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

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?

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.

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.

What tip do you have in conclusion for companies that want to set out in the direction of digitization?

In addition to deciding on the right technology, which should be considered with well-founded research, it can help if you stick to the guiding principle of "think big, start compact" during implementation. This means that you don't have to start implementation right across the board, but you can develop use cases one after the other. In our experience, it makes sense to start with high-impact use cases such as maintenance or commissioning. This is where efficiency gains can make a big contribution due to the high level of employee qualification and the lack of qualified personnel. This then in turn gives the further roll-out a decent boost.

Stefan, thank you very much for your detailed explanations and the useful advice, which will certainly benefit many companies!

You can get more detailed information on the cost drivers based on a specific use case in our whitepaper "Paper-based vs. digital commissioning: the 7 levers to success". The success stories of our customers will also provide you with deeper insights and perhaps serve as inspiration for your own digitization journey.