The point of creating budgets is to help focus spending priorities so limited capital and manpower can be used to best advantage. When it comes to information technology, though, fleet executives often feel unqualified to set those priorities and unprepared to follow up on budget mandates with vendor selections or return-on-investment (ROI) evaluations. However, as a fleet manager, your business knowledge and experience is a vital element in making the best possible IT investment decisions, and you can't afford to duck the issue by leaving those choices solely up to your fleet's IT specialists.
Unfortunately, there are no universal formulas for evaluating IT choices — trucking operations are simply too diverse. But there are some general principles that can help you set priorities for your needs, guide you through the choice of supplier partners as you address those needs, and make the implementation as smooth and efficient as possible.
The logical first step is setting priorities for spending. “Don't let IT set budgets or priorities by themselves,” says Tom Weisz, CEO and president of TMW Systems, a developer of fleet management software. “I'm not a big believer in committees, but this is one time you need a committee. It ought to include operations, accounting, IT and every group involved.”
“Operations will tell you what they need today, and IT will tell you what you need tomorrow,” says John Moscatelli, senior director of transportation for Nextel Communications. For example, operations may see the need for computer-aided dispatch, while IT sees opportunities for bar-code capture or integration with maintenance programs, he explains. With multiple voices at the table, “you have your best shot at prioritizing directions and coming up with clear objectives that address both immediate needs and future growth,” he says.
At small fleets, that committee might only include two or three people with multiple responsibilities. Large and mid-size fleets, however, should attempt to get broad representation. While even the larger fleets might find it simpler to keep the committee small, leaving a key player out will prove counterproductive in the long run.
Take maintenance, which may be viewed by some as less qualified to make IT decisions. “Most (maintenance) managers don't have the authority or budget to acquire technology themselves,” says Charles Arsenault, president of software developer Arsenault Assoc.. “They're usually at the mercy of executives and IT departments who don't share their priorities. So when those executives do provide technology, it is often tailored to priorities other than those of the shop.” Consequently, fleets install maintenance systems that meet accounting needs instead of those that improve shop effectiveness, Arsenault says.
Once a committee is formed, how should it go about setting investment priorities?
In the current economic environment, “the trend… indicates cautious IT investment,” according to a survey conducted by AMR Research on general business e-business budgets for 2001 and 2002. While they project a modest 9% increase in those budgets, the majority of spending will be limited to “areas that drive revenue, including sales and customer management initiatives,” the survey says. Market conditions in 2002 are “forcing companies to look at the fundamentals that impact their bottom line, with incremental purchases of technology that demonstrate an ability to delivery a rapid ROI.”
In trucking, the goal should be the same, says Guy Waterman, vp-marketing and business development for PointServe, a provider of supply chain software solutions. “I've seen people chase software for technology's sake,” he says. “What you want are systems that actually generate a benefit and a return.”
Small fleets in particular should consider what a particular IT investment can for their customers, Waterman advises. “If it isn't impacting revenues or customer service, it probably isn't worth pursuing — even if it might take some cost out of your operation.”
Large or small, a fleet should “develop a good business case for any IT investment,” he adds. “Don't let a vendor create the business case for you.”
Looking for a direct effect on revenue “is an admirable goal,” says Weisz, “but when you get into the details, there aren't all that many (IT) investments that have a quick return. Those that do are easy decisions; but for the most part you're going to have to make some hard decisions about taking risk. Using ROI as a planning goal is not shortsighted, but sticking to it blindly is.”
Weisz' suggestion is that the committee create two lists, ranking projects with the highest rate of return in one and those with non-quantifiable returns such as customer service or driver relation improvements in the other.
“Even though you suspect there's a financial impact, those (with non-quantifiable returns) sometimes get cut off the final list because it's hard to convert that suspicion into hard dollars,” he says. “So consider the risk of not doing them. Can you delay, and if you do, what will happen?”
Moscatelli also cautions that the evaluation process needs to be continuous in today's rapidly changing business environment. “IT investment is now a customer requirement, and without it you won't meet customer expectations,” he says. “You need continuous evaluation to remain competitive. Take security, example. After Sept. 11, security concerns are leading to new IT needs for certain kinds of fleets.”
CHOOSING PARTNERS
Once your committee agrees on the best way to invest your IT dollars and defines clear objectives for that investment, the process is fairly straightforward, although in many cases it will be time consuming.
The first step is to identify the key suppliers. FLEET OWNER is one source. Trade associations and shows are another. Internet searches can bring some useful results, and good competitors can also be a valuable source of information on suppliers.
Once you've developed a general list, you want to narrow the search to two or three before starting more detailed evaluations of software or services. Reputation in the industry, financial stability, customer references and core competencies should help identify the right potential partners for your project.
“Be sure to look beyond the technology,” says Moscatelli. “You want to be sure they have the resources and stability to be there long term as you grow.”
While price should be a consideration at this point, be sure to factor in the cost of the poor or limited support that may accompany the lowest price.
Evaluating the two or three remaining systems or services usually involves demonstrations for those in the fleet most directly involved, often followed by a pilot program where the system can be tested in your real-world application.
“Remember that evaluating software is not free for the fleet or the vendor,” says Waterman. The process will require significant resources in terms of time and money from both parties, which is one good reason to limit actual evaluation to just a few leading candidates.
CLOSING THE LOOP
Having made a final choice and moved to implement the new IT project, many would consider the final step to be measuring the effectiveness of your investment. But is that really the best IT management strategy?
“There are good academic reasons to look back, but how much are you willing to spend to find out what's happened already?” asks Weisz. “That might be an interesting exercise, but in business you want to look forward.
“The real question isn't ‘are you better off now?’, but ‘how can you get better?’” he says. “If you're going to ask questions, ask questions that will help you find actionable items, areas where you can make meaningful changes,” Weisz adds.
For Waterman, that means building in ways to monitor and track meaningful metrics as part of your original IT project. “If you are getting those metrics on a regular basis, the processes to drive them will follow naturally.”
In other words, if you do the work up-front to assess your priorities and choose the right partner, once the new system is in place it's time to go forward and move on to the next project.
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