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May 7, 2018 3:30 PM, EDT

Opinion: The Financial Case for Technology Investment

It’s no secret that technology is rapidly changing the business of trucking. Electronic logging devices, automation, electric power and advancements in telematics are or may soon affect the way transportation companies plan, execute, compete and succeed.

Trucking must continually focus on how to deliver loads more efficiently, while improving utilization and retention — and can do so using innovative and integrated technologies throughout the entire process.

Sean Maharaj

Maharaj

While transportation companies must recognize the capability of technology to reshape how the industry operates, they must also make prudent financial and operational changes in order to prosper.

There are two major components to consider when it comes to a more effective, technology-focused strategy: cost control and data management. Let’s look at how transportation businesses need to approach each of them.

Transportation companies large and small have long focused on certain priorities, like customer retention, recruitment, utilization and moving loads. Structured, principled cost controls and process haven’t always been a priority. That attitude needs to change before a company can effectively position itself to take advantage of emerging and existing technologies. Companies have to review current practices and make budget changes — sometimes, very substantial ones — to pay for investments in tools like ELD, telematics, automation and/or electric trucks.

A fresh look at direct costs, like equipment and fleet maintenance, as well as indirect costs, such as facilities management, marketing, human resources, IT spending and many other areas can help free up available capital.

To identify areas for change and subsequently redeploy capital and budget allowances, transportation companies can form strategic and centralized cost control groups. These specialized units look at direct and indirect costs through a centralized lens to find sustainable savings opportunities in areas such as vendor negotiations, competitive bidding, spend compliance and contract terms enhancement, alongside many others. Companies that make this commitment can free up capital and invest in technology that can drive revenue and, ultimately, economies of scale. Those that don’t may lag behind and find themselves contending with competitors who have these economic advantages already in place.

Just as transportation businesses must alter their approach to finances to reap the benefits of transformative technology, they must also adjust the way they gather, store and use data. Tools like telematics provide a valuable and broad range of data that can help organizations do everything from optimizing individual shipping routes, improving predictive maintenance and driver habits that can ultimately reduce costs and risks. Even limited data can provide value if it’s easily accessible and understood as well as effectively managed and protected.

There’s no way to craft effective analysis or extract value from an organization’s data if that company lacks tools and best practices to access and maintain such information. Technology is a critical path to future survival in the transportation industry as a whole, and that means reforming and improving current processes to information gathering, storage and management. Making the change now will improve visibility into current and future operations, while enabling corrective actions.

In the short term, this is a critical element of cost-saving and budget reallocation efforts that are necessary for investment in new, powerful technologies. Longer term, this change helps an organization recognize the value of a modern, responsive, secure and effective approach to data. It also provides the necessary infrastructure to extract the full value possible from data-rich technologies like telematics and driver-assist technologies. To prepare for a period of budget adjustments and to truly reap the rewards of investing in new technologies, data management is a foundational concept.

Some transportation businesses have already started to make these financial and technological adjustments and have placed themselves in a better and more competitive position.

In 2017, one of the transportation sector’s largest companies announced a $500 million investment in technology over a five-year period and adopted one of the industry’s more focused approaches to cost management.

To be sure, it’s hard for some companies to find room in the budget to consider purchasing new systems, tools and processes much less work through planning for them, implement them and train staff to use them. But without making room to invest in these improvements, companies across the transportation market risk falling on hard times once again.

The transportation industry has benefited significantly from its recent emergence from a relatively dark period in terms of overall finances and stability. Opportunities to modernize strategies for financial discipline and data management, which ultimately lead to the accessibility and beneficial use of new technology, have arisen during this general upswing in the industry.

AArete is a global consultancy specializing in data-informed performance improvement.