White paper

The information
ripple effect

This white paper discusses how the initial acquisition

of imperfect information creates an immediate and
dramatic enterprise-wide disruption. It will also address
how a digital platform can eliminate or minimize
the negative business outcomes resulting from the
information ripple effect.
Contents Executive summary 3

Daily disruptions 4

Understanding the ripples 5

Manufacturing and Chemical 6

Finance 7

Retail and CPG 9

Pharmaceuticals 9

Services 9

Summary 10

The information ripple effect 2/10

 Executive summary
Every business process requires information. Recent innovations focus primarily on the
processing of information and not the quality of the information processed. Too often,
the perception is that information only involves a relatively small focus group. The reality
is that, in a connected business enterprise, imperfect information creates a significant,
wide-reaching ripple effect.

The origin of the ripple begins with the initial acquisition of information. It is widely
assumed that information acquisition is electronic, but information acquisition remains
predominately non-electronic. This non-electronic channel is primarily paper or images
attached to emails. Any non-electronic information acquisition requires a human touch
point to enter into the corporate system of record. For this paper, it is assumed that the
system of record is SAP®.

“I don’t know” is a statement that can cause panic in the enterprise. Due to the speed of
the economy and the geographic dispersion of employees, business success requires
immediate access to information that is accurate, timely, relevant and secure. The vast
amount of information generated throughout a business process has elevated the task
of “knowing” to new levels of difficulty. This lack of knowledge often results in employees
providing imperfect information into the business process flow. Detection, evaluation and
resolution of the imperfect information disprupts an otherwise stable process, resulting in
ripples throughout the enterprise.

The SAP intelligent enterprise framework operates at an optimal postive outcome when
the informatation flow is not disrupted. Without disruption, the information flow is calm
and, when always in motion, the enterprise runs smoothly. When the steady stream of
information is not perfect, the information disruption begins and the information ripple
effect becomes pronounced and, in some cases, extremely dispruptive.

This white paper will discuss how the initial acquisition of imperfect information
immediately and dramatically drives enterprise-wide disruption. It will also address how a
digital plaform can eliminate or mimimize the negative business outcomes resulting from
the information ripple effect.

The information ripple effect 3/10

 Daily disruptions
Most employees begin each day collecting the information needed to complete their
work. This information acquisition continues throughout the day as they research,
evaluate, make decisions and take action. SAP does not include pre-populated business
information, therefore the information acquired must be either entered into the SAP
business process or stored to support the business transaction. Think about the start
of a work day. How much time is spent organizing and researching non-electronic sources
for information needed for the day? How often are you interrupted to correct problems
resulting from imperfect information entered on prior days? Who entered the information,
you or someone else that created the problem?

Software solutions, such as networks or EDI, have been successful in the digitalization
of business processes, but the fact remains that as much as 80 percent of information is
entered into SAP by manual, error-prone data entry. In addition, the storage of supporting
documentation for the information entered into SAP is still stored in paper format. Make
no mistake, the off-site storage of non-electronic information is still a big business. To
compound the problems related to the management of non-electronic information, the
“need” to make copies is still rampant and often these copies are also used and stored
in various formats across the enterprise.

The information ripple effect 4/10

Imperfect information can Understanding the ripples
be defined as, but is not In a modern business environment, it is critical that all units of the enterprise be
connected and consistent in the use of information. At all levels throughout the
limited to:
enterprise, it is imperative that each process participant understand that the use and
dissemination of information affects others throughout the connected enterprise.
• Error in entry, such as transposition
Information quality and its utilization will determine if the information ripple effect results
or spelling.
in a positive or negative outcome.
• Error in the source document,
such as an incorrect address. The digital capture of information frees individuals from manual entry, thereby increasing
• Incomplete information, such as profitability. Possibly even more impactful is the elimination of imperfect information. If
an omission of order date. imperfect information is detected and corrected as part of the input to SAP, the ripple is
• Information irrelevant to the kept to a minimum. The further into the process the error goes undetected, the ripples
business process. grow more destructive to a favorable outcome. In addition, the time and effort to correct
• Out of date information. imperfections detracts from proactive, value adding tasks.
• Lack of information enhancement.
• Non-compliant information.

