There are many reasons why organizations chose to review their Logistics program in 2018: rising transportation costs, proposed tariffs on imported goods, a reworking of NAFTA, an uptick in manufacturing, and an overall increase in economic activity brought on by low unemployment and renewed consumer confidence.
As freight issues and transportation spend are put under the microscope from the C-Suite, it is the perfect time to review your Logistics Technology and make an update.
Below are the 9 most common objections to updating Logistics Technology – Debunked!
Total Cost of Ownership (TCO) is Too High
While it is possible the total cost of ownership is too high if you bought a full ERP with every add-on, there are plenty of options available for every budget. With solid research of what is available and what your business needs, you can find a solution that not only fits your budget, but actually gives you a return.
Investing in a Transportation Management System (TMS) will pay for itself if you choose the right system and maximize all of the opportunities that accompany it. If your company already has a TMS; is it time to evaluate its performance, update it, or replace it all together?
It is also important to remember that some TMSs are standalone products whereas some are packaged with logistics management companies who will offer the software for free or at a reduced price if you let them negotiate your freight or provide some other services such as invoice processing.
There are a lot of opportunities to make the TCO affordable.
There are many new technologies available such as smart warehouses and tracking chips. When you are ready to upgrade your technology, solving your current frustrations is only half the battle. Your solution also has to have room to grow with your organization.
Technology is evolving exponentially, so make sure your solution includes something that will not be obsolete in a year or is already on the brink of being obsolete. With technology, it isn’t always how long a company has been in the game; what matters is how much longer they will stay relevant.
Implementation is Too Difficult or Lengthy
One of the best things about the newest technology is the focus put into the user interface and the user experience. For decades, new technology was difficult to understand, learn, and use (I am reminded of my first home computer and how many frustrating hours it took me to hook up a dot matrix printer).
New technologies are increasingly easier to use because the market has demanded it – this helps tremendously with the implementation schedule.
In addition to new technologies being developed with the user in mind, they are also increasingly intuitive. Newer pieces of software are programmed to automatically choose the next most logical step rather than waiting for a command.
The elimination/reduction of manual inputs necessary from users, creates less interaction points that users have to navigate, thereby decreasing training time and overall implementation time. Its a simple cost-benefit analysis.
Our People Aren't Prepared for the Change
Users are better prepared than ever to use new technologies. While many people may resist changing software because they feel like they just figured out how to use the existing software; there is now a learning curve.
Learning a new version is not like starting from the beginning. We retain the knowledge learned from using the first version and carry that to learning the next version and so on.
The majority of people in the workforce in 2018 have used many pieces of hardware and 100s of applications or pieces of software. The history of using all of this different technology makes learning new technology easier because it is building on an existing skill, not building an entirely new skill.
It is likely that your employees are more inclined to learn new software than even they may realize and their resistance shouldn't keep you from making the best business decisions. All it takes is a little push in the right direction.
We Don't Know if There is a Product Suited to Our Company
Advertising teams have damaged the credibility of television and radio commercials, billboards, and print ads. Outrageous claims, exaggerated results, and misleading information has created a class of consumers who are rightfully skeptical of every product.
Additionally, most organizations trust the employees they have in place. When the Director of Logistics or Transportation Manager tells the C-Suite they are getting the best rates and have a solid routing management plan, the C-Suite is inclined to believe them.
Trust in a relationship is a good thing, it is important to have the benefit of the doubt among colleagues. However, many people are ignorant in the realm of shipping which creates a blind spot in their logistics program.
The best chance of uncovering these blind spots is undergoing an external audit.
We live in the information age, technology age, and review-obsessed age. The vast majority of people consume at least five pieces of content before making a major purchase – follow that practice. Spending an extra 10-20 hours comparing the final three TMSs can save your organization thousands.
Some other best practices for choosing a TMS include:
- Seek out customers who use the technology you are considering and interview them.
- Read case studies about the product; they are often the most telling information on how the company approaches problems and provides solutions for their customers.
- Research the company on social media, read their blog, sign up for their newsletter. If that company is regularly putting out quality content, there is a better chance they truly are industry professionals and aren’t afraid to show it.
We Might Lose Our Negotiated Rates
Negotiating freight rates is tough business. The professional responsible for negotiating rates at every organization takes it seriously and does not want anyone stepping on his or her toes. To even insinuate they didn’t get the best possible rates can ruffle their feathers. However, there are a few reasons that having a 3rd party negotiate rates often yields better outcomes.
- There is often a good relationship between the carrier Rep. and whoever is in charge of negotiating the rates for the company.
- Negotiating power increases with the amount of freight. Someone managing $1MM in freight will not get as good of rates as someone managing 20MM in freight – or a 3PL managing $100s of millions in freight.
- Big Data also plays a pivotal role. The ability to see trends over years across multiple lanes aids in negotiations.
The results from using a logistics and technology company to negotiate rates is only one part of the equation. There are also the results gained from upgrading technology to consider. Many companies are still managing their shipping with paper and spreadsheets. It works for them and change averse people like to stick with what works, but so often there truly is something that works better.
The ARC Research Group says a company can expect an 8% savings in freight costs just by installing a new TMS. If your annual Transportation Spend is $10MM and you purchase a new TMS for $100,000, the ROI is $700,000 in the first year. That is an easy to receive, substantial return.
We Have Issues with Human Capital Management (HCM)
People are the backbone of every organization. There are a few prevailing views of technology and they are generally based on perception: technology increases efficiency and safety or technology hurts humans by automating once manual tasks thereby taking jobs.
