Manual Processes are (Slowly) Killing Your Business

Manual Processes are Killing Your Business (slowly)

You’ve done it a thousand times. Walking through operations, you’ve asked yourself “Why am I paying these smart people to spend half their time doing mindless tasks and data entry? What if I could free up their time to allow them to do what they do best – solve problems. That would give them more purpose – that would give our business more purpose”. Ok, maybe you didn’t think those words exactly, but I can guarantee that if you’re a high-performing carrier, it was something along those lines. Although detention and dwell times are the items with the largest targets on their backs with respect to operational efficiency, you don’t have to look to far for the next one on the list – manual data monitoring, entry and management.

We generate endless volumes of data each day in our dispatch and accounting systems.  Even more is found in unstructured formats, such as e-mails, POD’s, load tenders, and invoices.  Many paid hours are spent taking information from one format and rekeying it into one or more other disparate systems.  This duplicated effort is not only expensive, but it opens the (large) possibility of errors through typing mistakes or missed documentation.

The reality is, many of the tasks handled by our operations, accounting and customer service teams are repetitive and prime candidates for automation.  In general, any repetitive, rule-based task is a prime candidate for automation.  So why haven’t they already been automated?  Until recently such automation required a lot of expensive programming that resulted in systems that were not very flexible.  Simple upgrades of your dispatch system could cause the automation to fail simply by having a table renamed.  When this happens, your team must revert to the old manual processes until the programmer has the updates in place. The other reason is human nature. The growing list of portals and manual updates downloaded to today’s trucking companies is like compound interest. It started with a work-around to make one customer happy and has grown exponentially to the elephant in the room that no one wants to talk about.

EDI (Electronic Data Interchange) has been used to try and automate the transfer of information.  However, it has rarely been able to fully transform a manual task and create efficiencies.  EDI protocols can be very rigid as it uses standardized (and outdated) formats.  It is also expensive, meaning that most carriers or logistics companies are not able to invest what is necessary to use EDI to its full capabilities.  The other challenge is that it is not necessarily in real-time.  Things like check calls are not readily handled and a pod request is likely still going to require a phone call or e-mail.  The result is many carriers can only justify the expense of EDI setup and maintenance for their largest customers, typically representing less than 30% of loads.

Web portals have become more common for 3PLs and some larger customers to attempt to get around the limitations of EDI.  Documents such as PODs can be easily uploaded.  Documentation supporting detention can be transmitted, and many can log comments when further explanation is required. However, they can introduce other inefficiencies.  A human is still needed to transfer or transpose the information into the portal.  Errors are still possible and very likely, despite best efforts.  Depending on the internet speed where that employee is located, a lot of time could be wasted if your team member must wait for the information to get uploaded to the site and then wait again for the next screen to load.

The Institute for Robotic Process Automation defines RPA as “the application of technology that allows employees in a company to configure computer software or a ‘robot’ to capture and interpret existing applications for processing a transaction, manipulating data, triggering responses and communicating with other digital systems.”  In more practical terms, it’s software that you can “teach” to move information from multiple inputs to multiple systems without the help of a human.  RPA is designed to be deployed in days or weeks, not months.  It also does not care where the information comes from or where it goes to.  One of it’s strengths is that it does not rely on things like EDI or API’s to bridge into other systems or require complex programming to work.

Let’s look at a simple example that happens many times a day in your company.  A customer e-mails a shipment request to your CSR team.  The CSR is constantly monitoring their e-mail for these requests.  When they see one, they are likely saving (sometimes printing) the email to get the request on file.  The CSR then creates the order and enters the shipment details.  Once it is in your dispatch system, the CSR then logs into that shipper’s portal and enters the pickup date and time.  Finally, the CSR replies to the original e-mail to confirm that the order has been entered and received.  Depending on how busy it is, each CSR may be doing hundreds of these transactions every day.  Each of these steps could be automated by RPA.  The robot can monitor the email queues more efficiently than a human can.  It will parse each e-mail and pull out the new shipment information.  That data is then moved into your TMS where it checks availability and schedules the pickup date, time and location.  Because RPA is rules based, if there is missing information or any other exception, it will flag the appropriate CSR to handle it.  Once there are no exceptions, the system will log into the portal and update it with the pick-up information.  Finally, it will generate and send the customer email confirmation.  In this one scenario you can see that the CSR will now have time to work on higher value-added tasks, likely making their work much more interesting.   The process will be handled more efficiently, and the possibility of errors is greatly reduced. The best part is you can implement entirely on your own, no need to get in the long queue with your TMS provider to complete on your behalf.

So, what should you pay attention to when considering an RPA implementation?  A recent article gave 8 keys to having a successful RPA implementation.

