Motor Carriers & Technology: Optimizing Like Never Before
Motor carriers were once notorious laggards when it came to IT investment. No more. A robust freight market and higher margins are driving truckers to once again invest in their IT infrastructures. And the motor freight buyer comes out the winner.
A Yellow Roadway Corp. employee recently shared an interesting observation about the trucking industry and technology with Adrian Gonzalez, a senior analyst with ARC Advisory Group.
Not too long ago, the employee said, Yellow Roadway was only interested in technology from the standpoint of tracking its equipment. "But customers don't care about equipment; they care about shipments, orders, and inventory," the employee told Gonzalez. "So Yellow has had to realign its operations and systems to make them more customer-centric."
"Most of our customers are trying to get inventory out of their supply chains," says William D. Zollars, chairman of the board, president, and CEO, Yellow Roadway Corp., one of the largest transportation service providers in the world. "When you do that, the demand for real-time information increases, driving the need for more sophisticated IT infrastructure."
Recognizing this need, Yellow Roadway will spend some $150 million on technology this year. The company's subsidiary, Yellow Roadway Technologies, employs 550 technology professionals who work on nothing but technology for Yellow Roadway companies.
Why is Yellow Roadway's transformation to a technology-rich, customer-focused company so critical? The carrier "cannot drive future growth by simply remaining a less-than-truckload (LTL) company," Gonzalez says.
"In many ways, delivering goods from Point A to Point B is becoming a commodity. As the business environment becomes more global, dynamic, and complex, manufacturers and retailers are expecting companies such as Yellow to provide them with value-added logistics solutions.
"Service providers that can meet the challenge will be viewed as strategic partners and enhance their business opportunities, while those that cannot will become less significant," he says.
"Freight carriers are notorious laggards when it comes to investment in and use of leading technology, especially the small to mid-size companies," say Greg Aimi and Kevin O'Marah, AMR Research, in a recent trucking industry status report. The good news is that this situation is changing.
Thanks to the robust freight market and resulting higher margins, motor carriers are once again investing in their IT infrastructures.
"Shippers' exacting requirements, and the constraints they face as manufacturers and receivers of goods, are driving all sorts of change," says Matthew Menner, vice president transportation at software company Manhattan Associates Inc.
Tight capacity is enabling carriers to pick and choose their freight and optimize their business around the right financial metrics—something many carriers did not do in the past. So technology is helping them provide timely delivery for their customers' products, while improving the carriers' underlying asset utilization.
"This means carriers can do more with less," Menner notes.
It is shippers who reap the benefits of motor carrier investments in technology. The cases of Yellow Roadway and Schneider National illustrate how.
A Tale of Two Carriers
Yellow Roadway has two focus points when it comes to technology.
"First, how can we make our internal operations more efficient and reliable for customers?" says Zollars. "Second, how can we improve our customer-facing technology—such as our web site—to enable customers to do business with us easily, in real-time?
"In terms of efficiency," Zollars notes, "about 50,000 people work at Yellow across more than 700 locations, so manpower planning is very important. We need technology that allows us to plan by person, by shift, and by location so we have just the right manpower at each facility.
"At the other end of that process we need technology that allows us to plan the route of a shipment from the time we take the order to the time it is finally delivered," he says. "We plan the least-cost method to deliver individual shipments on time, then we aggregate those shipments and match them up with our manpower planning tool to make sure we have the right people.
"In the old days, if we needed 100 people to run our DC in St. Louis one year, and our business was growing, we'd estimate that we would need 105 the following year to handle that growth. So we'd add five people. But then we'd find out that we actually only needed 102 people, so we'd be overstaffed.
"Today," Zollars says, "we don't have to guess. We have real data at our customer service centers so we can staff properly and extrapolate our costs accurately."
To better manage its fleet and drivers, Roadway Express deployed a digital dispatch solution that enables real-time pickup and delivery management with in-cab devices.
"We can change the driver's route in real time, telling him to pick up an emergency shipment at the last minute," Zollars says. "This technology, which is a lot smaller, cheaper, and easier to use than older systems, has generated a 10-percent improvement in operating productivity at Roadway Express.
"That $350 to $400 million savings is a big number."
Schneider National, the largest privately held truckload motor carrier in North America, has a number of major IT projects underway, grouped into two major areas.
