Frito-Lay and sister company Pepsi-Cola saved more than $6 million in one year thanks to a high-speed scanning system. Can you benefit by implementing similar processes?
What were you doing in 1989? While many of us were installing our first fax machines or migrating our office computer operating system to Microsoft Windows, Frito-Lay, Inc. (Plano, TX) was making another technological advancement by becoming a pioneer in regard to automated invoice processing.
Prior to 1989, Frito-Lay's RSRs (route service representatives) collected signatures on proof-of-delivery invoices from retailers with credited accounts. These invoices were then sent to Frito-Lay's headquarters where the information was manually entered into an accounting system by 3 shifts of 60 people each day. The actual paper invoices were filed, so if a customer disputed the amount of the invoice, he or she could be shown a copy of the signed piece of paper as proof. The problem was, Frito-Lay received approximately 70,000 invoices a day, and these paper documents were often lost or misfiled. When an invoice could not be found, Frito-Lay was forced to appease the customer and credit the disputed amount -- a practice that cost Frito-Lay more than $1 million a year.
Automated Invoice Processing Saves Millions
In 1989, Frito-Lay was one of the first companies to begin using handheld computers for its RSRs. The company decided to combine this technological development with another -- a high-speed scanning system. The goal was to have the paper invoices scanned at Frito-Lay headquarters instead of manually entered into the system. The scanned images would then be placed in an electronic archive where accounting personnel could quickly access them from their desktops. In the early implementation of the technology, Frito-Lay found the functionality it was looking for with the ReliaReader scanning system from Scan-Optics (Manchester, CT).
The cost of this solution was $600,000, but it saved Frito-Lay more than $10 million in the first year. Savings were attributed to an easier retrieval mechanism that eliminated lost or misplaced invoices, recouping the $1 million in customer disputes Frito-Lay had been paying. Another $9 million was saved by eliminating the costs associated with manual data entry.
In 1997, Frito-Lay was approached by sister company Pepsi-Cola for help with its invoice scanning efforts. Pepsi's existing scanning system was malfunctioning, and employees were having a difficult time retrieving images from the electronic archive. Both companies determined they could save a significant amount of money by consolidating their resources and performing the invoice scanning activities for both organizations in one controlled environment. "We offered to take over the imaging of Pepsi's documents as long as they met our criteria," says Jignesh Patel, imaging manager for Frito-Lay. "We made changes to their form so that it would be identical to ours. We changed their format and made them switch from carbonless to carbon paper."
By 1997, Frito-Lay's invoice scanning volume increased from 70,000 to 100,000 per day, and adding Pepsi's invoices would basically double this workload to nearly 200,000 invoices a day. The company needed to upgrade its scanning platform to accommodate this growth. Once again Frito-Lay looked to Scan-Optics and installed the 9000 model to replace its existing ReliaReader unit. The 9000 had a high throughput that could accommodate the new scanning demands Frito-Lay faced.
Pepsi-Cola saved approximately $6 million in its first year as part of the Frito-Lay scanning system. This led Pepsi to present Jignesh Patel and his imaging technologies team with the Pepsi-Cola Annual Chairman's Award.
200,000 Invoices A Day Can Take Its Toll On A Scanner
After 6 years of scanning 200,000 invoices a day, the 9000 model slowly began to deteriorate. The scanner began to require more maintenance, which resulted in downtime, invoice backlog, and overtime. The downtime also resulted in chargebacks to the field sales force because of the imaging department's inability to process the invoice in a timely manner. Frito-Lay RSRs have 45 days to submit a copy of the scanned invoice to the accounting department. If these invoices aren't scanned in time, the RSR automatically receives a chargeback for the invoiced amount.
Due to these problems, the decision was made in 2003 to once again upgrade the scanning platform from the 9000 to the Scan-Optics 9000M model. The 9000M is capable of imaging 200,000 invoices per 24-hour shift and loads individual invoice batches from specific RSRs or regions extremely quickly. "It only takes the 9000M 40 seconds to load individual jobs, where other platforms can take from 10 to 15 minutes," says Patel. "This allows us to get our production document scanning done faster." The 9000M also makes it easier for Frito-Lay employees to identify the jam type and location. This feature helps employees resolve jams more quickly, increasing the rate of throughput.
Another advantage of the 9000M is that it integrated easily with the Ethernet network Frito-Lay has in place. "If we need to route this machine to a different server, it can be done in seconds," says Patel. "With the older model this could have taken up to a week because it would have required programming changes."
Meticulous Processes Result In A Solid Scanning Platform
Patel and his team have been automatically processing invoices for nearly 15 years now, and the systems they built have saved Frito-Lay millions of dollars. Patel believes the keys to the success of a scanning system are to put meticulous processes in place and to always demand more from the platform.
One of Frito-Lay's meticulous processes includes a detail-oriented document preparation team. When each invoice arrives, a small team of employees makes sure there are no perforated edges on the paper, no staples or paper clips, and if any invoices are wrinkled or folded, they are literally ironed out.
Another meticulous process employed by Frito-Lay is its document matching system. When an RSR generates a paper invoice in the field, he can actually upload this data from his handheld computer directly into the scanning system when he returns to his location at the end of a shift. This feed informs the imaging department of the sales that occurred each day, which RSR generated an invoice, and the paper invoice numbers that the imaging department should expect within 45 days. This data is then matched to what is scanned and determines whether an RSR will be charged back or not.
Patel demands more from Frito-Lay's scanning platform than what the equipment is usually marketed to deliver. "Most vendors out there will give you a read rate accuracy of 95% per character," says Patel. "I don't want my read rate accuracy per character. I expect a 97% read rate accuracy per scan line. This holds a vendor to a much higher level of accountability."
Demands like this have allowed Patel to maintain an invoice scanning system that has been profitable for Frito-Lay since 1989. With each passing year, it becomes more and more difficult to improve upon the system's performance from the year before. But, by sticking with a scanning platform in which he is confident and constantly refining internal processes, Patel is determined to squeeze even more out of the system in the years to come.