  1. Do the Research – Frank Casale, founder of the Institute for Robotic Process Automation & Artificial Intelligence, recommends that you invest the time to build a business case for RPA and learn about the products available. There are three key boxes to get success and only having two out of three will not work. The boxes include:
    1. Choosing the right technology solution to meet your organization’s needs;
    2. Creating a solid business case for RPA, including developing ROI metrics;
    3. Assessing current processes and organizational issues to avoid political problems. Keep in mind that RPA is a disrupting technology. People will fear that the technology will affect their jobs, possibly eliminating them. The human resources that will be affected are not going to be eager to train the robots that might replace them.  A vision and roadmap for the future needs to be communicated and it should include new opportunities for displaced workers. Managers also need to go in with open eyes, a cautiously optimistic mindset. Management of expectations is critical.
  2. Educate Staffers About RPA – It’s important to clarify what the technology will and will not do with regards to employees’ job roles. Many organizations use RPA strategically by helping staff do routine tasks quickly and efficiently so that they can spend time addressing higher priority needs. Determine how your company will use the technology and then honestly communicate what that vision is so that you get people onside with you before rolling the technology out.
  3. Determine Where the Technology Will Work Best – You will want to identify processes where you are most likely to see a positive business impact. Keep in mind that it will not always be easy. However, as the organization becomes more experienced with RPA, other processes will more easily be uncovered.  Many successful implementations are very selective as to what processes to automate – look for something that it repetitive and frequent.  Once you have achieved some initial success, fight the urge to try and automate everything.  If a task can not be done without a very limited amount of human interaction (preferably none), then it really is not a suitable candidate.  When picking your first process, remember that while cost reductions are important, improving customer experience is even more valuable.  The client experience is what will be your competitive advantage.
  4. Keep It Simple and Modular – RPA works best when it is not complex. As much as possible, keep your bots as generic, common and reusable objects. Mona Kahn of Fannie Mae recommends that you externalize all variables and logic to minimize failure points. This makes it much easier to update when something changes and makes it much faster and easier to test before putting the changes into production.
  5. Don’t Neglect Data Security – Make certain that processes can not be manipulated. Start with any processes that are business or mission critical. These must be secured before any implementation is attempted.  Regardless of how critical a specific task is, keep in mind that RPA will process much faster than a human can, so ensuring that a bot is secure must happen during the testing phase and this should be a show stopper if it is not secure.
  6. Test Implementations Regularly – Notwithstanding what we just discussed, testers can only try to test so many points of attack. Weaknesses are going to appear once the robot has gone live. Keep in mind that individual testers may not be as experienced with a process and may only be looking for positive results.  If possible, include the staff that actually do the task in the testing phase.  Additionally, test the automation on desktops running legacy systems to ensure that the desktop will be capable of handling the infrastructure requirements.  It is critical that you understand how different bots work together so that processes do not break.
  7. Develop a Cross-Functional Center of Excellence – By this, I mean put together a team that will share experiences and best practices to other parts of the organization. The idea is to leverage previous efforts to ensure that the wheel does not get reinvented repeatedly.  Make sure that both failures and successes are documented to make certain that the knowledge of those experiences is not lost.
  8. Prepare for Future Advances and Challenges – RPA is going to advance, and each company must keep up with the changes. Eventually, each organization will struggle with the management of the automation. End users will find ways to automate desktop processes for their own use, so understanding how the introduction, elimination or upgrading of enterprise applications will affect these deployed bots will become increasingly critical.  Like any other asset, bots need to be tracked and managed so that they can properly be maintained.  Consider what would happen if a password policy was changed for one of the applications the bot uses and how would you know if data is not being properly passed though?


So, what is driving the implementation of RPA?  The obvious one is cost reductions.  Forrester Research estimates that about 16% of US jobs could be replaced by RPA by 2025, while creating new jobs that are equivalent to 9%, meaning a net loss of 7% of jobs.  This is because bots are generally low cost and relatively easy to implement.  In the financial services sector, there is a major shift away from manual, clerical-type jobs and a move towards more analyst or advisory jobs.  The shift is being fueled by the vast amounts of data that RPA is creating, resulting in customers needing more human advice to help them process it.  In some cases, bots are assisting the human advisors by identifying patterns and offering options that the advisor can then present and explain to their clients.

There are several companies that have experience in working with our industry.  These include:

  • Kofax with it’s products that include Kapow, TotalAgility and Information Capture
  • Pega with it’s Pega Infinity digital transformation suite
  • Jacada with it’s Jacada Agent Desktop Automation
  • Automation Anywhere has it’s Automation Anywhere Enterprise Suite
  • UIPath – the UIPath Enterprise RPA Platform
  • Nintex Platform – utilizing Promapp, DocGen, Xtensions Framework and Hawkeye applications
  • IBM – Robotic Process Automation with Automation Anywhere

For those with an in-house development team (even a small one), building your own RPA toolkit and ‘army of bots’ is possible. There is even an open-source development framework to get you started. This Python-based framework – Selenium, is used thousands of companies all over the world. Worth examining if RPA is on your to-do list for 2019.

As a real-life example, Kofax has publicized a successful implementation with Crete Carrier (see the full case study here).  Specifically, Crete automated their appointment scheduling process because they previously only had CSRs available Monday thru Friday even though their business is 24/7.  If a shipment tender came in on the weekend, it would sit there until someone came in on Monday morning. Meaning that some of the shipments would have been missed, and the shipper might have ended up using a different carrier.  This is likely a scenario that you have all have faced at one time or another.  Crete created Kapow robots that handle a range of information about the shipment.  The bot then uses those parameters when it receives a tender and uses them to pick an appropriate pickup or delivery slot.  In most cases the bot can schedule an appointment on the first pass.  If it is unable to find one, it then passes all the information that it has received to a human operator who can establish a new set of criteria and have Kapow take a second pass at it, with additional human help if needed.

Crete also uses RPA to enhance visibility of its freight as it moves across the country.  It uses a near real time tracking of trucks, trailers and what freight is on each trailer.  Previously they would need to send an employee to inspect a trailer to see if it was available, even if it was reported on a yard check because of the difficulty in going through numerous e-mails or reports.  Kapow can go through all the reports and emails and give the operations staff the location and status of equipment as they need it.

A third use is allowing Crete’s customers to have improved freight tracking.  Dedicated web portals are used to keep certain clients informed as to where their freight is.  Staff would have to manually update the portal information, a time-consuming task that resulted in information-delivery delays.  On off-hours and weekends, the customers knew that the portals were not always up-to-date, resulting in more calls to the customer service team for load tracking.  The introduction of bots to this process have resulted in updates happening instantly, resulting in happier clients who now have faith in the portal information.  On the back end, it eliminated some very tedious tasks, freeing up the customer service team to spend time on other tasks with a more strategic focus.