The first focuses on developing and applying sophisticated revenue management techniques to better understand the balance between capacity and demand. The second effort involves redesigning and improving the process of acquiring business, accepting transportation orders, and moving the freight.
"We're trying to put in place more useful decision-support tools and automation so we can improve efficiency and provide robust options to our customers," says Ted Gifford, vice president of engineering and research at Schneider National.
In the revenue management area, Schneider has been working with a research university to develop a tactical planning model that will allow the carrier to simulate freight flows and driver assignments throughout its network.
"This will allow us to evaluate the impact of changing the mix of capacity types or driver assignment and deployment," notes Gifford. "We can simulate various operating scenarios, look at how potential new business would impact our network, or evaluate the effects of hiring drivers in different parts of the country.
"In the past, we used a combination of desktop tools, Excel spreadsheets, ad hoc analysis, instinct, and intuition to try to understand the underlying effects a new customer or route would have on business," Gifford explains. "We are trying to build a much more sophisticated costing model that will allow us to respond more accurately and in a more timely fashion to customer requests.
"We're also building more sophisticated and accurate pricing tools that will let us turn a large bid around in hours or days instead of weeks, and reduce the amount of effort required to develop it."
Finally, Schneider National is developing a new forecasting system to do a better job predicting freight demand in various markets at different times of the year.
"We're applying standard mathematical techniques to understand seasonality better so we can do a more efficient job of supporting customer capacity needs and expectations," Gifford says.
Customers benefit from these internally focused technology initiatives in several ways, Gifford says.
"We can give them a price and commitment that is more aligned with our true ability and cost. We'll have a better understanding of how a customer's business will affect our network, and we can make a much firmer commitment on capacity. This helps customers plan their supply chain operations more effectively. And customers may see lower rates because we don't have to include an uncertainty factor in our pricing."
To improve its day-to-day operations, Schneider is building new decision-support tools for planning and dispatching people and equipment more effectively. The carrier is installing tracking technology on all its trailers. This technology gives it much greater visibility as to where its trailers are, whether they're loaded or empty, and what condition they're in.
"We're moving toward a system where we can assign the optimal driver-equipment combination for a given load," Gifford says, "and we can do this in a far less labor-intensive way."
What do these investments mean to Schneider customers? "We are investing in systems that make us more responsive in terms of being able to provide flexible solutions to customers at pricing that is competitive—that allows us to remain healthy but provide the customer with the best value possible," Gifford says.
"If we can run our network more efficiently, reduce our costs, improve service, and become easier to do business with, well that's what the customer wants."
Yellow Roadway and Schneider clearly illustrate that carriers have made significant advances in the technology used to manage every aspect of their operations.
For example, Greg Aimi and Kevin O'Marah of AMR Research point out that over-the-road carriers with modern dispatch and tracking systems can provide the following information electronically:
- Available capacity at or near origins for planning.
- Timely response to electronic tenders.
- Actual arrival and departure from shipping and delivery locations.
- In-transit revised estimated time of arrival (ETA), especially when such an ETA indicates a variation from plan (critical information to proactively revise the dependent plans and avoid costly alternatives).
- Empty capacity available for lower-cost backhaul opportunities.
- Dock-door scheduling information.
- Claims and/or over, short, or damaged goods notifications.
In addition to proprietary fleet management solutions developed in-house by carriers, numerous fleet management technology tools are available to help trucking companies manage their operations.
Here's a look at some representative products.
Manhattan Associates' Carrier Management application gives carriers a clear picture of their transportation assets. It integrates with enterprise systems to automate operations, minimize integration costs, and maximize profitability.
Carriers can use the solution to assess profitability at the region, lane, customer, and load levels via an intuitive, web-enabled user interface. Flexible activity-based costing calculates regional opportunity costs, giving carriers complete insight into key profitability factors, including revenue, price, asset and driver utilization, fixed equipment costs, and network balance.
"Our solution is attuned not just to meeting the profit goals and operating objectives of carrier management," says Menner. "We can determine exactly what it costs to serve a given customer, and use that information to help price the service and manage actual trucking operations. We work with carriers to solve real-time yield management issues to apply the right truck to the right loads."
