Getting Rid Of Paper Is Just The BeginningWilliam C. Symonds
Two years ago, Connecticut Mutual Life Insurance Co. was drowning in a sea of paper. When one of its 1.2 million policyholders had a problem, someone at the Hartford company often had to call for a file that was stored in a warehouse the size of a football field. Vans stuffed with paper shuttled between the office and warehouse every hour. Simple changes to a policy "could take weeks," says Senior Vice-President Jan L. Scites.
Today, visitors to Connecticut Mutual might wonder whether it's still in the insurance business. Customer reps sit at IBM PCs, where they call up all the necessary forms and correspondence--converted into electronic form--to answer most questions. The upshot: Response to queries is down from five days to a few hours, 20% fewer people are involved, and productivity is up more than 35%. Scites says: "That has given us an enormous competitive advantage."
That edge, however, stems not from simply getting rid of all those bulging files--no small feat in itself. The most important benefit of prying information off paper and cramming it into computers is getting the opportunity to rethink thoroughly how the company conducts business.
PUBLIC ENEMY NO. 1. Consider what happens when you get rid of the humble business form. Despite the flood of computers into Corporate America, the multipart business form remains the staple of commerce 100 years after its invention. Everything from your expense account to multimillion-dollar orders for equipment continues to be done on paper forms. Moore Corp., the leading producer, figures that forms account for one-third of the 2.5 trillion pages that U.S. business generates each year. Corporations also spend $100 billion processing forms, Moore estimates.
Now, Connecticut Mutual, as well as dozens of other companies and government agencies, has identified this paper as Public Enemy No. 1 in efforts to reorganize, streamline, and reengineer core operations. Paper forms take up too much room, cost too much to process, and are difficult for computers to deal with. Scanners still can't accurately translate handwriting into computer code, and rekeying information into computers inevitably leads to errors. Worst of all, doing business on paper slows the pace of the enterprise down to the speed at which paper makes its leisurely way from the desk of one paper-pusher to the next.
So organizations are trying to make operations function without such paper. They're using workflow automation to lay paths for electronic documents to travel automatically from desk to desk in a fraction of the time it would take them to move physically. They're employing "smart" forms, which look just like their paper analogs but can catch errors as they're being entered and may even be able to route themselves to the right worker.
But unclogging the paper jam in one company is only part of the solution. That's why companies are flocking to a system called electronic data interchange (EDI), a scheme for helping suppliers, manufacturers, and their customers exchange communications directly, computer to computer. Instead of sending off a paper form to order a new supply of rubber soles and waiting days for the paperwork to kick in, the shoe manufacturer's computer will automatically enter the order in the sole maker's computer, which will simultaneously alert the warehouse, the factory, the accounting department, the billing department, and the shipping department.
This paperless process really pays off when it's applied to as many transactions as possible. General Electric Co., for example, says it's halfway to its goal of handling 80% of its business transactions by direct EDI links. So far, GE's system involves 2,500 trading partners and has eliminated almost 4 million business forms a year--just at the GE end. Eventually, it will save "tens of millions of dollars," predicts Ed Malcolm, GE's manager of EDI services.
Indeed, after several years' gestation, EDI use has reached critical mass. Some 37,000 U.S. companies are now actively involved, up from just 2,000 in 1987, and twice that number should take part next year. Even now, Wal-Mart Stores Inc. and General Motors Corp. prefer not to do business with suppliers on paper. They must use EDI to receive orders and respond electronically. All that requires, though, is a PC, a modem, and some EDI software from such companies as TSI International or IBM. For Wal-Mart, the tighter link is crucial to its strategy of avoiding inventory buildup and price markdowns.
TICKLED TAXMAN. Royal Bank of Canada, meanwhile, is working to make all 1,600 of its branches--North America's largest network--virtually 100% free ef paper forms. They've already been largely eliminated from tasks such as opening accounts and applying for loans. Officers can call up a customer's credit history on their desktop computers and approve some loans right on the spot. That was impossible when the information was locked away in file drawers.
The U.S. government, the world's top paperwork factory, has even bigger plans. The Pentagon's seven-year-old computer-aided acquisition and logistics support (CALS) initiative aims to scrap paper in favor of electronic media for complex weapons systems. A jet fighter's service manual, running to thousands of pages, could go on a compact disk, for instance. The National Security Industrial Assn., a trade group of defense contractors, reckons CALS could cut the time for developing a weapon by 40%. EDI also will help the military shop for the 50,000 items worth $25,000 or less that it buys each day.
The Internal Revenue Service, which now processes 1.7 billion pieces of paper annually, has launched an $8 billion program to go nearly paperless by decade's end. Among other goals, the IRS aims to receive 100 million tax returns electronically, up from just 11 million this year. The benefits: cutting return-processing time from six weeks to two weeks and making old returns available instantly to taxpayers. Today, such returns can take 10 weeks to find.
Just eliminating paper doesn't necessarily make for better productivity. "If you simply electronically replicate this paper factory, you haven't accomplished anything," says Robert Janson, president of Roy Walters & Associates, a consultant in Mahwah, N.J. But if you scrap the cumbersome procedures that have grown up around paper forms, you can make big gains in productivity and competitiveness.
FORMLESS VOID. That's what happened at Sears, Roebuck & Co.'s Discover Card unit. To sign up a new merchant, it used to take six forms and an average of 14 days to process. But today, portable computers capture the same information just once, and a central mainframe helps a team of workers complete the approval cycle in just one day.
Of course, as more paper disintegrates into electronic bits, the $8 billion business-form industry is in for wrenching change. "A lot of business forms are going to disappear," fears John K. Darragh, president of Standard Register Co., the No. 2 player. And as they do, Darragh figures, the industry may shrink to $6 billion or $7 billion in 10 years. The biggest form maker, $2.5 billion Moore Corp. in Toronto, is already feeling the effects. Its 1991 earnings of $88 million were off 56% from its 1989 record, partly because of the recession. And in the first nine months of 1992, its earnings were down 30% from a year earlier. "The forms business is mature," says John R. Anderluh, president of Moore North America.
So Moore and its competitors are gearing up for their own electronic futures. They're beginning to sell electronic-forms software, and after decades of designing forms for customers, they figure that they understand how corporations use information. So they want to become information consultants. Unfortunately, that would mean competing head-on with such industry giants as Electronic Data Systems, IBM, and Andersen Consulting.
Clearly, computers aren't about to push paper completely out of the office overnight. Many hurdles remain. Back in 1985, for example, the Automotive Industry Action Group predicted that, by stemming the paper flow between auto makers and their parts suppliers, the average car's production cost would go down $200 by 1988. No such savings ever occurred, though, because carmakers couldn't agree on how to format EDI messages. Even today, GM and Ford Motor Co. haven't agreed on internal EDI plans. And both, you can be sure, still have more paper than they would like. But soon, they say, they'll have less.