Transportation Visibility and Optimizition to Weather a Difficult Economy

INTRODUCTION
Like a canary in a coal mine, certain indicators serve to warn of difficult times ahead. For the transportation industry, one obvious indication of unhealthy conditions is the price of fuel, which both reduces an individual carrier’s immediate profitability and helps define the economic environment and thus the industry’s general health.

With a record $135 billion fuel spend predicted for 2008 (a remarkable 18% increase over 2007), it’s obvious that not only are difficult times ahead, they’re already here. Diesel prices that hit $3.974/gallon in March of 2008 are expected to exceed the psychologically and practically important threshold of $4/gallon in the near future. At such prices, fuel surcharges are increasingly insufficient to overcome the shortfalls faced by every carrier, and each empty or unnecessary mile driven and extra employee hired or retained directly impacts a carrier’s bottom line.

The canary, if not dead, is certainly sounding a bit unhealthy.

Fortunately, carriers can take a number of steps not only to survive, but to thrive, improve service levels, and increase profitability in such difficult economic conditions. They can reduce their routing, dispatch, and customer service staff, and they can decrease the miles driven to maintain their customer base and the amount of freight they move or deliver. In this way, a carrier can navigate through adversity toward the mother lode of business survivability—revenues and margins that both improve even as economic conditions erode.

Three factors—visibility, optimization, and responsiveness—contribute directly to taking these steps in the right direction. While other factors are also important, those above are prerequisites for any other actions a carrier might take to improve its chances of survival and, ultimately, success.

VISIBILITY – KNOWING IT

Most carriers recognize the importance of supply chain visibility into the movement of freight, but for some, visibility is merely GPS data about where a truck is or was. Such data is important, to be sure, but it’s only part of the story. More important is visibility into where a truck is going to be when all events and contingencies are considered. This means that today’s carrier needs intelligent visibility providing real-time and predictive insight, not only into location but also into future states and the impact of routing and dispatch decisions on miles driven, fuel utilized, and SLAs.

OPTIMIZATION – DOING IT

Visibility, by itself, is a bit like the canary: it’s good to know that something happened, but it’s vastly superior to do something about it before it does. Because there’s often more than one way to do something, merely responding to ongoing conditions isn’t by itself a guarantee of survival in difficult times. When the canary stops singing, one doesn’t merely need to leave the mine. One needs to leave by the most expeditious route.

This also goes for carriers—with fuel prices at historically high levels and demand for shipping services falling, a carrier must optimize route decisions based on all of the relevant factors. A carrier must not only adapt to events as they happen, such as revising a route on the fly to avoid missing a time-sensitive appointment or picking the best truck at this moment to make a pickup. It must also consider a decision’s influence on other factors such as customer service and available resources. Sometimes it’s better, for example, to drive extra miles to be on time with a delivery. Sometimes, though, it’s not, and a carrier needs to know the difference and adjust accordingly.

RESPONSIVENESS – TELLING IT

In many cases, customers aren’t dissatisfied when a delivery or pickup is delayed. Rather, they’re dissatisfied when they don’t know about it beforehand. The difference, therefore, between a satisfied customer and a former customer is a carrier’s responsiveness when conditions cause unavoidable delays in service. Whether by phone, email, or the Web, customers need to enjoy the same level of visibility into the status of their order as does the carrier. Otherwise, a late pickup or delivery isn’t just inconvenient, it’s an unwelcome surprise.

BEYOND THE CANARY

Today, the canary has been made obsolete by systems that register minute changes in air quality long before a canary would be affected. And, as a mere indicator of future disaster, the canary did nothing to enhance survival once its job was done. Carriers that implement systems to improve their visibility, optimization, and responsiveness move beyond the canary, achieving the ability to overcome economic adversity by reducing their labor costs, miles driven, and fuel usage—all while improving profitability, customer satisfaction, and enhancing competitiveness.

Carriers that don’t are just waiting for the canary to ………...