The use of RPA has allowed Crete to book freight further in advance, allowing them to have greater access to delivery slots that work for them and maximizes their meeting delivery targets as well as maximizing their effective use of rolling assets.  Additionally, they have found that staff were able to be dedicated to more customer-facing services instead of only having the time to handle routine tasks.  A better customer experience and a more efficient way for Crete to run the business are two major results.

Any of the companies or open-source packages that offer RPA tools, can allow your company to achieve similar or even greater success. The key is to know what it is that you want to accomplish – without a defined project scope there is a significantly reduced likelihood of goal achievement.  In fact, without spelling out what will constitute success and how to measure it you are probably dooming the project to failure right at the start.  It also means that you are more likely to use someone or something other than the optimal solution provider.  Similarly, the management of expectations is another critical component.  In the example above, Crete has been using RPA for over four years.  Your people need to understand that it will take some time to optimize and implement these bots.  If someone is offering to come in and “have you up and running in a week”, be very skeptical and ask some very pointed questions as to how that will happen.  It is possible that they have extensive industry specific experience and have semi-customizable templates that can get you implemented quickly.  If they tell you that “customer service is customer service” then they probably are not going to work.  A quick example is from the scheduling process used by Crete.  If an RPA provider does not understand how HOS can impact appointment times, then they may program a solution that ignores the mandatory break after being on duty for 8 hours.  A lack of industry experience does not have to be a deal breaker, but it will mean that your project team will have to spend more time and be more explicit in their requirements and specifications document.

So, in summary, some quick takeaways on RPA are:

  • Robotic Process Automation is a potential game changer for our industry, possibly causing a revolution in how we handle routine customer service tasks.
  • People are going to be afraid of losing their jobs when they hear the terms “robot” or “automation”. Expect that reaction and have education and communication resources prepared to help people get over those fears.
  • The potential for head count reduction is there, but it should not necessarily be the driving force behind this initiative. It is more likely that you will be able to handle more productivity out of the same number of people.
  • The ability to cover off-hours without having to add to your head count is a very real possibility. If things like location requests, driver direction requests or load tenders are why you are considering adding or maintaining off hours staff then this may be a lower cost solution for you.
  • Do not treat automation as an ad hoc process. Have some form of control over where bots are implemented and try to use common programming as much as possible. This will allow you to know what needs to be updated when other systems are upgraded.  Additionally, it will greatly reduce the time needed to develop fixes when problems arise.
  • Start with processes that occur regularly so that you have a few highly visible wins to the start of the project.
  • Expect there will be setbacks. Many of these processes have dependencies and it only takes one to cause a failure. Involve the people who currently do the job in the testing phase.  They will have seen the process breakdown before and can offer insights as to where to challenges may come from. This in turn will allow for more robust testing pre-implementation.  It will also increase the acceptance of RPA as they will have some say in how it is implemented.
  • RPA is not a magic bullet. Managing expectations is critical. Exceptions are going to happen. Crete considers having 40 to 50% of appointments scheduled by the bot a success.  Other processes may achieve closer to 95%.  Some processes may require human interactions.  Your team needs to be prepared for these to happen.  At the same time, let them know what that 40% means in terms of freeing up time to handle their other tasks that might be getting pushed off to the side.

SOPs for 2018 and Beyond – Start Improving Now!

Many of us have a procedures manual that sits on a desk somewhere, collecting dust and probably only used when a new employee comes on board.  At a previous company we had one that was called Big Red.  It was in a 3-inch red binder (hence the name) and it was so detailed that it included specific screens, keystrokes and entry fields for many processes.  It should have been a great resource, especially for new hires, people covering for vacations or for those processes that only happened a couple of times a year (such as inventory counts or year end processes). The problem was that it was a static document and a lot of the time it showed how a process “should” be done, not how it was done.  Missing would be things like customer-specific items (such as company A requires a consolidated invoice).  They can also be lagging people finding a better way to do something, making some pages out of date as soon as they are published and distributed.

The reality is that unless you are ISO certified it is unlikely that you are doing many reviews or audits of your SOPs.  It can easily happen – most of us run lean staffing levels, there is always something customer-related that is “top priority” and various other reasons that cause us to push a review off.    However, if you are trying to maintain a culture of continuous improvement failing to update your SOPs is a lost opportunity.

Think of the changes that could happen in a year.  Upgrades to any of your ERP, Accounting, HR, Payroll or Shop systems.  New regulations that may require different record keeping. New customer requirements that have been implemented across the board.  New training that has shown employees a better way to do something.  These are just a few examples, we can all think of many more.  Now think of how many are documented.  How many of those are handled by only a single person? Now what happens if that person leaves the organization?  So why is the SOP review considered to be something that can be put off yet again?

So how do we make sure that our SOP documents are effect and up to date?  Consider having them on an intranet site that is only accessible to your employees.  This will help make it more easily accessible, which should result in it being accessed more often.  Being more visible should result in discrepancies being identified more often and more quickly.

When writing your SOP, make it as detailed as possible.  An SOP should be something that you can give to almost anyone within your organization so that they could take over the process and complete it.  One of the best ways is to have a few different views of the process with each one getting progressively more detailed.

Step One – Flowcharting

Show the process as part of a flowchart.  Allow the audience to see how that one process fits into the larger organization.  Many processes may seem trivial or “just busywork” to the person doing the tasks.  By displaying how that process fits into the larger picture, you can increase employee satisfaction by showing them that a group of tasks helps to contribute to customer satisfaction and the company’s success.  Alternatively, the diagram may bring to attention processes and tasks that do not contribute value and are candidates for either re-engineering or elimination.  If the process is to satisfy the requirements of a small number of customers, now would be the time to have your account managers approach those customers to ensure that the process is still being used or perhaps needs modification.  There is no use trying to optimize a process only to find out that the audience for it has changed their requirements.

