Crain’s Roundtable on Logistics Automation
Improving Back-Office Efficiency
Recently, HubTran’s Vice President of 3PL and Brokerage sat down with industry leaders, Haley Evans (Vice President at TriumphPay) and Michelle Potter (Senior Director of Strategic Development at England Logistics) for an insightful panel conversation — hosted by Crain’s Chicago Business — on automation in the transportation and logistics industry’s back office.
It’s been said that back-office efficiency makes winners (and losers) in the transportation industry. As today’s COVID-19 environment puts further stress on freight brokers seeking growth and cash flow, three logistics executives involved in various aspects of back-office automation shared their current insights with Crain’s Content Studio.
How does improving back-office productivity help companies be more competitive?
Michelle Potter: Back-office productivity touches numerous aspects of a company’s P&L, and the healthier your financial statement, the more competitive you’ll be. Eliminating waste and redirecting payroll to revenue-generating functions will help you grow. The speed in which you collect outstanding receivables dictates how quickly you can reinvest and put your cash back to use. Audits can be performed more quickly through back-office automation, allowing for quicker invoicing and collections.
Haley Evans: Technologies or processes that improve companies’ back-offices can re-allocate employees to revenue-generating activities, thus reducing their back-office overhead.
Joshua Asbury: Poor back-office productivity is a leak in the revenue bucket and comes at a significant cost. If you aren’t acutely focused on being cost-competitive, your company is not going to be successful. Gross margins in the transportation industry are going down because of automation, and if you’re not leading the charge, you’ll be left behind by companies that are innovating and can profitably handle lower gross margins.
What’s the biggest productivity time-waster that you see in back-office, and how does your company help address it?
Asbury: Eighty percent of back-office work is wasted effort and shouldn’t be done by humans. There are many contenders for the biggest time-waster, but the worst is probably data entry. If you still have people doing data entry for carrier invoices with no plans to change, there’s a good chance you’ll soon be out of business. HubTran’s artificial intelligence is both faster and more accurate than human beings. We automatically pull all of the data from incoming carrier documents and reconcile it against data that lives in the 3PL transportation management system. You shouldn’t have humans doing this work; you should deploy them to meaningful work that can’t be automated.
Evans: In transportation, there’s so much back and forth communication among brokers, carriers and factors via phone and email verifying loads and confirming paperwork; this time-waster could easily be eliminated if everyone had access to the same data. Our online portal streamlines this information and provides access to all parties so they can see their loads and invoices. This allows factoring companies to quickly verify a load without having to pick up the phone. Also, it allows carriers to see which loads they’re factoring and which ones they aren’t so they can always keep track of their payments. Lastly, it reduces phone calls to brokers, so they can focus on revenue-generating activities. When we manage payments for a broker, we completely take over the phone calls from their factors and carriers, allowing them to spend more time with their customers.
Potter: The transportation industry in its current state is incredibly paper-heavy. Each shipment can generate vast amounts of documents including bills of lading, delivery receipts, rate confirmations, weight receipts, letter of assignments and more. Each document has to be reviewed and audited to complete the cycle through billing, collections and payables. To streamline these processes—eliminating both waste and error—we’ve implemented optical character recognition technology along with artificial intelligence to facilitate translating, auditing and document typing paperwork. By automating these repeatable functions we’re able to manage by exception and therefore quickly fund our factoring clients, pay our carriers and improve cash flow.
What types of customers do you serve, and how do they benefit from your products/services?
Evans: We serve both brokers and carriers by facilitating a broker’s QuickPay, which is when a broker provides a carrier with payment options such as being paid earlier than the typical 30 days. We also provide supply chain financing so brokers can better manage their cash flow and liquidity position; this has never been more important or helpful for brokers than in the current market. For carriers, we provide an online portal where they can elect the early payment term, see all of their invoices and payments and change their payment method. We strive to provide a premier payment experience for brokers and carriers, so that carriers get paid efficiently and on time, and brokers have less back-office labor dedicated to payments.
Potter: We offer a variety of products and services for trucking companies and drivers ranging from maintenance to support. We provide access to factoring services, nationwide discounts on fuel and tires, maintenance programs and freight opportunities. Our factoring services provide customers same-day funding for completed shipments, credit checks on potential shippers and brokers, and back-office support functions such as billing, collections and cash applications. Our fuel card program allows customers to receive discounts at over 550 fueling locations. Our tire program enables customers to purchase tires at a discounted price across the country. We also offer a maintenance program that provides savings on parts and services with service stations nationwide.
