Hard economic times have been especially tough for the transportation industry. During the recession, many companies were forced to lay off drivers and sideline trucks. As the economy recovers, the number of goods to ship will increase. And transportation companies might find it hard to meet the rising demand.
On Kinaxis, John Morris of consultancy Cushman & Wakefield discussed how a shortage of drivers and a multitude of outdated and damaged trucks means companies will struggle to reach capacity. Not to mention, recent increases in insurance and liability costs, fuel prices and aging-driver payroll expenses have decimated profits in an industry where margins have always been low.
“Many trucking companies today haven’t been able to make a decent profit,” says Robert Fike, Director of Freight Analysis for DCI Solutions. “In the past, they could make 30, 40 cents on the dollar. Today, if they make five cents they’re doing well.”
To meet the coming demand, transportation companies have to ensure their operation is running as efficiently as possible. In this article, I profile four technologies that can be deployed to improve transportation efficiency, increase margins and build a leaner operation.
1. Activity-Based Costing Software
With activity-based costing (ABC), companies can determine service costs from initial acceptance to final delivery. This is especially important in transportation, as there are a number of hidden costs that impact overhead–from load times at docks to delivery delays.
Effective implementation of ABC methods requires accurate data capture at each step–loading, departure, arrival, unloading and return. Using ABC software, the time and costs associated with each action can be analyzed to identify opportunities to reduce or eliminate costly inefficiencies.
Ken Manning, President of Transportation Costing Group, sees the importance of ABC as the ability to understand downstream impacts of decisions with customers.
“In analyzing the ideal load, companies have to analyze and find profitable freight,” Manning asserts.
Analysis of the proceeding steps is where ABC software is beneficial. The system can calculate the potential costs of choosing one customer over another, possible rates and prices to negotiate, and so on. Addressing each of the opportunities allows a fleet to increase its margins across the board.
2. Reliable EOBRs with Strong Vendor Support
While various transportation organizations square-off on the legality of a national electronic onboard recorder (EOBR) mandate, EOBRs offer transportation companies several benefits:
- Make logging easier;
- Eliminate paper usage;
- Reduce the driver’s ability to disregard compliance;
- Monitor fuel consumption, and;
- Present a real-time picture of vehicle locations.
Companies can also monitor and analyze how much individual vehicles, routes and loads are costing by looking at vehicle and driver performance. And EOBRs can increase regulatory compliance and driver safety, which will be especially important if new Hours of Service (HOS) regulations go into place in 2013.
Mark Stein, Director of Operations Services at Central Freight Lines, says his company uses EOBRs but is evaluating new vendors. Stein ranks vendor reliability, uptime and the ability for the driver to contact the vendor and troubleshoot as important features.
“It seems simplistic, but without support, problems eventually translate to the system not being used,” says Stein.
3. Fuel and Contract Management Solutions
Transportation companies can also look to technology solutions that automate a number of operational processes, such as fuel purchasing and contract signage. By using solutions to speed up transactions and improve traceability, companies can gain deeper insights into their operations and reduce the number of employees needed to manage accounts.
Fuel purchasing solutions like those from Trak Engineering and QuikQ offer radio frequency identification (RFID) solutions for fleets. This technology can help reduce fuel theft by only allowing authorized vehicles to use the pump. In addition, the technology provides an accurate, real-time view of fuel consumption and spend, holding drivers accountable for any discrepancies.
Electronic signage is another option. In an EchoSign case study, Celadon improved the average days to return a document for signature from 20 days to five. Centralizing document management can reduce the time spent sending, scanning and storing documents, and limit the chance that a critical contract is lost or left unsigned.
4. Electronic Data Interchange
Technologies such as global positioning system (GPS) and dispatch software enable transportation operations to be very efficient. Unfortunately, that efficiency is impacted when customer and partner data requests have to formatted, translated and re-formatted, according to Terry Wood, VP of Business Development and Technology at Intelek Technologies.
“Faxes, phone calls, PDFs, websites…information is coming from all directions,” says Wood. “You’ll have a whole room of dispatchers that aren’t doing anything other than hitting ‘refresh’ on a website.”
Electronic data interchange (EDI)–the structured transmission of information from one computer system to another–is one way to reduce translation and processing duties. Automation through EDI solutions can help companies eliminate the need for human data translation and wasting time spent on processing.
While EDI isn’t new, Wood says that it can be used in a number of innovative, time-saving ways, such as to regularly check drivers’ insurance records for unreported or incorrect violations or to obtain freight factoring quotes quicker and at better rates.
There are undoubtedly other applications of these technologies as well as other solutions that can improve the efficiency of transportation. What other advice would you provide logistics companies looking to improve their margins? Please leave your thoughts in the comments.
An additional thanks to David Beaudry, Director of Logistics Engineering at AmeriQuest for his insight into this topic.
Thumbnail image created by Walmart Stores.