The information ripple effect 5/10

 Potential destructive outcomes of imperfect information in selected business
processes include:

Manufacturing and Chemical

Order to Cash

If the information from a purchase order is imperfect, negative revenue outcome

might include:

• Loss of a sale and/or future business with a customer.

• Last minute changes in operations, which drive inefficiency.

• Degradation of trust between internal departments, resulting in “work arounds”

and inefficiency.

• High cost of materials due to the limited time to source and the expense
of expedited logistics.

Procure to Pay

Imperfect information related to an invoice, delivery note or quality checks

may harm profitability, resulting in:

• Duplicate payments.

• Excessive inventory.

• Lost sales due to inability to provide materials on time.

• Fraud.

• A negative relationship with trading partners, as late payments will affect cash flow.

Operations

This industry is especially sensitive to imperfect information. Production, maintenance

and logistics schedules are driven by information from across the enterprise. Since many
companies rely on contract personnel, imperfect HR information is also a potential for
disruptive ripples.

The information ripple effect 6/10

 Finance
The impact here can be both direct and indirect. Most information entered and
subsequently generated will have an impact on finance. Since financial postings are
typically an end of process step, imperfect information will require financial corrections.
If these corrections are late or sizeable, the outcome will be a less than desired view by
auditors and investors. Sometimes these problems even become news, lowering the
value of a publicly traded company. In a worst case scenario, imperfect information may
generate significant fines and penalties due to lack of compliance. It will typically affect
the cost of goods sold, inventories and tax determination.

Example scenario:

• A vendor sends an invoice for manufacturing equipment to the customer as a PDF

attached to an email.

• The equipment in question was ordered with a PO and requires a goods receipt.

• The customer’s maintenance crew has a scheduled shutdown that requires the
equipment to be installed over the weekend.

• The customer has a make to order production run scheduled for the machinery on
Monday to fulfil a large make to order shipment to the customer.

Problem description:

• The invoice is received the same day as the vendor ships the part
for expedited delivery.

• When the maintenance crew looks for the equipment to install during the shutdown,
it is discovered the vendor has not delivered the equipment.

The enterprise disruption resulting from the information ripple will rapidly grow as the
ripples flow out, making one person’s problem someone else’s. Eventually, the intelligent
enterprise does not look as intelligent as once assumed.

Further examination of the ripple exposes gaps in the connected enterprise. This ripple
began when the part was delivered late on Friday afternoon, but the goods receipt was
not entered in SAP and the part was pushed back into the corner of the warehouse for
entry on Monday. The ripple begins.

The imperfect information here is the goods receipt into SAP for the required equipment
part. In this case, the information is incomplete. The part has been delivered, but only the
warehouse person has that information. Others in the enterprise need this intelligence to
complete their assignment but they do not have the information.

Without the necessary information about the equipment, the maintenance crew is
working overtime to complete the shutdown but is unable to repair the machinery. The
vendor is contacted over the weekend to discuss why the part has not been delivered.
After explaining that it has been delivered, it is agreed that the vendor will expedite the
shipment of another part over the weekend so they can complete the shutdown. The
shutdown is finally complete, but it is now behind schedule. Operations cannot complete
the scheduled production on Monday since the machinery cannot be started on time.

While this ripple is not as predictable, in some situations, maintenance may not have time
to review all required environment, health and safety guidelines and may inadvertently
skip required steps in the shutdown. This non-compliance can result in future ripples
related to safety or lower profitability due to fines.

The information ripple effect 7/10

 Negative business outcomes continue to evolve with every ripple. The first ripple of
incomplete information affects profitability due to excessive maintenance labor. The
outcome of the next ripple is that the relationship with the vendor is adversely affected.
Profitability is further decreased since the customer now has two pieces of the same
equipment. This will result in additional expense if it is sent back or the organization incurs
inventory costs. As the ripple continues to flow across the enterprise, the outcome of the
next ripple is internal trust. Maintenance does not know if it can trust the warehouse group
to provide quality information when working on maintenance scheduling. The ripple now has
reached operations as they are unable to fulfill the production run requested by sales. While
this lost sale becomes a significant outcome of the information ripple, it is compounded by
the fact that the customer may lose confidence in the organization’s ability to fulfill make to
order requirements and could potentially take their business to a competitor.

