Process Mining: Retail’s Greatest Metal Detector
Process inefficiencies are silent killers to your business. Learn how process mining can help.
By Madison Roepe and David Sizer
If you were told there was $20,000 worth of gold coins buried somewhere in your backyard, how would you go about finding it? Would you quickly grab a shovel and go rogue, digging randomly? Methodically establish a digging strategy, sectioning off each area of space before beginning? Or use a metal detector and only dig where the device indicates?
The metal detector method is likely the quickest and easiest way to find the $20,000, while the methodical approach would take much longer and require more effort. In simply going rogue, you’d be more likely to uncover dog bones than treasure.
But what does this have to do with retail?
With an anticipated economic slowdown, the retail sector faces a challenging landscape ahead. Stimulus spending that boosted sales during the pandemic will no longer mask underlying business struggles.
To drive business optimization through technology, leaders must clearly visualize and communicate the extensive and expensive set of business processes supported by technologies that aren’t optimized or connected. This will expose the digital debt within organizations and reveal a path forward to increase operational efficiencies.
Process inefficiencies lay beneath many businesses’ complex system landscapes, leaving millions of dollars in value across the enterprise to recover. All you need is a metal detector.
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Where do process inefficiencies hide?
Naturally, complexity magnifies inefficiencies. In today’s digital landscape, many businesses have processes that run across fragmented technologies and inconsistent procedures. Something as simple as paying an invoice may touch multiple people, processes, and technologies. This is a breeding ground for inefficiencies and leaves enterprises at risk for bottlenecks, time-consuming manual processes, and — ultimately — lost revenue.
The process areas below are particularly susceptible to inefficiencies across the retail value chain.
- Supply and distribution: Inventory management
- Finance and administration: Accounts payable
- Product and services: Merchandising
Inventory management
Successful inventory management has never been more important. In fact, 87% of consumers will change shopping habits due to supply chain disruptions like stock availability. Studies also show that when consumers can’t find the precise product they’re looking for, they will substitute it with a different brand or buy the item at another store. The impact of abandoned purchases due to stock-outs results in approximately 4% of lost sales, or $40 million a year for a billion-dollar retailer.
Accounts payable
According to studies, 64% of organizations still rely primarily on manual control testing to detect control violations such as duplicate invoice payments. Even in high-performing Account Payable (AP) functions, duplicate invoices can slip through the cracks. Duplicate payments have many root causes and frequently lead to unapplied credits. According to industry experts, the average company pays 1.5% of its invoices twice. Given an average invoice volume of 500,000 and an average invoice amount of $300, this equates to approximately $2.25 million in duplicate payments annually. The impact of subpar AP processes may be hiding and costing your business millions of dollars.
Merchandising
With the complexity of merchandising processes, it is a natural place for inefficiencies to hide. Traditionally, a third-party team would assess business processes and identify inefficiencies by reviewing process documents, conducting workshops and interviews, and performing mapping exercises. Once they gathered sufficient data, the team would suggest changes to improve the observed processes. This process discovery method takes weeks and months, only gathering anecdotal information (which may not be the reality of how processes are functioning within a team) and qualitative data (which is difficult to measure and rely on to make actionable decisions). The traditional approach to process discovery is human-centric and only provides a glimpse of the whole picture.
However, process mining can help optimize performance by automating extensions and leveraging intelligent automation to flag potential promotion conflicts and stock-outs.
Revealing process inefficiencies and hidden dollars
In this uncertain economy, all businesses — but especially retailers — can’t afford to lose millions of dollars due to process inefficiencies. As the economic landscape following the COVID-19 pandemic remains unpredictable, executive boards are looking for leaders with a strong track record for operational execution and financial discipline. Businesses need to reduce inefficiencies that impact the bottom line, whether directly or indirectly, to remain competitive.
Luckily, leaders can use process mining — the retail industry’s version of a metal detector — to uncover these inefficiencies and hidden dollars. Process mining is a data-focused technique for discovering actual business processes, where insights are extracted from system event logs to streamline operations and continuously monitor performance. Process mining uses objective, data-driven sources of information to provide a fact-based view of current-state processes in a matter of days. Rather than depend on manual data-collecting techniques that only offer a partial understanding of the business, process mining uses automation to fully expose end-to-end processes and suggest real-time improvements.
How can you fix process inefficiencies?
Process mining technologies connect directly to data sources (such as SAP, Oracle, etc.) and transform raw data into actionable insights to empower your organization to analyze, improve, and automate business processes. Once you analyze the data you’ve gathered through process mining, you can begin making decisions to improve and automate your business processes.
In Conclusion
Process mining is the best way to identify process inefficiencies and quantify their impact on your business. At Slalom, we work with a wide array of retailers to execute process mining technology and enhance business operations. Together, we can find hidden potential, establish a path forward, and transform inefficiencies into opportunities for the future.
Slalom is a global consulting firm focused on strategy, technology, and business transformation. Learn more and reach out today.
