by Peter Bendor-Samuel

Robotic process automation is reworking supply chains

Apr 24, 2018
Supply Chain Management SoftwareTechnology Industry

RPA is colliding with business process services and inevitably will disrupt supply chains.

industrial supply chain management - ERP - Enterprise Resource Planning
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Robotic Process Automation (RPA) is a powerful set of digital tools that is poised to have a dramatic effect on the services industry, particularly the business process industry. RPA tools automate well-understood processes currently being done by hand and that have been outsourced. But from our findings in my employer Everest Group’s Pinnacle Model research on enterprises that undertake digital journeys, we believe companies will inevitably apply RPA to work that is not currently outsourced. This will radically change the supply chain of services over the next five years.

Why RPA is so attractive to enterprises

Well over a third – and in many cases – perhaps as much as 80 perc of currently outsourced business process work – can and will be automated using tools such as RPA. These tools are basically software sitting on a virtual server, which can be spun up at time and shut down when the work is finished. RPA software performs SOP (standard operating procedures) work that has been previously outsourced to low-cost human labor (“human robots” tightly conformed to the SOPs). Automation changes service delivery methods and allows companies to recruit, train and incentivize people for problem-solving work, rather than robotic work.

RPA adds two important components to the emerging digital platforms companies are developing. It’s an important part of a great data ingestion engine. It also acts as a core technology to the core systems integration layer that must be put in place for digital operations. 

RPA is disruptive because it delivers great efficiencies by breaking the link between FTEs and services such as finance and accounting, HR procurement, invoicing and customer service. For instance, we believe 40 percent of customer care / call center seats will be automated out of existence in the next five years. Through virtual agents, RPA will transform the customer experience and the cost to serve. FTEs are an inflexible cost and requires managing a continuous learning curve. In contrast, RPA can deliver services in a consumption-based pricing model.

Our study of Pinnacle Enterprises that have undertaken RPA journeys and achieved superior outcomes reveals a 50 percent improvement in operational metrics (on average) compared to 30 percent improvement in other enterprises. Pinnacle Enterprises also generate 4X the ROI of other enterprises implementing RPA technology.

Implications for vendors and service providers

As we probed further into the key enablers and determinants of success for Pinnacle Enterprises, it was clear that RPA technology itself is not a key differentiator. What’s more important is the approach and strategy enterprises take in RPA initiatives.

Therefore, we see several implications for RPA vendors and service providers offering automation. First, they need to position themselves as end-to-end service providers rather than a provider of RPA tools. Digital transformation and automating business processes requires an end-to-end approach to achieve the full benefits and anticipated ROI.

Second, Pinnacle Enterprises achieve a faster pace of RPA implementation, so this is an area where vendors and service providers need to demonstrate their expertise. Further, a one-size-fits-all model won’t work in a digital, end-to-end environment. Thus, a provider’ approach and strategy for implementation needs to vary with the people, processes, and technology maturity of the client.  

Radical disruption coming to BPO services

Companies choose to experiment with RPA to address their most prescient pain points:

  • How to reduce errors
  • How to rework repetitive, robotic work to reduce employee turnover and retain employees with enriching work

There is substantial opportunity achieve these goals in work that has already been reduced to SOPs and outsourced. That’s where the market currently is, and the BPO service providers already doing this work for clients are facing disruption to their supply chain and cannibalization of their existing work.

As service providers apply RPA against client’s pain points, the FTE model will give way to an automated model, which will lead to further disruption. When companies remove 80 percent of FTE work through automation, the remaining 20 percent is analytical and client relationship pieces, both of which will likely move onshore close to the client. Thus, RPA will radically change the existing BPO model.

I believe the market will also turn to RPA for functions that have not yet been outsourced.

Finally, there is another significant factor leading to supply chain disruption in the service industry. Although RPA technology is relatively easy and inexpensive to implement, it’s far more than a labor-to-technology substitution. Because digital transformation takes and end-to-end approach in business processes, it opens new issues around how processes should be designed. That leads to new issues in service delivery. In short: RPA adoption could change everything about services supply chains and delivering value.