Wheels of change Featured

8:00pm EDT April 25, 2009

The transportation industry has taken a hit in the past couple of years — first pummeled by fuel costs, now endangered because of lack of product demand. Even though the economic forecast may be grim, this is a prime time to evaluate your current network to find wasted money and inefficiencies that may be hurting your customer service.

Delivery delays and poor packing and routing methods can all cost your company money.

The good news is that there are software solutions out there that can help you fix your problems with a minimal investment and lower your logistics and transportation costs by 8 to 15 percent.

“Companies that rely on humans to control all aspects of the shipping process can seriously be hurt without the use of technology,” says Don Fitchett, president of Business Industrial Network, an industrial training company and author of the e-book “The True Cost of Downtime.” “Software will help streamline the process and eliminate the need for additional employees. Technology assists in all aspects of the business. Some available software will eliminate the need for paperwork because it will be handled digitally. The use of technology will also reveal bottlenecks in the process and help create a more efficient flow.”

Software programs are available to assist companies from the time an order is placed through the successful delivery of the order. Many executives view their transportation department as a cost center, but through successful management, it can be another way to earn money.

Why logistics software is important

The addition of software to your logistics department will optimize daily and long-term transportation plans and scheduling, carrier selection, route planning, inventory management and small parcel shipping, which can reduce costs.

While a software investment may cost at least $10,000, improving your shipping processes will allow you to serve more customers and increase profits in the long run.

“Executives view transportation logistics as a cost center and don’t communicate with the logistics team to see how software can save the company money,” says Daniel L. Rust, assistant director of the Center for Transportation Studies, University of Missouri-St. Louis. “But the companies that are acknowledging software benefits see that it speeds up the process through efficient planning and actually adds money to the business’s bottom line.”

A common transportation management issue has businesses keeping more inventory on hand than necessary. This typically happens when stock is manually cataloged instead of tracked with software. This means more of your money is sitting in warehouses instead of in your pocket.

“Some companies want to focus on their core competencies and outsource to a third-party logistics firm,” Rust says. “This is a great way to gain visibility of your goods and operation. You need to create a flow chart detailing the current glitches and how software will improve them, then determining if in-house workers or an external company would work best for you.”

Human error is a big part of what can go wrong in logistics. Depending on the volume of orders you are receiving, this can add up. The use of software can eliminate these errors and make your inventory and tracking easier to manage. Software can also determine the best carrier for a particular type of shipment and contractual agreements.

“Efficiency means better customer service,” says Jamison Day, professor, University of Houston, C.T. Bauer College of Business. “Software helps you move through the process better, faster and cheaper. If you don’t have the capabilities to purchase all of the necessary software, but your company relies heavily on shipping, you should consider a third-party logistics firm.”

What you need to know

Before making a software purchase, you need to assess what areas of your process are in greatest need of assistance. While some companies package their software options, others individualize the programs for specific areas of interest such as shipping and loading.

To figure out where you need help, you will need to perform an audit that tracks products from production to delivery.

Start by making a checklist. Are your shipments on time? Are your trucks traveling with full loads? What are your current fuel expenditures? Are you utilizing the best routes? What rates are you paying carriers? Are you paying your employees overtime? Are your orders accurate? If you don’t know how to obtain this information or you’re finding inconsistencies, software can probably help you reduce errors and delays.

“There are a fair amount of laws that must be obeyed in shipping, as well,” Day says. “Software will keep you abreast of what is necessary when sending out loads. You will, of course, have to keep upgrading your software, but this cost is much lower than fees and penalties that can be accrued when you don’t have paperwork in order. This delay will also make your customers unhappy.”

After you’ve determined the area you need the most help with, choose a software company you feel comfortable working with. Find a company that will be accessible when you need them. If you decide handling everything in-house is too expensive, find a third-party logistics firm that handles the details while you focus on your core competencies.

“Computers tend to find ways that reduce driving time and improve loading of shipments,” Day says. “The technology doesn’t replace the humans; it augments them, making everything more efficient. Depending on the industry, a third-party logistics firm will be a must. Calculate the rate to bring this service in-house compared to that of a logistics firm. Make sure that you find the right company to fit your needs. Don’t partner with the first guy holding a hammer looking for something to hammer even if it’s not the right tool. Look for a tool-independent firm.”

Today’s economic climate may be tough, but by looking for savings in every area of your business — including transportation — you can find money that can be better used elsewhere in your organization.

“Anything that can be done digitally and anything that gives you faster and better visibility to your stock will make you more efficient,” Fitchett says. “Taking as many things out of human hands as possible will eliminate errors and free up human workers for the jobs software can’t do yet. Barcode technology, which can also be produced through software, will also eliminate the need for forklifts by using conveyor technology that delivers the product all the way to the truck for loading — already labeled for their destination.”