Being as detailed as possible will assist in doing an optimization for two reasons – one, it allows an auditor to identify unnecessary tasks; and two, it forces you to check if those are still the required steps.  As an example, an accounting process may call for 8 tasks to occur in a specific sequence.  However, your accounting software has been recently updated and three of those tasks are no longer needed because they can now happen as part of a single command instead of running them individually.  The new SOP should reflect the reduced number of steps.

Step 2 – Checklists

The next step is to create a checklist that provides more detail than the flowchart.  This should have enough detail that an experienced operator will understand what steps are required, but not quite enough that a new employee would be able to do the process without additional information.  For example, a very simple invoicing process may look like this:

  • Ensure that all load documents and data for the billing period have been entered
  • Ensure that all proof of deliveries have been scanned into the system
  • Perform the invoice run
  • Determine how the customer wants their invoices and either e-mail them or print and mail them

At this point assume that the process will be performed by a competent employee and this document is just to assist them in assuring that all parts of the process are carried out.  If they have not already been involved, make sure that all the relevant stakeholders are onboard with the process as it is currently documented.  This allows them to buy into the process and identify and redundancies or improvements.  Identify pain points within the process.  Know where things currently break down and determine with the stakeholders how to correct them.

Step 3 – A Detailed SOP

The last step is put together a detailed document that spells out all the tasks and sub-tasks that go into that process.  This is where you document specific screens, fields to be entered, etc. This document provides enough detail that a new employee could use it to complete either a process or some of the tasks that make up that process.  An example of a task from above could look like this:

  • Log into Dispatch system
  • Go to Invoicing module
  • Run XYZ report to identify any probills missing information
  • If no missing information, go to 6.1.11 performing a billing run
  • If there is any missing information go to probill screen, etc.

Getting into this level of detail will further allow the identification of changed or redundant steps.  It also provides a high degree of risk management because the knowledge of how to run a process is fully documented.  This means that if an employee has an accident and is on short or long-term disability, or just goes on vacation, how they performed their job is not just stored in their head.  Another employee will be able to step in and backfill for them.  It also allows for easier transitions when an employee is transferred or promoted.  Having a detailed document means that the new person does not need to take notes (because they can easily access the document) and can focus on learning the task instead of writing things down.

A few final tips:

  • Use simple and easy to understand language in all steps.
  • If jargon or specialized terms must be used, provide a definition for the reader.
  • Keep sentences short or use point form, especially in the most detailed document.
  • Use the active voice. Utilize terms like “identify”, “direct”, “evaluate” or “review” to get the point across without requiring interpretation
  • Avoid ambiguity, such as using terms like “periodic”, “typical” or “should” as they do not give any consistent direction or execution
  • Be careful around important terms. Remember that “may” allows the user to decide. “Must” is always mandatory and “should” is always conditional. Make certain to use the proper term!
  • Use bulleted items or lists to focus attention and slow the reader’s pace. Long dense paragraphs are more likely to be either ignored or only skimmed over. Make it so that people can scan the document to quickly find the information that they need.
  • Use revision numbers and archive previous versions. This ensures that should you ever have to go back to (or defend) a previous process you have the necessary documentation.
  • At the same time, ensure that employees only have access to the most current documentation. You don’t want to make changes to a process only to find out later that an employee was using an out of date document.
  • Use a consistent format for all processes. Having your operations team use one format and accounting using another will just lead to confusion and time will be wasted by having to figure out how the other team formatted things.

The final thing is must be a living document that someone is the process owner and then updates it whenever situations change (such as software updates, regulatory changes, etc.).  Concurrently the process owner should be looking for redundancies and efficiencies every time the document is reviewed.  In the end you should get more done with less wasted effort, resulting in not only an improved bottom line but also in more satisfied employees who know that they are contributing value.

Are You Holding on to Trucks for Too Long and Spending Too Much?

We have all done it – held on to a tractor for too long, thinking that “I might as well keep it since it’s been paid for”.  And most of us have had that exact same truck breakdown as far away from home as possible, and need something like a new transmission or engine because we held on to it for too long.  The reason is simple – we can easily see what the interest and depreciation hit on the income statement will be.  It’s the unknown of how much the maintenance will be that is the problem.  It seems like we never learn and always discount what the repairs will cost.

Some old timers will swear that the 1972 Brockway or 1975 Ford Louisville that they have by the back fence would be less expensive to operate than these “new fangled, computerized things”.  They may have been, at one time, but I challenge you to get your local Mack dealer to find parts for that Brockway and get them to you by the next day.  Even better, let’s try and find a driver who is willing to run coast to coast in a vehicle that has even fewer creature comforts than the most basic rental truck.  While it might sound cool to do once, I would be surprised if you could convince the driver to do it twice.  Last year I had the opportunity take an early 1980’s Freightliner for a drive.  I had forgotten just how different a mechanical throttle linkage responds compared to today’s trucks.  And then there was the noise – you really don’t appreciate today’s sound insulation until you drive something that barely has any.  Looking for the fridge or microwave – sorry, it’s not there.  Looking to stand up in the bunk – you had better be short.

You might be asking why this is relevant.   Compare a 2018 model to a similar 2012 model, and you can see how they have gotten better. Things like automated transmissions, idling reduction technologies that still allow for a full hotel load on the electrical and HVAC systems either were not available, or were still in their infancy and subsequently unreliable.  I had one driver threaten to quit on me once because his bunk heater would only run for about 5 or 6 hours a night and he was tired of waking up in upstate New York with ice in his hair.  It was incidents like these that gave a lot of us a hesitation on getting newer vehicles.

