Industry 4.0 • May 5, 2022

Going Paperless Drives SME Manufacturing Competitiveness

Tier two and three manufacturers are the backbones of any manufacturing supply chain. Without a viable ecosystem of part and component suppliers, the tier-one OEMs are incapable of producing their systems and products. But there is also incredible pressure on this supplier community to control costs, improve quality and meet ever-tighter delivery schedules. We know that the coronavirus pandemic, Russia-Ukraine war-driven shortages, and overall inflation has challenged the viability of small or medium-sized enterprises (SME). And remaining a partner to your customers and maintaining profitability is also proving to be a challenge. While many businesses are moving to digitize their businesses, a PWC study from 2020 showed that less than 50% of European manufacturers are digitizing with similar numbers representing North America. Going paperless is one of the quickest steps a small or mid-sized manufacturer can take to reduce costs, improve quality, and drive higher productivity.

Paper is Expensive

Overall industry data reveals that organizations, on average, spend 3% of their operational budgets on the cost of just processing paper. Between the procurement costs, the storage costs for both blank and completed forms, and disposal costs, just the direct costs of paper alone eat into your profitability. Add in the labor costs of people having to take the time to fill out the forms and it is easy to see how that 3% figure may be low.

Paper is Error-prone

Manual data entry error rates vary widely depending on industry and workplace culture but manufacturers that have gone paperless report that the error rate on data entry drops by as much as 90%.  Imagine the benefits of cutting your current error rate to 1/10 of whatever it currently is.  The time and costs associated with correcting those errors drops. But more importantly, the impact of either not being able to ship products that are good but tagged as bad because of bad data or shipping bad products to customers is significantly reduced. 

Paper is Slow

The time it takes to fill out paper forms as well as locate them on the plant floor leads to delays in production that keep products in work-in-progress status far longer than they need to be.  Companies that have transitioned to paperless systems report an average drop in WIP (work in progress) of 32% (MESA report on MES #1) 

Paper Gets Lost

When the paperwork associated with manufacturing gets lost it can impact production in several ways. If paper-based work orders or work instructions are missing, production must wait for either duplicate sets to be printed or the originals to be located. This slows production even further. If the paper traveler that accompanies a product throughout the process becomes detached and lost that product immediately goes into a hold status until the proper paperwork is located or duplicated further being a key reason so many companies report significant WIP reductions as noted above. If quality paperwork is lost products cannot be shipped or must be downgraded, lowering their margin depending on the industry. Again, the reason so many companies that have made the shift report as much as a 100% reduction in WIP from going paperless.

MES is Fast Track to Going Paperless

While there are document management systems that can aid in the paperless migration, the advantages of adopting an MES as your approach to going paperless are that an MES is tailored to manufacturing operations. It is easier to build in the checks and balances that reduce data entry errors as the MES has embedded product and process business logic. The benefits of going paperless via an MES have been documented for over 25 years. And a recent PWC European study found that 90 percent of the respondents believe that digitization offers their companies more opportunities than risks. In addition, three out of four respondents set up digital factories to react to customer preferences more quickly. Your small to mid-sized manufacturing business cannot afford to wait any longer if you want to remain competitive in today’s challenging economy.

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