How do you evaluate the value of automating a process?
Process automation is the use of technology to streamline and optimize repetitive, manual, or rule-based tasks. By automating a process, you can save time, reduce errors, improve quality, and increase productivity. But how do you evaluate the value of automating a process? In this article, you will learn how to identify the potential benefits and costs of process automation, and how to calculate the return on investment (ROI) and the payback period of your automation project.
The first step to evaluate the value of automating a process is to identify the process that you want to automate. You need to understand the current state of the process, including its inputs, outputs, steps, roles, resources, frequency, duration, and performance. You also need to define the desired state of the process, including the goals, objectives, expectations, and metrics that you want to achieve with automation. You can use tools like flowcharts, diagrams, or process maps to document and visualize the process.
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Vinita Kothare
We started evaluating something as basic as a travel and expense tool. This entire process was manual! We have now implemented a tool for Travel and Expense Reimbursement, integrated with SAP which is further being integrated with the banking channel to ensure smooth recording of the claims as well as timely processing and actual payout. Employees can easily upload all their details using a mobile or web application, once approval is received and further validated by the finance team - the same is recorded into SAP as well as integrated with banking channel for payment. We are now saving more than 20+ hours per person across India locations; leading to efficiency and time devoted to more analytical tasks, rather than mundane activities.
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Sabin Nair
Founder, CEO @ Origin21 | Hydrogen on demand, Decarbonisation and Nett Zero
In my experience the first step is always to get data. Any task that’s repetitive theoretically can be automated. A comprehensive data set can be contextualised and will give you a lot of data on why you need to automate and what.
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Pedro Berrocoso
An alternative approach to starting off with as-is analysis of a process is to simply reimagine it through a Machine-first lense laying out a design maximising the use of process automation and adding human input and validation where it makes best sense as part of a process mapping workshop. This could help to unlock process change resistance and help defining expectations beyond what is currently known and in place. A simulation of the reimagined process can then be compared with existing performance metrics to gauge potential goals and what an optimal, phased delivery of the new hyperautomated process could look like.
The next step is to estimate the benefits of automating the process. The benefits can be tangible or intangible, depending on how they affect your business outcomes. Tangible benefits are those that can be measured and quantified in monetary terms, such as cost savings, revenue increase, or profit growth. Intangible benefits are those that cannot be easily measured or valued in monetary terms, such as customer satisfaction, employee engagement, or risk reduction. You can use methods like benchmarking, forecasting, or surveys to estimate the benefits of automation.
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Pedro Berrocoso
Whilst the quantitative benefit calculation for process automation can be straight forward particularly if processing data, event logs etc. from process mining activities exists other qualitative factors such as risk levels, customer satisfaction are often following a valuation approach where stakeholders like compliance or customer care are involved to give additional input.
The third step is to estimate the costs of automating the process. The costs can be divided into two categories: capital costs and operational costs. Capital costs are the one-time expenses that you incur to acquire, implement, and deploy the automation solution, such as hardware, software, or consulting fees. Operational costs are the ongoing expenses that you incur to maintain and support the automation solution, such as licenses, upgrades, or training. You can use methods like budgeting, pricing, or quotes to estimate the costs of automation.
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Gargi Shastri
Certified Product Owner | Technical Business Analyst | IT Consultant | RPA Consultant | Data Analytics | Data Visualization | Ex-Cognizant & Verizon | CSM | SAFe 5.0
In my experience, I diligently account for the initial costs associated with automation, including expenses for licensing, infrastructure, and training. Despite these upfront investments, the significant return on investment (ROI) offered by various RPA solutions far outweighs these costs.
The fourth step is to calculate the return on investment (ROI) of automating the process. The ROI is the ratio of the net benefits to the net costs of automation, expressed as a percentage. The net benefits are the difference between the benefits and the costs of automation. The net costs are the sum of the capital and operational costs of automation. The formula for ROI is:
ROI = (Net Benefits / Net Costs) x 100
The higher the ROI, the more value you get from automating the process.
The fifth step is to calculate the payback period of automating the process. The payback period is the time it takes for the net benefits of automation to equal the net costs of automation. The formula for payback period is:
Payback Period = Net Costs / Net Benefits
The shorter the payback period, the faster you recover your investment in automation.
The final step is to evaluate the results of your value analysis. You need to compare the ROI and the payback period of automating the process with your expectations and criteria. You also need to consider other factors that may affect your decision, such as the feasibility, scalability, or reliability of the automation solution. You can use tools like charts, graphs, or dashboards to present and communicate your results to stakeholders and decision-makers.
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