Years ago I had a boss who told me The problems remain the same. Its only the faces that change. Years of management have taught me the truism of that statement. A few weeks ago it got me to thinking about the impact technology has had in solving problems.
Technology is continually touted as the method to gain information, improve service to our customers, improve productivity and reduce costs. But as time goes on we wonder why our bottom line still does not fully match our expectations. While technology solves specific problems, it seems to continually identify additional problems that must be resolved.
Is there a way to end this cycle? Even though we take into consideration the cost of the new technology, it seems that at the end of the fiscal year, margins continually fall short of what weve come to expect. Ive come to the conclusion that there are five basic reasons why the bottom line may not reflect what carriers of all sizes anticipate after incorporating the newest technology into their companies.
Profit vs. Expectation
While technology can isolate and reduce costs, other variable costs may continue to escalate. The current cost of fuel is a prime example. Unless you can pass those costs on to your customers, youre in a no-win situation regardless of the degree of technology you utilize. A good IT system should allow you to identify and charge customers for ancillary costs regardless of whether you term them to be fuel surcharges, residential deliveries, waiting charges, etc. A one size fits all cost mentality is a direct route to lower margins.
Secondly, many carriers layer programs on top of programs, creating band aid solutions to address a variety of issues. And the band aid effect is not limited to small and medium sized carriers. Many of the programs of the Big 3 are layered programs. The net effect is systems that dont talk to each other directly (or not at all) and an array of hidden costs which are generally viewed as a cost of doing business. Each new system adds complexity with the need to hire specialists to manage those systems. This is generally how empires are built in IT Departments.
Thirdly, the technology is designed to give us more information to better evaluate the big picture. But actually what it does is provide information regarding a lot of smaller pictures rather than isolating the real information that is required for cost reduction. We see some reduction in costs, but no where near what one would expect after listening to the vendor marketing rhetoric. The new information simply uncovers additional problems that need to be addressed. Expect future program upgrades which your software provider will gladly sell you. Most of the programs available to carriers today do not isolate root costs.
Fourth, competitors leapfrog us, forcing us to implement new products which had not been anticipated. Unless carefully analyzed, new products typically carry high hidden costs. Even if you keep your same products, you may have to tweak them to remain competitive.
Fifth, we inherently choose to buy products rather than subscribing to them. By the time systems become unmanageable and costly to run, its typically too late to change the systems without a complete system overhaul. You buy technology for the future, not for the present. The big problem: will your technology provider be heading in the same direction as you are in two to three years? If the answer is no, youre in trouble. Most probably the answer is I dont know.
Note that Im saying cost containment and not cost control. Costs will always continue to increase overall as there are many unseen variables. With cost containment you want to identify to the lowest possible entity what the cost is and then monitor the cost. Cost control may make you feel good in the short term, but it can turn into a margin killer in the long term.
We lease office and warehouse space because of our growth expectations. We utilize independent contractors or lease vehicles to contain costs. But when it comes to technology we feel the need to buy because thats what software providers continue to force upon us, until now.
Web 2.0 systems change the paradigm. Their costs may appear high per unit on the front end, but theyre truly not, as they have the ability to isolate and contain costs. Over time they save significant funds by providing cutting edge services and upgrade programs that you would normally have to buy with traditional buy to own systems. An added benefit is little to no investment upfront.
This is good news to small carriers or entrepreneurs looking to enter the continually expanding regional carrier market. They can incorporate technology into their companies that looks and feels just like the technology offered by well established companies. Another added benefit---they have the ability to isolate costs.
Larger carriers seem to have a problem with this concept as theyve had a lot of heartburn with software and technology in the past.
Pixelize Your Company
For larger companies, the $100 decision of years ago has grown into a $500,000 decision today with business management and decision making becoming a lot more difficult. Or has it? The real problem is that traditional carrier-focused technology is boxing companies into a corner with the major emphasis on the big picture, rather than giving equal or greater emphasis to the myriad of costs (at their lowest possible level) that comprise the big picture.
Think of it this way. Youre looking at your computer screen and seeing a page---the big picture. However, the person who designed your computer screen was thinking about the number of pixels required to create the screen size. They determined the amount of any page you would actually see. The smaller the screen, less of the page you will see. If you want to see more of the page, you have to buy a larger monitor with a bigger screen. Typical carrier programs provide data in this manner. They determine the screen size (through the amount of information they gather and provide) and determine how much of the actual data youre going to see. If you want to see more data you have to upgrade to another product.
Good subscription based systems do not place a limitation on what you can see. They collect all data continually and allow you to choose to see as much or as little of the big picture as you want to see at any time. And since all the data is available, the better systems even allow you to create your own customized reports on the fly. Youll find yourself pixelizing your company to increase profitability through lower costs and increased revenues. These systems allow you to manage profitability, rather than the data managing your company.
Current and future technology trends are clearly heading in the direction of Web 2.0 technology. Today you can access data from any location and generate personalized reports and information based upon the way you want to manage your company rather than vice versa.
The Bottom Line
Web 2.0 is all about making investments in your technology infrastructure to increase profitability. Per shipment charges may seem high initially, but they not only represent an accumulation of all your technology costs (both realized and unrealized), but they stabilize them for the long term also.
With subscriber technology, youll be doing more with less and see opportunities to eliminate major costs that negatively impact your bottom line. If you have an IT Department, be aware that a subscription service could downplay its usefulness. You will probably see a need for fewer dispatchers and customer service personnel as most of the current functions will become automated. Invoicing technology is also built into many of the systems allowing automated invoicing at the time of your choosing.
From a marketing and sales perspective, youll actually make your customers part of your company. Customers will place their own dispatches and receive PODs automatically or on-demand. Youll be able to receive real time reports from your marketing and sales people as well as track customer commitments.
Shippers can also utilize a Web 2.0 system for their own internal tracking and might quite possibly ask their carriers to utilize one standard system so all of their reports are identically formatted, measurable and comparable. The next step for shippers would be to utilize Web 2.0 technology to import raw data from all carriers regardless of size and generate real time reports via their PC.
Ultimately, Shippers and Carriers both want flexible, transparent, cost effective and scalable systems. With the carrier Web 2.0 technology, if you can imagine it, it probably can be done.
Bob Ferri and