Asbury: We serve 3PLs, brokers, factoring companies and international freight forwarders—saving them money by automating routine back-office tasks. For every fifty cents a customer spends with us, they get one dollar in cost savings. Whether they’re processing 5,000 or five loads a day, our customers see immediate returns on their investment when they automate their back-offices with us.
How can companies identify areas where automation can increase productivity, and ensure that it’s worth the expense?
Evans: The easiest way to see if automation can increase productivity is to look at tasks that occur over and over again. Is there much variation to what someone is doing, or is it pretty much the same process? Are any strategic decisions being made? If so, what percent of the time does a decision need to be made, and does that mean you can at least automate part of the process? Once you’ve identified some areas you think you can automate, calculate how much it costs to have employees manually performing that task. Next, identify whether it’s a problem to be solved by IT or a process-enhancement project. If it’s an IT project, consider whether you have the tools and resources in-house to take this on, and what other IT priorities might be ahead of this one. If building it in-house isn’t an option or it isn’t a priority right now, consider outsourcing. If solutions exist in the marketplace that you can integrate with quickly and would cost less than the number of employees currently performing this manually, then your cost is less than your benefit to implement.
Asbury: If you have people hitting a keyboard all day, you can automate. If you’re doing anything with documents, you can automate. With very few exceptions, you’re going to save money in the long term by automating repeatable tasks. 3PLs need to look at how many loads they ship in a day. Divide that number by the number of accounts receivable and accounts payable people they have. If it’s close to 75—the industry average—they should be able to easily justify the expense of automating because they’ll quickly recoup that investment. If they’re over 300, they’re doing OK. Competitive 3PLs are now processing over 300 loads per person per day.
Potter: The first step is to ensure you have the right key performance indicators. For roles such as customer funding, invoicing and payables there are a vast number of metrics that should be consistently measured. Examples include days to invoice, number of rebills, cost per transaction, invoices per rep and funding time. Once you understand where you are, you can start benchmarking against the competition, review white papers and work with technology partners to understand the opportunities that exist. It’s critical that companies continue to evaluate the return on technology investments and process changes to quickly course correct and justify expenses.
As a company automates its back office, how can it address issues such as training – especially with a remote workforce – job insecurity and continuing its company culture?
Potter: Having a culture that embraces change, continuous improvement and service excellence can help overcome perceptions of job insecurity in the face of technology advancements. It’s critical that your employee group is a force for change and the ones sounding the trumpet when it comes to recognizing opportunities for improvement. What better way to demonstrate your value to an organization then to promote solutions that improve a company’s competitive edge? The current work from home environment creates both challenges and opportunities as it relates to implementing new technology. Probably the most challenging issue to overcome is training. Messaging, communication and support are critical. A misstep in any of these areas can doom a project from the get-go, in terms of both internal adoption and customer experience. From an opportunity perspective, out-of-the-box thinking is running rampant. Processes that have always been mindlessly embraced may no longer be plausible. Demonstrating to your customers that you not only survive—but thrive—in difficult circumstances can create huge wins.
Asbury: Jobs are going to change. When you automate, you’re moving from repetitive, clerical, menial work to something that adds value, requires judgement and poises the company for growth. People worry about job security on an individual level, but if your company isn’t rock-solid on automation, everyone’s job is at risk. Training people for process changes required for automation is easy if your company culture is built around innovation and growth. Your team will embrace change and work to execute on overall corporate improvements. It’s not uncommon for us to train a customer team on Monday morning and have them go live on Monday afternoon.
Evans: A company should always be focused on its culture and providing employees with career paths and different opportunities to work within the organization. If an organization is focused on continuing education for their employees and helping them grow within the organization, there should be other opportunities available if an employee’s job is outsourced or automated. For a remote workforce, it helps to plan different things throughout the week to keep employees engaged and informed. We have a company meeting every Monday morning to provide updates about both the company and what’s going on in the industry. It’s also a fun time to recognize teammates publicly. Some industries and companies have been slowly shifting to remote work for a while. So while the immediate jump to remote work was jarring for some, many managers are seeing how productive and happy their employees are working from home. If you hire right and build a solid team, your team will continue to strive for that success whether at home or working remotely.
How can automating back-end processes improve relationships between a company and its business partners?
Evans: Automating back-end processes makes a company leaner and more efficient, so it can provide excellent service to its clients. In addition, the company can be competitive on price and provide increased value to clients. Showcasing that you’re ahead of the curve in adopting efficient methodologies and IT solutions shows your business partners that you’re committed to excellence and best practices, and improves your reputation and brand.
Asbury: Carriers want to know that the invoice they sent is good, and if it has an issue, they want to know right away. They don’t want to jump through hoops or change processes to work with a broker or 3PL. They just want to give 3PLs the proper paperwork and get paid. If 3PLs can’t do that in a timely basis, their carriers won’t be happy and will gravitate to others that are easier to do business with. And on a related note, shippers hate getting invoices that are incomplete or inaccurate. Automation helps remove that as an issue.