So, what don’t we want to hold on to our vehicles longer?  As I have hinted, driver satisfaction tends to go up when they get a newer vehicle with more creature comforts than their old one.  However, there is little that dissatisfies a driver more than constantly sitting at the side of the road waiting for either a service vehicle or a tow truck because he broke down “yet again”.  Whatever you pay for a layover is less than what they could have made rolling down the road.  Throw in the additional costs of having an outside repair shop and you are probably looking at a large invoice.

So that’s what a breakdown will cost you, but what about the work that gets done in your own shops?  Fleet Advantage recently put out a report that estimates that a tractor requires approximately 2.5 hours a month to maintain while a three-year-old one requires 4.5 hours a month.  A simple guide that many people use is to assume that a technician costs you a dollar a minute.  So, in dollar terms, the newer truck cost you $150 per month while the older one costs you $270 per month (and that will only go up as the vehicle ages).  To put it another way, you will need almost double the number of mechanics for an average fleet age of three years compared to an average age of only one year.  Keep in mind that this only includes the mechanics on the floor, it doesn’t address the additional administration costs of having more bodies in the shop.  It also does not look at the increased inventory and parts costs that are needed to keep an older vehicle running.  For trucks that are only a year old, you are mostly stocking preventative maintenance items like filters, bulbs and fluids.  You will still be stocking those items with an older vehicle, but you will also need to stock brake shoes, drums, various exhaust system sensors and other higher priced items.  The inventory carrying costs are something that many people do not account for when looking at what it costs to keep an older truck.

The Fleet Advantage report suggests that by reducing your vehicle lifecycle from 5 years to 3 years, the expected average maintenance savings would be $17,150.  Reduce it to 3 years from 7 years and those savings go up to $42,830 per unit (to download a copy of the report click here).  Your numbers may be slightly different, but the trend will be the same – the annual maintenance costs will go up each additional year that you own that vehicle.

One other place where you could come out ahead concerns the current value of your used truck on today’s market, compared to what you typically use for a residual value.  In a strong used truck market like we have seen recently, you may see a significant gain (remember to check your financing contracts to ensure that there are no fees or penalties that you are not accounting for).  Yes, the capital cost of a new tractor is higher than the one you are replacing but the residual value should also be higher down the road.

Finally, look at what your preventative maintenance program covers and consider if it is catching everything that it should be within your shop.  Look at how often you have on the road repairs and what they are.  Is there a pattern, specifically are the same components failing at a similar mileage?  If you are seeing a pattern, add it as a pm program and catch them in your shop before they fail.  If not, then try to determine the average mileage to failure and use that as a guide.  Yes, your in-shop costs will rise but there should be a corresponding reduction in breakdowns that cost more than just the repair bill.

Regardless of what method you decide to utilize to reduce your costs, make sure that you are making sell/keep decisions on a total cost of ownership basis, not just on one or two factors.  Looking at all costs as a system instead of isolation will result in determining the optimal time to replace a vehicle with objective data, not just a “gut feel”.  You may just find that you are spending more in additional maintenance than you would in buying a newer vehicle.

Optimizing Shop Layout for Peak Performance

Shop layout is something that if you brought 10 companies together and asked for their ideal layout you would get 10 different answers.  This is because no two trucking companies are the exact same with the same fleet size, makeup or territory.  What will work for a regional carrier that has every vehicle back most nights will not be optimal for a cross-county truckload carrier that has trucks leaving every day of the week.  That said, every shop will have some similar guiding principles – safety, an ergonomic working condition, improved productivity and energy savings.  However, there will be a large degree of variation on how fleets accomplish these objectives.

To start there are two basic configurations for tractor-trailer fleet – a drive-through shop and a pull-in structure.  Both have their strong points depending on your geographic locale. A drive-though bay tends to be safer through the elimination of the need to back a vehicle either into or out of the work bay.  A drive-though layout also increases ventilation as both bay doors can be opened to allow for a cross-breeze and disburse any heat.  However, in a colder climate a pull-in structure allows for doors to be installed at only one end making heat retention much easier in the winter.  For a pull-in layout, additional forms of mechanical ventilation will be needed to keep temperatures comfortable in the summer months.

The number of bays is also important.  One issue some fleets run into is having the same number of technicians as there are bays.  The National Association of Fleet Administrators recommends a ratio of 1.5 to 2 bays per technician.  This is to remove the need to pull a vehicle out of a bay while a technician is waiting for parts to arrive.  Any unnecessary shunting is a waste of time and an avoidable cost. This also keeps your techs working on vehicles and staying productive by doing the skilled labor you are paying them to for.

The size of the bays is another critical factor.  Obviously, it needs to be long enough to accommodate whatever equipment you will be working on.  What may not be so obvious is the width of each bay.  It needs to be able to accommodate the maneuvering of trucks, technician work areas and storage for parts and tools.  Finally, keep the height of the shop as high as possible.  Workers will need the space to work on top of trailers so things like overhead cranes and fall arrest systems need to have sufficient overhead space for a technician to safely work.  If you build it high enough that the space can be converted into warehouse space, then you have made your building more valuable if you outgrow it and need to repurpose it.

The overall design of your shop should be directed at maximizing technician productivity.  One expert recommends building workbenches between each bay and equipping them with common tools such as grinders and vices, instead of only providing them in centralized locations.  This will reduce the amount of time spent looking for an available workspace or tool.  Additionally, look at having your bays designed for cleanliness.  Have the floor painted and provide cleaning items such as shovels, mops and brooms at each bay and make the technician responsible for keeping them clean.  A clean floor reduces slips and falls, making the facility safer for everyone.  Keeping the floor clean will also reduce any losses caused by vehicles running over tools or parts that have been left sitting on the bay floor.

