach Zacharia, Director of the Centre for Supply Chain Research at Lehigh. "While many companies have made great strides toward improving their supply chain processes, this study has discovered that companies still face many physical and financial challenges.”
The survey questioned 125 CFOs and CEOs of North American-based manufacturing companies.