Shifting the gears of business

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The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” -Bill Gates


It‘s time to realize that business is undergoing a sea change - the sort of big-time seismic shift that needs to occur to cope with new and nearly overwhelming economic conditions.


We all know what‘s driving this change, too - the price of oil and, subsequently, the cost of diesel and gasoline. We‘re sitting at $4 a gallon for gasoline and over $5 a gallon for diesel across much of the U.S. right now (and can you believe diesel cost 90 CENTS a gallon nine years ago at this very same point in time) and that‘s raising all kinds of havoc for us as a nation, since we‘ve over-relied on cars for decades for much of our daily transport needs.


On the freight side of the ledger, things are much worse. Commercial trucks haul 70% of all tonnage in the U.S. - a far cry from the 1940s and 50s, when railroads carried almost 90% of it. I‘m not sitting here saying we need to go back to those days - the railroads themselves are largely to blame for this topsy turvy turn in the freight world - but trucking needs to make some significant changes to cope with the new reality in fuel costs we‘re facing here.


The business world is trying to cope by relying more on technology rather than movement to handle many daily needs, and it‘s on using technology more wisely as a resource that Professor Jerry Osteryoung from the college of business at Florida State University has some thoughts. As usual, I‘ll let him do the talking today.


You‘ll note he says that shippers need to rethink how they transport their goods and should look to more local and regional carriers - that‘s a trend that is probably going to increase, which may not be such a bad thing as the industry could use more local and regional routing to give drivers more home time. In any event, it‘s something to think about. Professor Osteryoung, the floor is yours.


“With gasoline hitting four dollars a gallon and no end to the increase in sight, it is time to start thinking about the structural changes that we are going to experience in our economy and in our businesses. With the exception of the Internet revolution, this is one of the most dramatic changes that‘s come along in the last 50 years.


A recent report showed that if the current rate of oil consumption in China continues, they will need all of the world‘s fuel in the next ten years. Additionally, production and refinery capacity is going to further limit the availability of fuel, meaning higher prices as well.


Do I think that fuel prices will ever go down to two or even three dollars a gallon? No, because the demand for this commodity is increasing exponentially. I would not even be surprised to see fuel at five dollars a gallon by year end, especially if the dollar continues to do poorly against other currencies.


Not only is this a very big challenge for our country, but it is also an immense challenge for each and every business. One major change that I think we are going to see as a result of these conditions is more and more shopping on the Internet. People are going to opt for this alternative as a way to avoid using gas. Of course, people will still have to shop for items like food; but they will use the Internet much more in order to combat higher fuel prices and maintain their standard of living.


What this means is that your business is going to have to step up your web site. An okay web site is not going to cut it. To prosper in tomorrow‘s economy you must have a great web site that clearly demonstrates your products and services. It must also be easy to navigate and transact business. Users will simply fly by your site if it is not dynamic and relevant to their needs. In light of this, I think it would be very prudent to shift as many advertising dollars as possible to the Internet.


A second trend we can expect to see is telecommuting becoming the norm rather than the exception. With high fuel prices and congested roads, businesses will simply not be able to recruit or afford workers that have to commute. Businesses will have to design the workplace so that more of their workers will not have to come into the office everyday. Of course, mass transportation will eventually fill this void, but this is going to take a long time to develop.


Another major change I see is development growing up instead of spreading out. In the past, new development moved away from the city core, but now it will have to come back to the center to provide housing for people that can no longer afford to live in the suburbs.


This will be especially troubling for the many workers who moved further out to get inexpensive land for their houses. The commute was acceptable when fuel costs were low; however, now that paradigm has changed, and these workers are getting caught in an economic squeeze. They are going to be stuck, both unable to live out of town due to fuel costs, and unable to take on the expense of moving.


Another business cost that will warrant examination is transportation for your materials or products. Now is the time to take a look at ways that you can reduce your shipping costs. Start by looking for vendors or resources that are closer to home, thereby reducing your cost of doing business.


Finally, each and every business will have to change the way it thinks about fuel. Businesses will have to limit travel, opting to conduct more meetings using video conferencing technology. Smaller vehicles will have to become the rule rather than the exception. Bottom line: each business will have to redesign itself assuming that fuel hits $7 a gallon.


Now, there is a solution to this fuel price issue, and the answer is technology. Will this be a quick fix? No, but I believe it will come within the next seven to ten years. But do not be satisfied with minor tweaking here and there. The scope of this issue demands a major structural change - a re-engineering of each and every business.”


Professor Osteryoung can be reached by e-mail at jerry.osteryoung@gmail.com or by phone at 850-644-3372.

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