Of course, both views have merit and both views require consideration when the idea of bringing in new technology emerges. There is a very real discussion that must happen about the effects a new technology will have on the existing workforce.
“Will we have to lay off people?” This is a difficult question to contemplate. Your people work hard for you, you have a sense of responsibility to them. However, bringing in new logistics technology rarely results in layoffs in SMBs.
More often it does greatly increase the efficiency of those involved in quoting, creating and tendering shipments, routing management, invoice processing, rate negotiations, and various other activities such as managing claims and disputing bills.
The increase in efficiency may allow your transportation department to meet the capacity you needed for growth. The human capital necessary for the undertaking of new projects is now freed up from the increased efficiency, so people aren’t laid off, but their roles are expanded to fulfill new needs.
Conversely, many larger organizations want to reduce their largest expenditure - human capital. Technology can help achieve that. Smart technology has proven results in weeding out inefficiency and the need for redundant middle managers.
Logistics Technology, specifically, is often used by large organizations with multiple shipping locations to reduce labor at satellite locations and execute the majority of non-labor intensive operations from the corporate headquarters.
For example, all of the shipping and receiving employees at the satellite locations remain. However, things like invoice processing, freight negotiations, claims management, and so on can all be centralized to the corporate headquarters reducing the need for individuals at each satellite location in redundant roles.
Will We Have to Hire Someone to Use the New Technology
The flipside of not wanting to lay anyone off is not wanting to hire someone just to operate the new technology you bought. Many large companies choose to hire a specialist who will operate and train all applicable staff on the new technology.
However, as discussed above, most new technology is incredibly intuitive and easy to use. Additionally, software such as a new TMS often comes with support and training built into the sticker price.
Also, there are plenty of 3PLs who are more than happy to roll out a beautiful piece of technology for you, train all your people how to use it, and manage it on the back end – all for free or at a very reduced price if you engage with some of their other services like freight negotiations or invoice processing. There are many advantageous scenarios.
Fears of Incompatible Technology Platforms
Many companies have invested in technology already and may even have an entire ERP helping with various activities. The big ERPs all offer some kind of logistics software as an add on, but they don’t always receive high marks as they are often expensive, outdated or slow to update, not as user-friendly, and lacking in customization abilities.
For organizations who have invested in big ERPs, you aren’t locked into the TMS or logistics software offered by that ERP; you have many options that allow you to have a combination of software solutions that work together.
The majority of new TMSs and other logistics software offerings are compatible with existing applications and platforms. APIs now allow different applications to share data with each other with relative ease. Many software solutions will advertise which ERPs they are compatible with right in their specs, but even if they can’t make a seamless integration – they can often work alongside them and share crucial data.
In the age of technology, there is always a solution.
Carrier Service Level Will Decline
Machines don’t care about people; they simply follow algorithms to complete tasks. It is important to acknowledge this because it is the basis for declining customer service – or could the opposite be true?
Many people will forever have a bad taste in their mouth over the advent of the automated customer service hotline. It seemed like overnight every major corporation in the US switched from having people answering customer service hotlines to having an automated system. These early systems were terribly frustrating.
People often had to re-enter the same information several times and were still never guaranteed any resolution to their problem. The early systems made it difficult to talk to a person if you even could at all. This nightmare technology laid the groundwork for the death of customer service at the hands of technology.
But things are different now.
In an age where consumers can look up any business on their phone and see reviews, consumers better be the number one priority or that business will soon find themselves out of business.
It can be argued that new technology developed and offered now is the opposite of those early systems; it is not developed to ease the burden on businesses at the expense of customer service, but to aid businesses in providing better customer service than they ever could have without the technology.
When discussing customer service in the specific area of shipping there are two relationships: the customer and the shipper, the shipper and the carrier. You buy a personalized thermos from Yeti (you’re Yeti’s customer), then Yeti ships that to you using ABC Courier (Yeti is ABC Courier’s customer). Yeti has to rely on ABC Courier to give them good service, so that they can guarantee to give you good service. It is a unique situation in that if the thermos is late or damaged – you call and complain to Yeti, then Yeti has to call and complain to ABC Courier. Technology HELPS customer service in this situation.
A shipping manager may relish the relationship s/he has developed with the reps at various carriers. There is an open line of communication, problems are addressed quickly, and there is a comfort in knowing a person cares about that relationship. A logistics technology solution such as a TMS does not replace that relationship, it strengthens that relationship.
For example, the TMS will allow the shipping manager to know about problems before they arise allowing them to be addressed sooner and provide better customer service to their customers. Additionally, with big data management capabilities, it is easier than ever for shipping professionals to approach carriers with accurate statistics to reinforce any issues they have brought up to carriers.
Perhaps a specific route has damages 18% more often than other routes, delivery to one region is 12% more likely to be a day late, or pickups on Wednesdays are running an hour behind schedule. Data empowers the shipper to provide better service to their customers and secure better service from their carriers.
Bottom Line – Results
There are valid reasons to delay bringing in a new piece of logistics software, but more often than not a risk assessment reveals there are more reasons to update your technology sooner rather than later.
Results are clear and the market is ripe. There are numerous offerings to fulfill your specific needs and probably one that will positively delight you and your staff.
Objections should never be dismissed, they should be explored. With people having a natural instinct to be change averse, just telling them something new is better is not likely to rally their support. Hearing their objections and then taking the journey of learning about the new offering with them is likely to result in an enthusiastic atmosphere of progress and support.