kmguru
06-25-02, 04:47 PM
** Business Technology: The $40 Billion Question
(excerpt from informationweek.com)
How big is 40 billion? Well, in a grid, it would be 200 million
up one side and 200 million out the other, but that image is a
bit tricky to project in your head. If we use dollars as our
unit, it could almost approximate the total value of compensation
and perks raked in by the CEO of Global Crossing in the past
couple of quarters, but that image doesn't lead to productive
thoughts. But $40 billion spread out over a year would mean about
$110 million every single day, or about $5.5 million per hour, 24
hours a day for 365 days. That has a certain toothiness to it, I
think.
Now imagine that your industry (and therefore, in some
proportion, your own company) wastes, squanders, burns, loses,
and flushes that amount--$40 billion a year--to correct errors
created in the manual entry of ordering and shipping and
purchasing and receiving millions of products. Wouldn't that
trigger a vein-throbbing, spittle-spewing, fire-breathing tirade
from the CEO, who'd seem to have good reason to threaten to fire
every person in the company--starting with himself--unless fixing
the problem became the top priority of the entire organization?
What if you could cut that loss by just 1%--that would be a $400
million annual savings industrywide! Surely something can be
done, right?
Well, yes and no. We seem to be at that fuzzy point where elegant
and seamless theory meets the messy and sometimes almost
intractable world of reality. The scenario outlined above is all
too true and describes the jumbled world of the retail industry
and the millions of products created by manufacturers and ordered
by stores--and misnumbered by manufacturers or stores or both.
Where 30% of the information in catalogs used by retailers and
manufacturers for replenishment of stock is incorrect, and each
error costs around $70 to fix. One $500 million retail chain had
to send out 100,000 purchase orders manually each year, and in
turn could match only 53% of those to supplier invoices, kicking
open the door for some manufacturers to employ the time-honored
practice of padding the bill by tacking on items that weren't
ordered. The good news is that with an automated system now
coming up to speed, 93% of purchase orders and supplier invoices
can be matched, which will let the company cut out not only the
extra expense caused by suppliers padding the bill, but also the
unethical companies that have used such practices.
more next week...
(excerpt from informationweek.com)
How big is 40 billion? Well, in a grid, it would be 200 million
up one side and 200 million out the other, but that image is a
bit tricky to project in your head. If we use dollars as our
unit, it could almost approximate the total value of compensation
and perks raked in by the CEO of Global Crossing in the past
couple of quarters, but that image doesn't lead to productive
thoughts. But $40 billion spread out over a year would mean about
$110 million every single day, or about $5.5 million per hour, 24
hours a day for 365 days. That has a certain toothiness to it, I
think.
Now imagine that your industry (and therefore, in some
proportion, your own company) wastes, squanders, burns, loses,
and flushes that amount--$40 billion a year--to correct errors
created in the manual entry of ordering and shipping and
purchasing and receiving millions of products. Wouldn't that
trigger a vein-throbbing, spittle-spewing, fire-breathing tirade
from the CEO, who'd seem to have good reason to threaten to fire
every person in the company--starting with himself--unless fixing
the problem became the top priority of the entire organization?
What if you could cut that loss by just 1%--that would be a $400
million annual savings industrywide! Surely something can be
done, right?
Well, yes and no. We seem to be at that fuzzy point where elegant
and seamless theory meets the messy and sometimes almost
intractable world of reality. The scenario outlined above is all
too true and describes the jumbled world of the retail industry
and the millions of products created by manufacturers and ordered
by stores--and misnumbered by manufacturers or stores or both.
Where 30% of the information in catalogs used by retailers and
manufacturers for replenishment of stock is incorrect, and each
error costs around $70 to fix. One $500 million retail chain had
to send out 100,000 purchase orders manually each year, and in
turn could match only 53% of those to supplier invoices, kicking
open the door for some manufacturers to employ the time-honored
practice of padding the bill by tacking on items that weren't
ordered. The good news is that with an automated system now
coming up to speed, 93% of purchase orders and supplier invoices
can be matched, which will let the company cut out not only the
extra expense caused by suppliers padding the bill, but also the
unethical companies that have used such practices.
more next week...