iTECH: There’s More to Return on Investment Than a Price Tag

This story appears in the October/November 2007 issue of iTECH, published in the Oct. 15 print edition of Transport Topics. Click here to subscribe today.

Return on investment is a standard measurement of the dollar value of an information technology system. Small or medium-sized fleets likely focus their financials on cost per truck — “per seat,” in the IT lexicon.

And there are other aspects to consider, too.

“You can measure your costs in terms of per vehicle or even per shipment. Miles over the road is another common metric,” said Frank Bernhard, managing principal of supply chain and telecommunications for the Omni Consulting Group in Davis, Calif.

Cost over time also is important to understanding ROI. As Michael Newcity of ABF Freight Systems expressed it, “You need to map it out for some period of years to know when you will hit that magic number. . . . Real costs occur over time.”

Bernhard added another element to the equation: total data “throughput” over time, as measured against “how much you are paying for the guarantee of that service.”
He said this is particularly important for determining the ROI of mobile communication purchases.

In that case, aside from the capital outlay, do not overlook “connectivity” rates and related data charges.
Other costs that should not be overlooked include vendor fees for installation and training.
Newcity warned about IT providers that make promises of a quick installation.

“Especially in larger enterprises, we hear of vendors taking six to nine months to get a system up and running,” he said. “You need to determine whether those projections are accurate.”

And there is the matter of future upgrades.

“Maintenance fees can be straightforward, but it’s not so easy to determine whether the solution will have to be tailored over time,” Newcity said.

Most experts agree that any size trucking company needs to interview a potential vendor’s own customers and gauge their level of satisfaction with product and service.

Kenneth Weinberg of Carrier Logistics Inc. declared himself “appalled” that trucking companies so rarely do their homework before choosing an IT platform. Weinberg has developed IT projects for less-than-truckload companies, courier services and freight forwarders since the 1970s.

He said homework should include extensive quizzing of vendors, investigating availability of service, questioning a cross-section of employees and — most often overlooked, he said — visiting similar trucking companies to learn of their experiences.

IT buyers “must make site visits to similar companies, not say, ‘Oh yeah, we have someone using that software; it’s good,’ ” Weinberg said. “They need to go out and see that the company really is using it in the same way they would run their company on the platform. I’m absolutely amazed at how they won’t spend the money to get to a company in Michigan or Chicago or Idaho and spend a day to investigate a system.”