Potter: By automating back-end processes, a company can improve turnaround times on critical processes and heighten communication between customers and key vendors. Those two improvements strengthen relationships through greater trust and operational performance.
In what ways has the coronavirus pandemic impacted your business?
Asbury: Transportation companies that haven’t modernized their systems scrambled to deal with the remote work requirements forced on them by COVID-19. If their enterprise applications aren’t cloud-based, it’s a tough situation. Team members should be able to work from anywhere. If they require multiple monitors, printers and a lot of verbal coordination to get work done, that suggests they don’t have the right application architecture. Since we’re cloud-based, we help teams effortlessly organize and track their work. Customers feel they’re well-positioned to manage through this crisis because their team members can get their job done anywhere they can access a computer. Also, we charge our customers based on the number of transactions they process in our system. In March, our revenues increased because our customers’ revenues increased. In April, our revenues decreased because the overall freight market softened. We share the burden and live and die by our customers’ revenues. Fortunately, we’re continuing to grow our customer base as more companies are automating their back offices. As I’m writing this, we’ve onboarded four new customers this week, including Ascent Global Logistics.
Potter: The largest impact on our business has been supply chain disruptions limiting the availability of freight for our carrier clients. Due to our breadth of services we’ve been able to maximize opportunities for these clients by identifying freight opportunities through our truckload brokerage business. We’ve also been able to help our carriers manage costs through our tires, fuel and maintenance discount programs while also helping to facilitate cash flow through our factoring service. Finally, we’ve provided our customers with technology that’s allowed their office staffs to submit invoices electronically while working from home.
Evans: Because we offer supply chain finance, when the pandemic hit and many brokers were impacted by extended payment terms, we were able to provide our clients with liquidity while still paying their carriers on time. Our ability to step in and make sure that the financial piece of a client’s business still works has freed them to focus on other COVID-19 impacts.
How is back-office automation helping the transportation industry transition to the next phase of the economy?
Potter: Game-changing solutions that have been brewing for years prior are now becoming a reality. Customers are demanding quality, speed and efficiency as they work to meet their product and service objectives. Incorporating solutions that allow employees to direct their efforts to more meaningful and gratifying tasks helps drive job satisfaction and further employee engagement. Much of today’s workforce grew up in the age of technology, thus shifting work environment expectations. Companies that aren’t embracing those changes will find themselves less competitive when it comes to recruiting creative and solutions-orientated employees.
Evans: As we start to see more digital brokers and VC money enter the 3PL space, back-office automation is helping traditional brokers stay competitive and on the cutting edge of what newer companies are starting to do. Brokers and 3PLs who’ve been successful over the last 30 years will need to quickly adopt new technology to stay competitive and continue their success.
Asbury: Every area of waste and cost needs to be scrutinized. COOs and CFOs will be the heroes of the second half of 2020 and beyond as they ensure their companies are operating as efficiently and profitably as possible. Automation will ensure that the transportation industry comes out of this crisis leaner and better able to efficiently deliver critical goods around the world. This cycle will be defined by artificial intelligence and machine learning as companies now have the data, insights and tools to understand where they’re wasteful and what they should automate.
What new automation expectations or challenges do you expect in the near future, and how is your company preparing for it?
Asbury: Back-office issues have become a focal point in transportation. We’ll continue identifying hidden costs and eliminating them through automation. For example, payables people and dispatchers constantly get phone calls and emails about invoice and payment status, which they end up manually fielding. We’re automating that away. No other company thinks about these things, and no one else is focused on developing solutions to eliminate hidden costs like these.
Potter: The transportation industry lacks a seamless process that checks all of the boxes related to the entire shipment life cycle. As the industry steers toward digital processes, we’re partnering with technology companies to close the gaps with streamlined solutions for customers and carriers. We’ll continue to evolve our solutions beyond our current offerings including digital freight brokering, tracking automation, fuel route optimization and digital paperwork submission and processing. The quicker we provide quality solutions, the better value for all parties involved.
Evans: Our industry relies on consistent cash flow, and that’s never been more apparent than now with the impacts of COVID-19. We strive to pay the carrier as quickly as possible on behalf of the broker, and in the future, we’re anticipating that carriers will want to be paid even faster, as soon as they complete a load. With this expectation, we’re working with other industry leaders to further streamline the paperwork process for brokers and allow carriers to get paid as fast as possible. Providing an excellent low-touch experience for brokers and carriers is our goal, and we’ll continue working to make that as efficient as possible.