Digitalization is driving the trend of automation in the world today. It's important to understand what automation is, its different dimensions, and how it impacts your organization.
For many years, organizations have discussed automation as a means to increase efficiency, productivity, profitability, and effectiveness.
To begin, examining the history of automation and its recent developments in digital technologies would be beneficial. When organizations first adopted computers decades ago, the primary focus was on simple data collection and capturing, alongside centralizing and electronically gathering data previously stored on paper or spreadsheets. During the 1970s and 1980s, organizations began recording data within computer systems for the first time, allowing centralized visibility into their operations and financial outcomes.
Fast forwarding to the 2020s, automation and digital technologies continue to decentralize data, as discussed earlier. However, they now offer additional benefits, including workflow streamlining to ensure optimal business processes. Additionally, they focus on delivering greater insights into organizational operations. Rather than merely providing high-level numbers, these technologies offer in-depth insight into the drivers behind the financial outcomes of various organizations worldwide.
In some instances, automation is fully automating low-skill, high-volume, and repetitive transactional processes. Throughout the years, automation has transformed from digitizing data to increasing efficiency, revenue, insights, and comprehension of business operations.
The essential basis of automation is software automation, which follows a trend from decades ago, involving the computerization of back-office processes. These processes include ERP systems that record financial information, inventory levels, and stock locations in a warehouse. Software automation not only records data but also simplifies workflows and links end-to-end business processes throughout the organization. Enterprise resource planning (ERP) systems, customer relationship management/sales systems, and supply chain tools are examples of such technologies designed to integrate business processes across different functions and disciplines within an organization. While software automation is the fundamental basis for automation, there are other technologies and automation forms that can advance an organization's potential.
Robotics and sensors are another technology and automation form that has been advancing in recent years. Robotics and sensors are best demonstrated in a manufacturing shop floor where robots automate various business and production processes by physically moving and assembling products. Warehouses also use robots to transfer inventory to different locations or staging areas for shipping to customers. These examples highlight how organizations are utilizing robotics.
The data captured by the robots is also automated, including information on inventory locations, work-in-progress status, quality issues, productivity metrics, and other related metrics. This data is captured by the robotics and forwarded to the computer systems or software automation mentioned in the previous segment. Automation encompasses not only the automation of core back-office software but also physical automation with robots and the sensors associated with it.
Bringing together the two previous points around software automation and robotics, we have a third type of automation: robotic process automation (RPA). Despite the name robotic, there is not actually a physical robot involved in RPA. It's a function within a software system that automates and does the work of what a human might have historically done. For example, if an organization has a high-volume transaction that doesn't require a lot of skill or human intelligence, RPA can be a way to automate that process. Purchase order processing is a good example of RPA.
When procuring a product or service, a purchase order is issued, and delivery is received before issuing payment. Later, the supplier will invoice the purchaser, and a three-way match is done to ensure the purchase order matches the invoice and the delivered product. Robotic process automation can automate this process, performing the three-way match and flagging any exceptions, thereby eliminating the need for humans to manually process every purchase order and invoice.
Another type of automation that builds on RPA technology is AI, machine learning, and intelligent automation. These technologies not only automate business processes but also have predictive capabilities, learn from data, and detect patterns to understand what is happening within an operation or a business process. AI is a form of intelligent automation, and machine learning is a technology that supports AI by learning from data. Machine learning analyzes data and predicts what will happen in future data sets based on the patterns it has learned. AI uses machine learning to apply algorithms and make predictions for future decision-making.
Of all the technologies discussed today, this is the most advanced and where the world is headed. While many organizations have some level of software automation, they are now evolving to incorporate robotic process automation, AI, machine learning, and intelligent automation. This whole bucket is a layer of automation that's important to understand when looking at your digital strategy for the future.
A significant question concerning automation is its impact on human employment. Will automation lead to job displacement? Will there be job opportunities in the future given the proliferation of automation?
The impact of technology on human jobs is a historical question, and it's difficult to predict its future implications. However, throughout history, technology and automation have significantly disrupted and altered people's jobs. The critical issue is how we can aid individuals in adapting to these changes.
Through historical analysis and current work with clients and organizations, it has been found that technology and automation are creating opportunities for individuals to focus on strategic tasks that require advanced skills, rather than mundane tasks.
It's an opportunity for people to learn and develop, but it requires assistance to make the transition. Understanding automation means understanding its impact on your organization and employees, and developing a plan to assist them through the transformation. This should give you context and understanding of what automation is.
These are the decision points that organizations must go through to determine the best fit for their needs. If you are looking to strategize an upcoming transformation or are looking at selecting an ERP system, we would love to give you some insights. Please contact me for more information eric.kimberling@thirdstage-consulting.com
