Technology is bringing enormous changes to how manufacturers operate. Information can now flow swiftly from plant floor to corner office, from process engineers to production line workers, from customers to product designers—no matter where the people and facilities are in the world. Everyone in the organization is empowered to solve problems effectively and efficiently.
Yet many manufacturers are still using paper-based systems. They have adopted some digital technologies, such as spreadsheets, emails, and even ERP systems. But they haven’t transformed the way they do business.
According to one survey, 161 executives in nine heavy industry sectors said they still use a mix of spreadsheets and paper to coordinate contractor prequalification and other vital records. And Forbes reports that invoicing is still largely paper-based for most companies in almost every industry.
What’s going on? Why don’t more companies take full advantage of digital technology?
Change is hard
There are many reasons why companies are still using paper, but the biggest may be simple inertia. Change is hard for any organization. People are used to their paper systems, and executives are busy dealing with more urgent issues. Why risk disrupting business?
Besides, there are legacy technologies throughout the organization, many of them customized and difficult or impractical to upgrade. The old process or system still works, even though it can’t be easily modified or provide real-time access to operations data. Continuing to limp along is easier than overhauling your information systems.
When seeing it through that lens, the cost of change seems high. But when you look at the other side of the coin, the story is very different.
The true cost of paper
There are several ways to measure the cost of paper systems. One is the cost of paper itself. Gartner says that companies spend as much as 3% of their revenue on paper. There’s the cost of the staff to process and manage the paper, plus the cost of moving and storing it as well as the ultimate shredding of sensitive documents after the appropriate time elapses. Organizations can spend up to $20 just to file a document, and hundreds more to find or reproduce paper that’s been misplaced.
In reality, the actual cost may be much higher.
PricewaterhouseCoopers has estimated that knowledge workers spend up to half their time looking for information. Mind you, these are knowledge workers who must have information to do their jobs! It’s like having half of your production lines shut down all the time because you can’t find the work orders. Which does happen, sadly enough.
Then there is the big picture to consider, such as how an organization interacts with its supply chain, a key factor in building business resilience. Supply chains that operate based on emails and paper can’t change on a dime. Sometimes they can’t change for any amount of money! Yet supply chain disruptions are a nearly daily occurrence, especially for multi-national firms.
The impact from today’s labor shortage
The issue of not being able to staff all open positions across the manufacturing industry is impacting every facet of the business – and is driving companies to make changes to adapt. This issue is predicted to get much worse.
New employees entering the workforce have grown up as “digitally native” with high levels of technology expectations in how they live their life and work at their job. Who has the better chance to hire these valuable, skilled people—the manufacturing company that has digitally transformed itself, or the one that’s still using paper and decades-old technology?
Not only is the next generation of workers coming to the table with expectations of working in a modern digital environment, but they also care very much about carbon footprints and being environmentally friendly. After all, it will be their world in the future, and they understand that the responsibility lies with them. According to the Environmental Protection Agency, paper products make up the largest percentage of materials that end up in landfills. Going paperless in manufacturing is an important step in fighting climate change.
Will 2022 be the year?
The paper problem continues to worsen. Each year the amount of data that manufacturers create keeps increasing. Some companies are using that information to communicate, collaborate, and achieve measurable profitability and competitive gains, while some are still filing it away in basement cabinets.
Five years ago, surveys showed that 43% of firms considered themselves “fully connected” digitally, but that number was expected to reach 64% by the year 2022. Well, it’s 2022. I don’t know what the figures will show when this year is over, but I do know that companies still using paper-based processes will be another year further behind than they are now.
