Meridian Shared Services: The RPA Business Case under Data Quality Risk
Meridian Shared Services processes 480,000 supplier invoices a year for a retail group. The current process costs £6.20 per invoice and has an error rate of 3.5%. Each error costs £18 to rework. The operations director proposes robotic process automation (RPA). Implementation would cost £1.4 million, with annual licence fees of £320,000 and maintenance of £90,000. The vendor claims RPA would process 80% of invoices at £2.10 each; the remaining 20% would be exceptions handled manually at £9.50 each. The error rate is expected to fall to 1.2%, but the vendor’s reference site had a 30% exception rate in the first year because supplier master data was incomplete. Meridian’s supplier master file has not been cleansed for four years, and 8% of vendor records have missing bank details. The finance director is keen to sign a four-year contract before the year-end to secure a discount, but the IT auditor has not reviewed the vendor’s security controls.
1. Calculate the annual net benefit, payback period and four-year NPV at a 10% discount rate, and advise whether the project should proceed.
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Current annual cost
Processing: 480,000 × £6.20 = £2,976,000. Rework: 480,000 × 3.5% × £18 = £302,400. Total = £3,278,400.
Proposed RPA cost
Standard: 384,000 × £2.10 = £806,400. Exceptions: 96,000 × £9.50 = £912,000. Rework: 480,000 × 1.2% × £18 = £103,680. Total = £1,822,080.
Annual saving = £3,278,400 - £1,822,080 = £1,456,320. Less licence £320,000 and maintenance £90,000 = net annual benefit £1,046,320.
Payback = £1,400,000 / £1,046,320 = 1.34 years.
NPV = £1,046,320 × 3.1699 - £1,400,000 = £1,916,730.
Advice
The project is financially attractive on the vendor’s assumptions, with a quick payback and positive NPV. However, the case is sensitive to the exception rate. At a 30% exception rate, the annual net benefit falls to about £691,000 and NPV to about £790,000, still positive but much weaker. Proceed only after a pilot and data cleansing, not on the vendor’s reference-site claims alone.
2. Evaluate the data quality, control and vendor risks, and recommend conditions before signing the contract.
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Data quality
The supplier master file has not been cleansed for four years and 8% of records lack bank details, which is consistent with the vendor’s 30% first-year exception rate. RPA works on structured, clean data; poor data will push invoices into manual handling and erode the business case. Before signing, Meridian should run a data-profiling exercise, cleanse bank and tax records, and set a target exception rate with a contractual remedy.
Control and vendor risks
- Security: the IT auditor has not reviewed the vendor’s controls. Meridian should obtain an independent assurance report, right-to-audit clause and evidence of access controls.
- Segregation of duties: bots must not be able to create suppliers and approve payments. Logging, exception reports and periodic review are needed.
- Contract: avoid a four-year lock-in before pilot results. Negotiate a pilot, service levels, error-liability, price benchmarks, exit and data-return clauses.
- Change management: retrain staff for exception handling and monitor error rates monthly.
Recommendation
Sign a short pilot with clear success criteria. Approve full implementation only if the exception rate falls below an agreed threshold and the security review is satisfactory.