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Case Study

RPA Case Study: Global Manufacturer Achieves 45% Cost Reduction in AP

Client Profile

Global plastic packaging company and an established leader in the development, manufacturing, and sourcing of flexible and rigid plastic and paper packaging, as well as coatings solutions for various consumer and industrial end-use markets. Private equity owned, the company was formed through the combination of various similar businesses, resulting in a single entity with aggregate revenues of more than $2.5B, and more than 60 manufacturing plants across North America, Europe, the Middle East, and China.

Business Challenge

The company’s North American operations (with revenues exceeding $1B), had established a US-based shared services center and had migrated several functions into the SSC, but was challenged by the fact that the multiple operating entities/plants remained highly decentralized, and were running multiple operational systems.

Auxis was hired to help design an effective operating model to support the consolidation of the company’s Accounts Payable (AP) and Accounts Receivable (AR) functions for the North American operation, which was currently being conducted at 23 distinct plant locations. Beyond the highly decentralized operation, some key challenges included:

  • Across these entities, 17 different operating systems were in use, including 10 ERP systems, and 7 supporting systems (Purchasing, MRO, etc.).
  • Most of these systems were old, legacy platforms with minimal integration, requiring significant manual work to process AP and AR transactions.
  • The company had very lean operations with limited job specialization as resources in most plants were not dedicated to any one task, but instead worked on a wide variety of operational and administrative and administrative activities.
  • Beyond AP and AR, there was limited visibility into the range of activities performed by staff at the plant locations, and it was critical to understand the other operational and administrative tasks being performed by these individuals to ensure that there was no disruption to the local plant operations once their positions were migrated into an SSC model.

The company recognized that this operating model was not scalable and created a high degree of risk due to the dependency on people, rather than processes and systems, and the potential for poor data integrity due to the amount of manual work required.

To gain the highest level of operational and cost efficiency, the company wanted to define an operating model that went beyond a “one-to-one” centralized FTE migration, and offered options for operational improvements to increase performed levels and lower labor costs.

Solution & Approach

Auxis conducted a three month engagement to perform a baseline assessment of the company’s NA Shared Services operation for the AP and AR functions, as well as selected plant locations that were representative of the field operations across the region. Specific objectives of this engagement included:

  • Identify organizational, performance and cost improvement opportunities and the ability to scale to support the future state NA Shared Services Operating Model for the AP and AR functions.
  • Conduct an activity survey of the SSC and all plant operations for in-scope activities and FTE’s to identify and quantify all activities (inside and outside of scope) performed by staff in these locations.
  • Provide a comparison of the “to be” SSC based operating model to a nearshore BPO scenario to better understand potential cost savings through labor arbitrage and increased operational efficiencies.
  • Develop a high-level implementation roadmap for the migration and consolidation of the AP And AR functions, including a detailed project plan defining timelines, activities, resources, milestones and investments required,and longer term vision for an optimized future state operating model.

Auxis followed its proven methodology to assess SSC operations, and performed the following key activities:

  • Strategic Interviews – Conducted strategic interviews with key company executives to gain strategic alignment on the operating vision and guidelines. This first step is critical for the success of any transformation initiative, as it provides the foundation that the various business units will need to follow
  • Process Taxonomy – Developed a standard Process Taxonomy, breaking down all of the key activities performed within the AP and AR functions and aligning these across all plant locations and the SSC to ensure that a common framework was in place to define “AP” and “AR” at the various locations
  • Process Walk-Throughs – Performed detailed process walk-throughs and interviews with functional subject matter experts at the SSC and the plant locations to gain a detailed understanding of existing processes, systems and organization. Auxis identified multiple process improvement and automation opportunities that could be implemented during the SSC implementation phase
  • FTE Activity Analysis – Based on the Process Taxonomy, developed a web-based survey to quantify the time and amount of FTEs dedicated towards the various activities, categorizing each employee based on their effort related to AP AR functions, as well as identifying the other activities being performed which would need to be reallocated if the AP and AR functions were centralized

Based on the activities identified as migration candidates, Auxis defined and analyzed three different operating scenarios, evaluating each for financial and operational benefits that could be obtained compared to the current, decentralized operation. The three scenarios included:

  • SCENARIO 1: Lift & Shift. A ”lift and shift” of the current operation, with no significant performance improvement beyond centralization, with some organizational redesign and re-leveling of current roles.
  • SCENARIO 2: Third Party Invoice Processing & Document Management Tool. Centralization of the current operation, and incorporating a third-party invoice processing and document management platform to gain additional operating efficiencies. Three different industry solutions were.
  • SCENARIO 3: RPA. Centralization of the current operation incorporating a central data repository and an RPA solution for AP to ”normalize” the transactions across the multiple systems in use, and eliminate most of the manual work being.

For both scenarios 1 and 2, cost comparisons were provided between centralizing in the captive US-based SSC and a nearshore BPO operation, to determine the level of labor arbitrage that could be available. For scenario 3, only the BPO option was considered, as it was determined that the level of investment and IT support required would not be feasible in the captive, US-based model.

To further define the benefits of each scenario, Auxis conducted an industry-based benchmark analysis to determine the performance of the current operation compared to industry peers, as well as projecting performance improvements based on the different “to be” operating scenarios.

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RPA Case Study: Global Manufacturer Achieves 45% Cost Reduction in AP

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