While we are looking at safety, ensure that there is adequate lighting within the bays.  Begin by allowing for as much natural lighting as possible through either skylights or windows.  Next pick a lighting technology that provides a relatively white light.  High pressure sodium lighting gives off a yellow hue, which can make faded wiring look like the same colour.  There are a lot of modern LED lights that provide a white light and are significantly more energy efficient than incandescent bulbs.  They may cost a little more up front, but they tend to have a lower life-cycle cost.  Painting the walls white will also help to reflect the light and make your shop have a brighter interior.

Another common theme when building or reconfiguring a shop is to plan for the future.  Avoiding the use of load bearing walls will make a future expansion easier to manage.  Also remember to leave enough physical land space to allow for future building.  Putting your wall ten feet from your property line is not going to help you add usable shop floor space in the years ahead.  Having enough space in your electrical panel for future growth is also important.  While you are considering it, ensure that your utility room is large enough to handle things like a larger air compressor, a larger air dryer or just more circuits.  While it will cost more to put that capacity in up front it is generally more expensive to retrofit later.

The last thing to look at is the IT infrastructure that you provide your technicians with.  Are you providing computers for them to put in their work orders in a centralized location or are they closer to the bays?  To properly outfit a computer and a suitable cart or stand you are likely looking at around $2000 per machine.  That might seem like a lot to spend on a computer that is being used to enter in work orders, clocking onto job lines, entering comments and billing out parts.  However, let’s use an internal cost of $1 per minute for your technicians’ time and they spend 10 minutes a day just walking back and forth to a centralized computer that $2000 has a 200-day payback based on lost productivity – less than 1 year of working days! There is starting to be a trend towards outfitting the technicians with a ruggedized tablet that allows access to your shop management software as well as having some of the OEM diagnostic software available.  This will allow the technician to enter jobs, notes and parts in real time as well as pulling ECM data at each service to allow for predictive and proactive maintenance.  Your ROI will not only be based on the avoidance of unproductive time spent walking to a computer but also in the reduced inventory shrink caused by missing to bill all parts out to a job.

Not everyone will be able to do all these ideas – either because of budget or space restrictions.  However, it will be a good exercise to compare your shop with these suggestions and do a payback and ROI for each of them.  It’s possible that some of these items could free up enough time to either reduce headcount or having the ability to redeploy employees to a different shift – perhaps offering an evening or weekend shift to take advantage of when equipment is sitting idle.  You may just find out that a reasonable investment now could result in an improved bottom line going forward.

Have You Done a Redundancy Audit?

At the risk of sounding like a broken record, I want to address something that is common with businesses of all sizes, types and industries. Chasing the shiny new project, product or service is exciting. In fact, it can reinvigorate your team, and build momentum for continued progress.

Clearing the deck for progress, doesn’t just mean establishing tasks, deadlines, milestones and holding team members accountable, it should include a careful audit of all the processes, tasks, and routines that your team is doing on a daily, weekly and monthly basis. Further, once the audit is complete, it will be very easy to update periodically to ensure peak efficiency. Many would categorize this as a LEAN Management principle, specifically the “Sort” part of the Kaizen Framework – separating what is needed and what is not needed.

The great thing is that a redundancy audit can be applied to all functions in an organization, and for trucking it can be extended to the driver’s seat. There are non-value adding tasks being done everyday, and for those that want to profit more with the same overhead – this is a crucial step.

Step 1 – Make a List

Have your staff list all the tasks that they do on a daily, weekly and monthly basis.  Ask the team to be specific as they can to best identify any unnecessary tasks and processes are being completed.  Conversely, this may be an enlightening exercise – you may not be aware of all the important functions a team member performs each day, week and month. However, be aware that the person doing the work may “hide” some tasks, intentionally or unintentionally, especially if they involve something they enjoy doing, or that have a social aspect to them.  These are areas where you may run into some resistance to your change efforts.  Consider the use of internal auditors, but keep in mind that people will act differently when they are being observed.

Ensure that communications about the process are kept up, and ensure that the audit is not done in a bubble.  Ensure that people understand why this process is happening and get them to focus on what they will gain from it instead of what they will lose.  Ask the staff for input as to which of their items that they feel are redundant.  Solicit feedback as to why they feel these things are good candidates to be eliminated.  At the same time, get their opinion on how they could improve on the tasks on their lists as they may be aware of ways to improve performance that are currently outside of accepted procedures.  Reach out to your customers and see if there are any statements, reports, etc. that you are currently providing that they no longer need or that could be provided in an alternative format.  As an example, have your sales staff ask their customers if they are willing to go to automated invoices, or if they really want to get monthly statements.

Step 2 – Meet as a group to review and prioritize

Use the concept of “would a customer pay for this” as a starting point.  In addition, look for duplicated efforts in various parts of the organization – perhaps both accounting and operations are performing essentially the same task without knowing it.  Pay special attention to the reports people are creating as these are easily duplicated or are candidates for automation.  Maybe you have an underutilized customer web access portal that could eliminate some phone calls and generate customer value by letting them gain access to their information when they want it.  Be aware that some low value tasks or processes may have regulatory reasons for doing them – either for you or your customer.  These are items that you must ensure are not discontinued.

Begin with items that are being duplicated in different departments.  Put those to the affected departments to find a way to do the same thing in a format that all can use (such as reports). Next look for items that provide no or minimal value that will have a low cost to eliminate.   Lastly, any processes that will require major re-engineering or automation will require a full ROI and cost-benefit analysis before implementation.

The last step is to go back to the stakeholders and ensure that there is agreement on what the priorities are.  Be prepared to put your sales hat on, as some departments or staff members will have a harder time seeing the need to change.  Effort spent at this stage will get paid back easily during the elimination or implementation phase.

