Year after year it seems analysts and business reporters predict that information technology budgets in supply chain management will see an upswing, but in many respects the hoped-for bounce in sales often doesn't quite measure up to the hype. However, things have been a bit brighter for at least one important player in the supply chain, the trucking industry. For many companies there, IT budgets have kept pace or even accelerated as management has sought new technologies to help keep tabs on expenses. They have particularly been interested in in-cab systems as a means to measure and boost driver productivity, or in technologies that can help manage the ever-rising cost of fuel, says Gary F. Petty, president and CEO of the National Private Truck Council, and Judy Lemke, Schneider National CIO. Even companies that have chosen not to make such IT investments themselves often want the benefits such systems can provide. They may turn to logistics services providers to get the visibility they need to prune their operational costs or even manage their fleets, says Laurie Johnson, vice president of technology for UPS Supply Chain Solutions.
It hasn't hurt that the trucking industry overall has seen some record years recently. That's allowed fleet operators to allocate significant sums for IT, amounts that may have caused CIOs in some other industries to hesitate. Trucking companies, for the most part, haven't waited, says Petty. "Across the board they are getting more sophisticated about their investments, and to the point that those that don't invest in technology are left behind with negative consequences in terms of managing their costs." Petty says operators are well aware of the expense of IT that supports the trucking industry, but says they really have no choice. "It costs more money to capture data and analyze it on a daily basis, but companies are willing to spend it now because costs continue to rise. There is a flight to technology, if you will, to put systems in place that preemptively and defensively mitigate those costs as much as possible."
What are they buying? Among other things, operators are investing in tire and fuel management systems, Petty says. The importance of the former goes well beyond procurement or knowing when to change a tire. He quotes a federal study that says improper tire-pressure management can increase fuel and equipment costs by $500 per tire over a year. "If you're running several hundred trucks, that's real money."
On-board computer systems that track operational data of vehicle and virtually ever move a driver makes are also of great interest to operators. For one thing, such computers help improve fuel economy. By monitoring equipment and driver functions, in-cab computers can detail precisely how a truck is being driven-and how that affects the fuel gauge.
Driver productivity is a very important phrase that crops up when speaking to trucking executives. Compensation and the cost of insurance are going up, so companies clearly need to maximize what they get out of their drivers. Some companies have gone to productivity-based compensation for drivers rather than the traditional hourly pay schemes. Expensive data collection and analysis systems of daily delivery and activity logs can determine the "par" of a given run, and then challenge drivers to beat it.
But schedules based on sophisticated benchmarking like that can be defeated by traffic congestion, which seems to be on the increase everywhere. Route and scheduling optimization applications may then be in order to help drivers meet productivity targets. For a driver making 15 to 18 stops a day, and possibly unloading and stacking product at every one, often there are practical realities that can't be changed much. It's crucial then for company CIOs to look for opportunities within those schedules to create more timely access to stores or to streamline deliveries. Routing and scheduling systems-and the communications systems that can alert drivers to changing traffic patterns or other conditions that cause delays--are a necessity for many concerns, especially for fleets that need to keep tabs on operating costs on a per-run, per-day basis. Clearly, that kind of granular analysis is needed if they are seeking to differentiate their service to potential customers on cost.
"This is a very technology- and information-dependent industry," says Lemke. The trucking business as a whole, and Schneider in particular, has been intent on weeding out many legacy applications and building in the IT capabilities that promote growth and expansion. That kind of investment has been consistent for several years at Schneider, she says, and this year is no exception.
Johnson says that UPS Supply Chain Solutions has seen a marked increase in customers who want route optimization and the associated savings that come with it, but want to outsource the job. "From a solutions standpoint," Johnson says, "we're finding customers coming to us and saying, 'We're really not prepared to make the technology/device investment, or in the application that surrounds it. We'd like to consider what you have to offer and see if there's a better way for us to do it with without the heavy capital investment.'"
In fact, she says customers seem to have a huge wish list, including fleet management, and alerting and exception management. General trucking services or dedicated fleet management is a major investment, but Johnson says more customers are willing to commit to it. But they expect near real-time information and deep levels of detail on driver location, upcoming stops, what's actually being delivered, and so on.
Johnson says that if anything tops customer IT demands, it's end-to-end visibility. A good example is the manufacturer's need to track truck-bound vehicles from the plants to the dealer. The ability to track the vehicle by VIN number is powerful for both the automaker and the dealer, Johnson says, especially as ownership and associated liabilities change.
"You have to have visibility and be able to control and manage in order to optimize the route, to get the most out of your labor dollar, and know when to invest in capital-intensive technology such as driver devices or cellular devices."
It's something that UPS itself clearly must stay on top of: It reportedly has more than 88,000 vehicles worldwide, and is said to have spent $2.1bn on fuel last year (mostly for ground vehicles, but also for about 270 planes).
IT investment needs more than executive-level buy-in, Petty warns. Take computer-based training, driving simulators and onboard video monitors, for instance. Many carriers are adding them to their driver education programs. It's one thing for management to assess these and other devices in the abstract and calculate their value and ROI; it's another to get wholehearted driver acceptance of some technologies, and carriers need to be aware of that potential barrier.
Nevertheless, return on investment is a prime concern for management, and Lemke says that careful study often shows that benefits are what she calls multidimensional. Trailer tracking systems and devices are illustrative, she says. They can pinpoint equipment at customer yards and say whether a trailer is hooked or unhooked, full or empty-and that ability clearly enhances drive productivity. "We can maximize the time our drivers are on the road as opposed to looking for a trailer," Lemke says. But there is a security dimension as well if such systems can indicate whether equipment is stolen or tampered with. And that is an important benefit.
The industry uses one tractor for every three trailers, according to the Federal Motor Carrier Safety Administration, which means that a lot of trailers lie idle somewhere, usually at parking lots and truck stops, at risk to theft or damage. Trailer tracking systems can help minimize those problems.
"Technology is critical for everybody in this industry," says Lemke, "and I think you will find a lot of forward thinking in it as we look to be as efficient, innovative and as responsive as we can."
|Top 10 Concerns of the Trucking Industry|
|The American Trucking Associations commissioned the American Transportation Research Institute in 2005 to rank the highest-priority issues within the U.S. trucking industry. ATRI contacted more than 2000 carriers. |
1. Fuel Costs
2. Driver Shortage
3. Insurance Costs
5. Tolls/Highway Funding
6. Tort Reform/Legal Issues
7. Overlapping/Burdensome Regulations
9. Environmental Issues
10. Truck Security
Source: ATRI, ATA
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