August 2006 | Commentary | IT Matters

Technology Smooths Transportation's Bumpy Ride

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We've come a long way from the horse-and-buggy era when a transportation company's biggest expense was feeding horses.

Today, fuel costs nibble away at profits, and the transportation industry's operational base is severely threatened. Fleet owners, as well as less-than-truckload (LTL) and delivery companies, face increased manpower and fuel expenses.

Currently, the U.S. national average cost of diesel fuel is nearly $3 per gallon, and fuel costs for the industry are expected to hit a record $98.3 billion this year, according to the American Trucking Associations.

Solutions to the fuel crisis have been proposed at the legislative level. California, where fuel costs top the national average at $3.24 per gallon, is spearheading a push for tougher fuel economy standards to hold back escalating prices. The state's legislature also hopes to require all diesel sold in California to contain at least 2 percent biodiesel by 2008.

Most of these solutions, however, are long range and fraught with political concerns. And transportation companies cannot simply raise prices to stay ahead of costs. At some point the cost of delivery and its real-time value will become unbalanced, causing major disruptions.

What the transportation industry needs are solutions that help streamline operations and costs so carriers can be profitable and competitive. Practical logistics technology that is affordable, easy to implement, and cost-effective for organizations of all sizes is the answer.

Companies are increasingly turning to logistics technology to mitigate the soaring costs of doing business.

One mid-level LTL carrier, for example, struggled with an inefficient manual dispatching system, which forced costly delays and excessive dispatch traffic. It implemented a route planning and automated dispatch system integrated with a wireless, GPS-enabled phone system, and saved 16,415 gallons of fuel this year. At nearly $3 per gallon for diesel, that's a cost reduction of almost $50,000.

Of course, logistics efficiency should go beyond merely reducing fuel consumption. Implementing a logistics software solution enabled one Midwest transportation company to better utilize manpower and equipment resources, providing more stops per man-hour.

A few crucial technologies enable these scenarios to become everyday occurrences in the transport industry, including the Internet's use as a tool for carriers, shippers, and receivers.

Many carriers, for example, offer shippers access to order status, delay, and proof of delivery information on their web sites.

GPS systems are another key transportation technology. When integrated with route tracking to enable real-time route planning, these systems allow companies to easily make shipment, load, and delivery changes, and keep dispatchers, drivers, and customers informed and up to date.

These systems allow freight companies to reduce the burden on their customer service departments, while making deliveries more efficient and inevitably more precise.

Regardless of your fleet or carrier's size, technology will play an increasing role in fuel economy, efficiency, and profitability. Costs for technology solutions have dropped considerably and customized tools are now readily available.

Businesses must look to transportation technology as a practical, cost-effective solution to increasing capacity and income. Without it, they will be stuck in the horse-and-buggy era.

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