Manhattan's software also helps carriers better manage driver rank and file. "For example," Menner says, "when our system schedules a load, it takes into consideration the overall importance of the shipment, and whether it is on time or late. It then weighs that information against driver requirements and hours of service."
The system also can recognize patterns of regularly occurring volumes on each freight lane and make automatic recommendations for load plan changes, such as adding or subtracting direct service lanes.
Before implementing any proposed changes, a carrier can first determine the potential network-wide impact on costs, service, and capacity using a virtual model of its existing linehaul network. The company can also analyze terminal locations and types, and multi-modal routes.
QUALCOMM Corporation offers a number of high-tech tools for motor carriers, all based around digital wireless communications systems. The QTRACS fleet management solution displays operational data at the carrier's dispatch station using a web-based service or host software that interfaces with the company's existing system.
The company's TrailerTRACS asset management system tracks the location and status of trailers, and can monitor temperatures in refrigerated trailers. And SensorTRACS performance monitoring allows carriers to analyze driving behavior and performance of on-road vehicles.
The QTRACS fleet management system provides dynamic fleet and driver management through two-way driver messaging, street-level vehicle tracking, and mapping. With rapid access to current and historical tractor/trailer location and status, carriers can project more accurate ETAs, which can translate into increased load opportunities and improved customer satisfaction.
Rand McNally's IntelliRoute software helps carriers route freight more intelligently and cost effectively. A new mileage functionality, including updated highway data and location points, facilitates the calculation of driver pay, auditing tax records and driver logs, and confirming bills of lading. It also helps carriers accurately report fuel taxes using state-by-state mileage breakdown calculations.
IntelliRoute software provides fleets with real cost savings by enabling route optimization and reducing downtime and fines. Fleets can calculate more efficient stops with the updated database of more than 5,000 truck stops, and drivers can customize specific fuel networks to meet their particular pickup and delivery needs. The updated Lowest Cost routing option provides them with an accurate assessment of profitability per load per lane.
Intermec Technologies Corporation develops, manufactures, and integrates wired and wireless automated data collection, Intellitag RFID (radio frequency identification), and mobile computing systems.
Old Dominion Freight Line, an LTL inter-regional and multi-regional motor carrier headquartered in Thomasville, N.C., deployed Intermec's mobile computers and wireless technology in an automated dock and yard management system, which the carrier uses at its 117 U.S. service centers.
Old Dominion attached RFID tags to its trucks. As vehicles arrive at the service centers, they are automatically identified by an RFID reader. This information is relayed to the company's dock and yard management software application. The system, which was developed in-house, looks up the shipment information and determines how the load should be handled.
Handling instructions are immediately relayed to "switchers," who operate tractors in the yard to receive trailers from over-the-road drivers. Switchers receive their pickup and handling instructions by wireless transmission to an Intermec computer mounted in the cab.
Supervisors also are notified of arrivals in real time on their handheld Intermec wireless computers. Supervisors use the computers to view all work activity, redirect resources, and make updates as needed.
Switchers deliver trailers to the designated dock door for handling. Workers then use an Intermec reader tethered to a wireless computer mounted near the dock door to scan a bar-coded number label that is applied to each item in the shipment.
The scan triggers an inquiry on the dock and yard management system that matches the number with the manifest records. Dock door workers then receive handling instructions without having to read through pages of manifest and customer information.
The scan also saves significant time previously required to enter data into Old Dominion's host system. Once information is in the host system, it quickly becomes available to customers through web-based applications.
The dock-door computers and scanners help get trucks loaded and back on the road quickly. Every number label is scanned as the item is loaded onto the truck. The scans automatically build a shipment manifest record, which eliminates the time and labor required to key-enter the information. System software verifies that each scanned item is part of the shipment and sends an instant wireless alert if there is a mistake.
Old Dominion is saving more than 50 cents per bill using the system.
The Power of Information
The point of all this trucking technology is simple: carriers deploy it to streamline operations and cut costs while at the same time providing better service to customers.
"Having real-time information helps us cut transit time and improve visibility," says Old Dominion Vice President Chip Overbey. "That's where we start providing real value-add for our customers. If they can go from holding five days of inventory to two days, it lowers their inventory costs, improves their cash flow, and starts to reduce their overall cost of goods."
That's a powerful solution indeed.