Step 3 – Eliminate

Focus on the low hanging fruit first – anything that just does not need to be performed or done in a different manner.  Then move forward using Cost/Benefit as your guide. Be sure to re-evaluate as you progress – did you eliminate something that a customer needs?  Be prepared to back track or re-evaluate how you implement the changes based on circumstances that will arise as you implement.  Somewhere in the process you are going to eliminate a report that someone really uses, but did not tell you in the investigation stage.  Be ready to bring something back if this happens and understand that it could stay under the radar for a few months.

Step 4 – Repeat Quarterly

Keep in mind that situations, needs and regulations change constantly.  What is necessary today can become obsolete tomorrow.  Ensure that you take time every quarter to go back to this process and re-evaluate not only the progress but what else can be eliminated.  The team will find that in a lot of cases they didn’t eliminate enough as people will start to ask: “do I really need this, or can I get the same result from something else”?  If the answer is yes, then put that task or process back under the microscope.  In some cases, it may take several iterations until you get that process right.

The first time through the process will be painful.  There will be a lot of “that is how we have always done things” raised. People may resent or be fearful of the process as they will focus on what they could lose.  Get some easy victories first, show people the value of the process and you will see people really get onboard.  As you get into making this an ongoing process it will become a habit, and that is when you will really see a shift in the organization’s performance.

A Workforce on Steroids – Creating a Purposeful Work Environment

We all have routine (robotic) tasks that we hate doing, but they just have to get done.  These can be anything from reviewing and answering “routine” e-mail inquiries, to regulatory and legal reporting requirements.  Most of these activities fall into one of two categories – essential non-value adding activities and purely non-value adding activities.  How do we maximize the amount of time that our teams spend on value-added, cognitive (thinking) tasks and minimizing the routine tasks that offer little or no value-add?  Can we utilize a lean culture in terms of processes, while at the same time providing a more interesting and stimulating work environment?

I was recently reading a presentation, using Lean Principles, that was developed by the University of California – Davis School of Organizational Excellence.   To download the presentation, click here.  The presentation starts out by summarizing lean as having 3 main pillars:

  1. Increasing value
  2. Reducing waste
  3. Respecting people

Among other things, a Lean culture will constantly challenge the status quo, use team-based problem solving, emphasize communication and leverage talents.  It does this through standardized processes, eliminating anything that does not add value, continually improves, routine tasks are automated and uses clear metrics and goals.

An important concept is that value is defined from the end user or customer’s perspective.  A quick way of thinking about this is for any task ask yourself “would a customer be willing to pay for this?”  These items directly contribute to customer expectations and as a result they need to be done right both the first time and every time.

As a simple example, consider taking a check to the bank and making a deposit.  The traditional process means driving to the bank, waiting in line, completing the transaction and then driving back home.  Out of these 4 steps, only the completing the transaction provides value.  The person lives 10 minutes away from where they bank, and they normally have to wait in line for about 5 minutes to complete a 1 minute transaction.  Based on this example, the customer waste 25 minutes to do a simple 1 minute transaction – an efficiency of only 4%!  Now most banks are offering the ability to deposit checks with a smartphone app.  The example given in the presentation suggests that an average user will take about 30 seconds to enter the deposit information into the app, take about 60 seconds to capture a usable image of the check and then another 30 seconds to complete the transaction.  This reduces the wasted time to 90 seconds and reduces the value added task to 30 seconds.  The efficiency ratio is now 25% and the overall time spent is reduced from 26 minutes down to 2.

We can see a similar situation that goes on in our Operations departments.  Many of us still use a traditional system where most customers either call in, or e-mail in load orders and these requests are handled by Customer Service Representatives (the definition of CSRs vary greatly from carrier to carrier).  By having a friendly person answering the phone. and talking with the client we are offering great value to our customer – right?  Maybe not.

CSRs offer value when the customer has a one-off shipment or something that requires special handling or routing instructions.  In these situations, the CSR is truly offering a solution to a unique situation.  However, if I am a shipper and I have a daily run of in-process parts from Birmingham into Chattanooga that are always 16 bins, and 40,000 pounds with a pickup time of 8AM Monday to Friday, then forcing me to talk with a CSR is taking extra time and creating no value for either party.  This situation is a perfect candidate for automation – such as a standing order that the shipper only communicates exceptions.  Now when the shipper talks with the CSR, it is a situation where the CSR can actually provide value.  If the customer is large enough and provides it, consider going to a full EDI solution instead of just utilizing a web portal for things like load tenders, status updates, etc.

Another example is with customer updates.  Normally the customer calls into the CSR, who then needs to find the shipment, see what truck and driver are assigned to that load and then determine that vehicle’s location.  A much more efficient process would be to offer some form of customer web access to allow your client to check on the status themselves. Many carriers are providing this type of service via Freight visibility services such as Four Kites, 10-4, and MacroPoint (however, this is typically driven via the shipper). The customer can get the information when they want it (not just when your Customer Service department is staffed) and your employee is freed up to take on cognitive tasks.  Now they are able to spend more time on problem solving, such as updating customers who have a shipment that is in danger of being late due to breakdowns, weather, traffic conditions or potentially impacted by the new hours of service regulations.

What about those non-value added tasks that are still necessary for regulatory or compliance reasons?  First, look for ways to at least partially automate them. If you don’t think a routine task can be automated, read this article. If you have an item that you need to do, such as periodic reports to a regulatory body, are you tracking them in a spreadsheet or do you have a report that will gather the necessary data for you?  Secondly, have you recently confirmed that this task/report is still required? A audit of routine tasks should be done regularly – why do them if they are redundant – you’re paying for them! A similar case can be made for those reports that customers ask for.  Have you done a recent follow up with the customer to see if they still want or even use the reports you are sending.  Could they be done in a simpler format that takes less time for you and provides more value to them?

