Investing in IT while tightening the belt

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With economic growth still in the grip of uncertainty, tighter budgets are forcing trucking companies to revisit their spending priorities. As a result, many companies are investing less in IT than in the past.

Yet logistics software development continues to roll ahead. Innovative products that capture, analyze and transfer information can potentially improve company efficiencies, increase customer satisfaction or help give shape to a firm’s competitive advantage. Invariably, each trucking firm will make its own decisions, but a case can be made for keeping IT spending off the chopping block.

“There’s two kinds of spiral: the spiral going up and the spiral going down. The spiral going down is the less you invest, the less you’re competitive. The less you’re competitive, the less you invest. Then you go down and down,” says Albert Goodhue, Partner in the GCL Group, a Montreal-based consulting company active in the logistics arena.

Adrain Gonzalez, Senior Analyst in the ARC Advisory Group, outside of Boston, Mass., has just completed a report for a major U.S. carrier on IT spending. He says that focusing just on the short-term can put trucking firms in a bind.

“The trucking industry is in a catch 22 because these guys operate on pretty low margins to begin with. They have limited capital to invest into new trucks, IT or anything else. On the flip side of that, they need to invest in IT in order to be able to survive, in order to meet many of the requirements that their clients are looking for. A lot of manufacturers and retailers are looking to interface with carriers electronically, to access information electronically and that sort of thing.”

According to Gonzalez, in some smaller companies – the 70% of the industry that operate with revenues under $1M and with less than six trucks – IT may not even be on the radar screen. They may not even have a computer screen. IT is simply out of their range of expertise and now, faced with issues of keeping drivers, IT gets pushed even further down the list.

Stephen Brown, Senior Manager at Deloitte Consulting Inc. in Toronto, says, “I think we should always start from a strategy stand-point before we ask the technology question. The challenge right now has to do with maintaining market share, maintaining customers, maintaining revenue. We’re in a soft economy. At minimum, you want to keep the customers you currently have and to grow them, because we know that it’s cheaper and less complex to keep existing customers than to go out and get new ones.”

Starting from this premise, Brown suggests carriers keep an eye on their rates compared to the competition and focus on IT solutions that will accurately quantify their costs and pricing.

“A carrier can have a problem with either or both cost and pricing. Maybe your costs are fine but what you’re doing from a pricing perspective isn’t. A lot of companies don’t know what it costs them for a particular route, a particular customer or a particular product. Then it becomes very difficult to know the break-even point, or how far down the company can go and still make money,” Brown says.

Goodhue also suggests companies on a tight budget focus on evaluating and quantifying their performance: “Anything related to execution should be of high priority… You want to make sure the execution of what you do on a daily basis is well done. There are a ton of these programs that can help you do that. They have different price structures, based on different platforms – some can be implemented in weeks, some in years… Focus on products that can grow with you.”

According to Gonzalez, carriers need to look at IT investment in terms of three goals: “One is improving profit margins. If, at the end of the day, the solution can’t make a case for improved profit margins, either by reducing costs, or by enhancing revenue or improving asset utilization, it’s going to be hard to justify. Two is enhanced customer satisfaction. And three is a factor that is most often overlooked – will it create a competitive advantage?”

How companies define competitive advantage will vary. It could be as simple as achieving the highest operating margin in the industry. Or it could be best on-time performance. Larger fleets with an established IT backbone may already have a granular understanding of their costs. They may already be using a billing, a settlement and dispatch solution, so they may want to consider more sophisticated technologies aimed at further differentiating them from their competition – possibly track and trace for customers, advanced security systems, automated customs technologies, etc.

According to these consultants, the trucking industry generally expects a return on investment of less than a year. At most, two years. Goodhue suggests, however, that putting in place a basic IT system shouldn’t even be measured from an ROI perspective. Rather, it should be seen as the cost-of-doing-business.

Nonetheless, he also acknowledges that IT investment has its risks: Is the company selecting the right software? The right partners? The right platform? Will it use the technology correctly? Will there be resistance to change?

“The specialized nature of IT often requires carriers to rely on outside expertise,” Goodhue says, which isn’t comforting to some hands-on managers.

But in a technology-driven industry, there is no such thing as a nice low-tech, horse-n-buggy operation. Instead of cutting off information technology investment, Goodhue suggests lessening the risks – talking to peers and trucking associations, looking into software directories, magazines and the Internet, contracting with experts, inviting software reps in to show their products.

With that and some sound business practice, carriers can hope to stay on the upward spiral.


Richer Systems Group unveils new Enrich TMS

Calgary’s Richer Systems Group has added new capabilities to the Enrich Transportation Management System (TMS) including dispatch, freight billing, driver settlement, and warehouse management through an OEM licensing arrangement with SCORE Corporation of Canton, Michigan.

Enrich TMS is a modular software package that can be deployed progressively and extends functionality to many parts of the business: freight and truck operations, asset management and maintenance, fuel management, compliance, accounting and financial reporting, payroll and HR, and customer service.

Enrich claims its software is unique in its abilities to support multi-mode service offerings within a single management system: truckload, LTL, dedicated, specialty, brokerage, air freight, warehousing, leasing and contract maintenance, rentals, and retail maintenance.

Enrich TMS can be integrated with a range of technologies: in-cab communications, EDI, customer Web portals, PDA and other hand-held devices, reporting and data analysis tools.

The Enrich TMS is targeted at companies which offer a broad range of transportation services to customers and require the additional efficiencies that a single, integrated and enterprise-wide management system can bring, says Tim Bowes, Vice President, Sales and Marketing of RSG.

CancomTracking signs 60 Canadian fleets in 2002

Cancom Tracking reports that 60 new Canadian carriers implemented its OmnniTRACS two-way satellite real-time fleet management solution in 2002.

Recently Harmac helped Cancom establish a new Canadian milestone when it activated Cancom’s 26,000th unit on the Canadian Satellite Network.

There are 375,000 OmniTRACS units in North America and over 450,000 OmniTRACS units in use by over 33 countries.

“OmniTRACS will continue to set the pace for true two-way real-time communications and tracking,” said Mike Ham, Vice President of Business Services, Cancom Tracking. “Cancom will continue to launch new feature-rich solutions such as Automated Fuel Tax Reporting, Wheel to Door directions, Preventative Maintenance Scheduling and integrated solutions providing fleets with an enterprise-wide flow of reliable information.”

GEOCOMtms expands SaskTel Mobility rel

GEOCOMtms, the provider of the A.MAZE solution to optimize the execution of fleet operations, is expanding its partnership with Canada’s SaskTel Mobility to provide carriers with an on-line tracking and messaging solution through a complete ASP model.

The company says the move will make for a product that boosts fleet efficiency and extends services to any size fleet.

The integration of A.MAZE Tracking with LoadTrak from SaskTel Mobility offer the transportation industry Real-Time Feedback and Response (RTFR) to companies who need such a solution to optimize their fleet operations without having to invest in a tailored IT backbone, the company says.

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