"Digital processes enable 6-digit savings potential" Interview with Stefan Philipp from Operations1

Companies that believe that the only chance of digitization lies in finally getting rid of the mountains of documents are thinking too short of the issue. Digital processes are just the tip of the iceberg, as Stefan Philipp knows. The Head of Solutions at Operations1 and his team have already successfully supported many companies on their way toward connected work. In this interview, he provides in-depth insights into how networked working can optimize processes to such an extent that productivity and employee satisfaction increase significantly and six-figure sums can be saved at the same time.

Stefan Philipp, Head of Solutions at Operations1
8 minutes reading time

What the interview is about

In his role as Head of Solutions at Operations1, Stefan Philipp and his team support companies in successfully digitizing their processes. In this interview, he explains why companies usually only factor in the obvious costs, such as paper and creation effort, when deciding on the topic of connected work. However, there are far greater challenges that add up to much more.

Read on to find out what these are and why manufacturing industries can expect average savings potential in the six- to seven-figure range through connected work.

Misleading thoughts on paper costs

Stefan, in the connected work study, which will be published exclusively by us at the end of January, we found that 23% of respondents gave a cost estimate in the high 5-digit range per site. As an expert, how do you rate this figure?

In fact, this assessment is very typical. For me, it is clear that for many companies, the topic of paper-based processes is currently still undervalued. In my role as Head of Solutions, I talk to many customers and interested companies from manufacturing industries. In our experience, the costs incurred by paper-based processes are actually much higher than the study participants indicate.

Paper-based processes complicate work on the shopfloor

The real cost drivers

Is saving paper costs the main argument for you why companies should digitize their processes?

It is a very important argument in favor of moving in the direction of connected work. However, creation efforts and paper costs are only on the surface and therefore catch the eye directly. In addition, there are less obvious cost drivers hiding below the surface that many companies have yet to see.

Does this explain why many underestimate the actual costs of paper-based processes, as you said?

Right. When companies cite paper costs as the only factor in their digitization efforts, they don't realize that there are far more opportunities in digitization than simply getting rid of mountains of documents. That's because the full extent of the cost is not transparent. In order to determine it, it is important to carry out well-founded analyses and, in case of doubt, to calculate with estimated values if the data situation does not provide any actual figures.

Can you explain this in more detail?

In order to approximate costs, companies need a starting point. For being able to estimate the actual extent of the costs incurred, it is important to carry out a kind of "digital value stream analysis", specifically along the employee-led processes. If you do this, it becomes clear that, abstractly speaking, the costs of paper-based processes are made up of 5 cost items.

What are these?

5 factors

First of all, of course, the direct costs that arise in connection with the use of paper. In addition to the paper itself, these are the costs of toner, ink, etc. Then there are the personnel costs that add up due to activities such as printing, copying and the filing of paper documents. They can be calculated by multiplying the time spent on these tasks by the hourly wage of the employees involved. Another factor is storage costs. This is just as much a capital expense as managing and organizing the paper documents. In addition to the costs of paper usage, personnel and storage, there are also error and opportunity costs.

What is meant by this?

Digitized processes hold enormous savings potential

Error and opportunity costs

Error costs occur when, for example, operational processes are carried out incompletely due to misinterpretation of text-heavy documents and then lead to scrap and rework. Finally, opportunity costs are the lost profits, because if I choose paper-based processes, I miss out on the opportunities that digitized processes bring, first and foremost increased efficiency and productivity gains. Adding up all these factors adds up to a tidy sum, and it becomes apparent that there are a great many other insufficiencies besides paper costs that cause unnecessary costs.

Can you give us specific examples of this?

Many non-value-added activities that operational staff are involved with. I'm thinking specifically of such things as media breaks that occur when employees create and maintain checklists and inspection records, for example in commissioning processes. In many companies, this is still done in Word and Excel documents. Especially when documents are to be available in multiple languages and in a standardized form across all plants, and when they have to be updated and versioned in the event of changes, this results in a handling effort that should not be underestimated. After the commissioning documentation has been completed, the paper documents are then scanned again and stored in SAP - often hundreds of pages. If there are queries, the employee has to conduct a manual search in the physical document, which is time-consuming and error-prone and results in increased search efforts. Particularly against the backdrop of an increasing shortage of skilled workers, it is important to free production employees from such inefficient tasks. This not only increases their productivity, but also their personal well-being, because they can use their skills to add value.

With digitization, there are far more opportunities than just getting rid of mountains of documents.

Stefan Philipp Head of Solutions, Operations1

Hidden drivers

What are concrete other cost drivers besides non-value-added activities?

Another example is increased reaction times in the event of errors. After all, if an employee identifies errors or defects for which a quick solution or immediate consultation with the supervisor is required, in many companies he or she has to leave the plant or resort to other systems such as telephone, smartphone, paper or similar. This then leads to unnecessary travel times, long response times and operational costs. Such communication efforts can be significantly streamlined with the help of digitization through task management. Employees can then assign a task to their supervisor or colleague or communicate directly with them via live chat and solve problems in real time.

What would you advise companies to do if they want to take a closer look at their actual costs based on the examples you gave?

It's important to draw the right conclusions. This means taking a close look at an argument such as increased susceptibility to errors and individually assessing what costs are incurred if the quality data is not analyzed. Based on this assessment, solutions must be sought that leverage the unused potential.