Some employees will resist some of these changes. Humans generally don’t like change. If you build explain the importance of these proposed changes in a big picture narrative, instead of simply telling them to stop, you will get much more buy-in.  You may be worried that by pushing some of these items onto your customer you are reducing that “personalized touch”.  The focus needs to be on asking “is this something that the customer actually values and is it something that they would pay for?”.  Instead of having a CSR just take routine orders, empower them to do customer checkups, such as a review of historical loads versus contractual commitments.  Maybe identifying lost accessorial revenue that could flow straight to your bottom-line.

Continuous improvement does not mean constantly taking things away.  By removing repetitive “busy work” you can make the job much more enjoyable. You are allowing them to use their talents and abilities more often.  However, keep in mind that there are some people who prefer to do more routine type jobs, and do not enjoy problem solving.  If in a department you have one person like this and four others who would prefer to deal with unique situations, you may consider redistributing tasks so that the routine situations are handled by that one person and the others get their time freed up to work on something more creative.  The third pillar of LEAN is respecting people.  Different people have different motivations and desires.  Asking a person who prefers routine to handle exceptions is not going to satisfy them.  Similarly putting a lot of routine, repetitive tasks on a person who has excellent problem-solving skills will result in a dissatisfied employee who is probably looking for another job – sooner rather than later.  By knowing and respecting the players involved, an organization can structure itself in a way that is always looking to eliminate waste, creates value and truly becomes customer focused while still creating opportunities to better leverage individual talents and goals.

Incentivizing Your Way to Success Part II – Targets for Accounting/Billing Associates

Last week, we discussed best practices for implementing Performance based pay structures within your trucking operation with the ultimate goal of imrpoving Gross Margin AND Net Margin. In order to implement appropriate incentives, you have to first decide which targets to use (based on role/responsibility/department). As a reminder, the targets you implement for your associates need to be: 1) Understandable and easy to calculate, 2) Improve the financial health or lower the risk profile of the company 3) Within the realm of control of the associates, and 4) Give high-performing associates the chance to earn more than they were previously able to.

Over the course of the next five weeks, we will be providing examples of targets/measures you can examine for each of the following departments: 1) Accounting and Billing, 2) Operations/Fleet Management, 3) Shop/Maintenance, 4) Recruiting and 5) Safety. For this week’s article, we will focus on accounting and billing. The reason I want to focus on this group is that many companies do not have ANY type of incentive/variable compensation for those in the Accounting and Billing. In my opinion, this fact reinforces the general idea that accounting and billing is just a series of tasks on a checklist that stays within a narrow range of performance. This is absolutely not the case! Based on our data, the high performing fleets have exceptional Accounting and billing teams. They have low Days Sales Outstanding (DSO) results (typically in the 28 to 32 day range on average), and have very little lag between deliveries and accurate invoices AND a high rate of accessorial capture. A great accounting team has the ability to dramatically improve your cash flow.

With this in mind, here are some measures you can consider using for implementing a Performance based pay structure for your accounting and billing teams:

  1. Days Sales Outstanding (DSO) – Many companies simply aren’t tracking their DSO numbers religiously. For any company, regardless of industry, if you’re not being prepaid for your service, you need to start doing so right away. The formula for this measure is: (Current Accounts Receivable including Linehaul, Accessorial and FSC / Period Total Revenue) * # of Days in Period. Prior to implementing a proposed target, you may need to finally write-off those ‘doubtful accounts’ that have become ‘not a chance” accounts. Further, as additional targets within this topic would be the % of receivables that are paid within 15, 30, 90 days, and then establish target ratios to maintain. By improving on these values, your invoicing lag will undoubtedly improve, as will your utilization of EDI.
  2. % of Accessorial Revenue Capture – From company to company, there are some pretty dramatic differences in levels of accessorial revenue. Obviously these results can be a direct result of the type of freight you’re hauling, and the way you charge your customers. However, it is safe to say, that all companies can improve the percentage of accessorial opportunities that convert to revenue. A simple KPI, would be to track the percentage of Accessorial Revenue on weekly or monthly basis versus your linehaul revenue and/or Total Revenue. By improving on this KPI, you will definitely see higher gross margin and more importantly improved communication between accounting and operations.
  3. # of Bank Reconciliations Completed During Month – I’m a big believer in daily (yes daily) bank reconciliations. Daily bank recs reinforce discipline within accounting and can drastically improve internal processes that have a collateral positive affect on other departments. Further, chances of inefficient cash management and potential fraud are greatly reduced. All accounting systems have many tools available to allow you efficiently handle daily bank recs and report to interested parties (which would be me if I was the President).

These are just a couple, hopefully it got you thinking about additional measures specific to accounting which you can use to motivate top accounting performers!

OEM vs. Aftermarket Parts – Part II

Last week we talked about the differences between OE and aftermarket parts. Now for the money question – what’s my optimum mix between them? Like a good economist once said “it all depends”. Like many things, the least expensive option rarely is the best one. You also don’t want to just go with the most expensive option, unless you have done your homework and determined if it brings you the most value and the overall best total cost of ownership. Make sure you start with a relatively small number of your high volume and high dollar value parts. Going with too many will bog down your efforts. (more…)

OEM vs. Aftermarket Parts

How much time do you spend thinking about parts? Do you buy solely OEM, or do you only look at aftermarket? Do you know the the difference between rebuilt and remanufactured parts? Using the wrong mix could be hurting your bottom line. (more…)

Become a A/R Ninja



Aside from delivering freight, Accounts Receivable management is one of the most important business activities for any Motor Carrier. As with all businesses, cash flow is always a primary concern. (more…)