Enterprises can calm the information ripple effect with a digital capture solution. A digital
capture solution transforms and enhances the Intelligent and Connected Enterprise.
Information is available immediately, is complete, accurate and visible to all appropriate
individuals across the entire enterprise.

As mentioned, imperfect information often starts the ripple disruption with a human touch
point to acquire the information. Elimination of the unnecessary human touch point by
digitizing non-electronic information ensures a favorable business outcome, including
increased profitability, user trust and improved relationships with all trading partners.

In the example related to the manual ingestion of invoice

information, a solution should be used to digitally capture non-
electronic information. OpenText™ Information Extraction Service
for SAP® Solutions will ensure accuracy and completeness of
information from the invoice and delivery note, and information will
automatically be recorded in the proper SAP business transaction.
OpenText™ Vendor Invoice Management for SAP® Solutions will also
assure timely and accurate payment to the vendor. For capture
of information outside of procure to pay processing, OpenText™
Business Center for SAP® Solutions provides the latest digital
capture technology. The use of OpenText™ Extended ECM for
SAP® Solutions ensures the delivery of the right information, to the
right people, at the right time. The maintenance crew would have
immediate access to required shutdown steps, all communication
with the vendor, crew scheduling and more. Through Extended
ECM for SAP Solutions, sales would have total visibility into
progress and, if required, can proactively communicate with the
customer related to the sales order. Those in the warehouse would
also have the complete documented history of inventory issues to
ensure the proper parts are available.

The information ripple effect 8/10

 It should be noted that the information ripple effect can be a positive. With OpenText,
the impact of perfect information can drive favorable outcomes, including an increase
in profits, strong compliance and better relationships with trading partners. In addition,
the carbon footprint improvement, derived from the reduction of paper use, copying
and storing will position any corporation as a leader in social awareness.

Retail and CPG

Since these vertical organizations are typically customer facing, imperfect information
will not only disrupt the current profitability, but most likely future revenue as well.
For example, imperfect information related to providing goods for sale may result
in not being able to deliver goods related to an annual marketing campaign.

Pharmaceuticals
In this business vertical, imperfect information can quickly result in fines, as well as the
loss of public confidence. Given the ultimate consequence of imperfect information may
be the loss of human life, it is imperative that all ripples are eliminated.

Services
In this industry, the ripple effect is more sensitive due the injection of service information
rather than goods. Information related to goods is typically static, where service
information is more dynamic. The entering of imperfect service information may result
in ripples that are more difficult to calm as several trading partners could be involved.

The information ripple effect 9/10

 Summary
There will always be information ripples, even in the most Intelligent and Connected
Enterprises. The challenge is to reduce them to a minimum. When ripples do occur,
tools must be in place to detect them early in the process flow to minimize impact and
ensure a smooth business process flow. Whether the imperfect information is master
data, information from trading partners or internal information, the impact will be process
disruption resulting in lower profit.

OpenText and SAP have invested more than 20 years co-developing solutions that
eliminate the imperfect ingestion of information while optimizing the digital process
flow that uses it. When ripples do occur, the OpenText solutions provide early detection,
full visibility of the process flow and all supporting documentation in a digital format.
Access to information by the right people at the right time ensures immediate resolution
to prevent outgoing ripples. Exchange of information with trading partners is up to date
and relevant. Potential negative business outcomes are turned into positive business
outcomes with OpenText solutions.

Resources

• OpenText Information Extraction Service for SAP Solutions

• Effective Capture is the First Step in Digital Transformation

• Information Extraction Service—An innovative approach to capture

• 5 key learnings from the Gartner Data and Analytics Summit 2019

About OpenText
OpenText, The Information Company, enables organizations to gain insight through
market leading information management solutions, on-premises or in the cloud. For more
information about OpenText (NASDAQ: OTEX, TSX: OTEX) visit: opentext.com.

Connect with us:

• OpenText CEO Mark Barrenechea’s blog
• Twitter | LinkedIn

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