Cameron Laird - The Payoff

Payment automation and unintended consequences

Written by Cameron Laird
Published on Thursday, 10 May 2012
Published on Thursday, 10 May 2012 06:33

payment"The Payoff" and, more generally, ec-bp, advocate automation and related supply-chain efficiencies; our general attitude is that "trimming the fat" is always a good thing. That's why we explain the latest techniques in EDI (electronic data interchange) and ERP (enterprise resource planning), and how to make the most of them.

There's a "de-skilling" or "deprofessionalization" aspect of this that worries us, though. It will take a bit to explain.

Parallel shifts: processes, software, personnel

EDI has largely been a success over the last couple of decades: it has reduced the "friction" of transactions, eliminated errors, enabled the nimbler responsiveness of just-in-time logistics, and liberated some portion of purchasing-and-payments efforts from routine matters to more strategic efforts. A higher-level label for this kind of program is "procure-to-pay", that is, the integration through software of purchasing with accounts payable.

To this point, essentially all organizations had parallel processes; along with automated procure-to-pay, it was also possible to issue manual checks against paper invoices. Over the last decade, though, an increasing number of organizations have dictated that they'll only recognize on-line invoices, or only pay through a limited number of on-line channels, and so on. It's certainly become accepted and comfortable for major retailers to expect suppliers to conform to entire "books" of standard procedures that accelerate the move towards paperless ordering, inventory, monitoring, tracking, and payment.

This shift has been healthy in many regards: procurement of "commodity" equipment and materials--"direct" buys--has become less expensive. There's still a place for expertise, though: as Senior Contracts and Subcontracts Executive James W. Kendrick pointed out in recent conversations, not everything can be done by "commodity specialists". "'[I]ndirect buys' of non-manufacturing and professional or business-to-business services, due to their complexity, are not so easily automated and still require human interaction and business judgment ...", in his words.

This is where things get sticky. It's easy to caricature "buyers" as deadwood who specialize in golf dates and expense accounts; in that perspective, they're ripe for replacement. On the other hand, we've also seen industry after industry over-react to deregulation and related market changes by firing its most experienced cadres in the expectation that all the work that's left can be done by underskilled, inexperienced, and cheap labor. That leads to calamity just as surely as does clinging to old ways too long.

There's a balance somewhere in the middle. Implement procure-to-pay fully, yes; but don't conclude that firing senior employees is a necessary accompaniment to automation. Instead of seeing their salaries as superfluous expenses, look at them as licenses to make the best advantage of years of training and company-specific investment. How can you team together the technical efficiencies of twenty-first century automation systems of procurement and payment, with the human insight that builds your brand and makes your business more than just another commodity handler?

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Cameron Laird - The Payoff

Cameron Laird keeps track of payment processing systems and the development of technologies that move money from one place to another. Payment methods are changing regularly and the supply chain relies on the timely movement of money. Follow Cameron's commentary to keep up with emerging payment processing trends.

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