BY LOUIS BIRON

Cost Savingsin Your Back Office

20 IT MAGAZINE Vo l . 10 , No . 2

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Integrated Dispatch-Accounting Phase

This is where you start using your dispatch software to automatically enter data into your QuickBooks. Hopefully the original dispatch system is up to the task. If not, you need to start from scratch. At this point all your systems should be talking to one another, and if you let the systems run, you should be able to get rid of a lot of the internal paperwork. Companies often look for customized software to fit their particular needs (there is always someone who thinks that their company is so different from all the other brokerage companies out there that they need customized software). The decisions made at this point can make or break a company’s future. Choose the wrong software and you will be stuck with it for a long time.

Unfortunately, this is where most companies make a common mistake, so common that most Enterprise Resource Planning systems make it. The software customization/selection is made by the people who use it. So you might say shouldn’t they be the one knowing what they need? Here is the typical scenario that we encounter regularly when discussing implementing Stratebo, our home-grown integrated solution, with potential customers. The primary concern of Mary in the shipping department is to ensure that Mary stays in the shipping department so any solution that she helps develop/install cannot threaten her employment or that of her friends. So when a company embarks on a big software project, savings are often elusive for that simple reason. In practice if you look at most integrated systems, you can still see the paper trail. In fact, I have often seen where people will print the documents at various phases just so they can have a physical signature/approval before passing it to the next department. There is so much money left on the table it is not funny. But there is often a lot of institutional resistance over this. I must say that all is not bad with this approach. A company should be able to grow gradually and keep a handle on things.

Total Paper Phase

There should be very few companies still operating at this level but to this day we still receive here and there hand-written carrier bills. And don’t forget mechanical faxes that are still in operation. I guess they still sell them.

So at the Total Paper Phase, there is no computer or smart phone usage beyond the actual phone function.

I don’t think that I need to dwell on the fact that there cannot be hope of growth in this day and age while a company is at this stage. Luckily there are plenty of tried and tested tools that can push you to the next phase.

Standalone Quickbooks Phase

This is when your accountant is at wit’s end and declares that you can’t keep doing things like this anymore, you have to automate. So from the accountant’s point of view, QuickBooks (or similar package) is the ideal solution.

All of a sudden you can generate invoices that are a step above hand written.

I say only a step because although I feel sorry for my vendors when I see a hand written invoice, when I see the very recognizable QuickBooks invoice I don’t feel much better for them, either. The problem with this phase is that QuickBooks makes life easier for your accountant, but it does not do much for the rest of the business and so the paper pile keeps growing.

Quickbooks + Dispatch System Phase

So now you get yourself a dispatch system. At first you get a simple one. The benefits are so big compared to pen and paper that you now feel you have arrived. When we bought our trucking company, we were at this stage. With these tools, if you use them fully you will be able to manage complexity up to a point. I have seen fairly large trucking companies and brokerages operate at this stage. If your margins are good enough you can actually grow your business, but what you will find is that your back office will grow as fast if not faster than your business. At some point someone realizes that these systems need to talk to each other.

“At this point all your systems

should be talking to

one another, and if you let the systems

run, you should be able to get

rid of a lot of the internal paperwork.”

“The benefits are so big compared to pen and paper that

you now feel you have arrived.”

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Scalable Business Model

I often get asked what is a scalable model/business. In simple terms, if you can grow the revenue without proportionally growing your expenses, you have a scalable business. A simple example if you wrote an app for a smart phone. Once the app is in the store, whether you sell 10 or 10,000 your cost is going to be about the same: That is a scalable business. Of course we can already hear, “But I have a trucking company not a software company. That does not scale.” Not true.

Internal Scaling Phase

First, you need to eliminate all internal paper. Paper is the enemy of scaling. Here is the simplest example, in our earlier days, we used to make a copy of all the invoices before we mailed them to our customers. We had a significant part of our office space dedicated to storing these paper files. This cost just kept growing along with the company.

Now that invoices are generated electronically, and all PODs are kept in the Cloud, our storage cost is down to couple of dollars per GB per year, which is an order of magnitude cheaper than square footage.

Here is a simple question you can ask yourself to see if a particular function is scalable, “If next month we triple our volume do I need to hire someone?” If the answer is, “Yes,” look at what is the first place where you think your system would break and that is where you need to rethink or automate your process.

External Scaling Phase

Second, you need to eliminate external paper. Here is an example: when we started we would print checks out of QuickBooks, sign them, fold, mail, and stamp. Eventually we got the data entered automatically into the accounting package and the checks printed out pre-signed in batches. But we still needed to fold, stamp, and deliver to the Post Office. So as volume grew, the number of envelopes kept growing so not scalable. So we integrated ourselves with an external vendor that prints checks for us. Now, whether I have one check or a thousand, the cost and effort on our part is the same that is scalable. Another example is contracts. We long ago went paperless but we still needed to process the email or fax that came in with the signed contract or insurance, now our software automatically posts the contract to the system and shares the news with everyone who needs it. Cost of generating, sending, receiving, posting a contract or insurance is almost $0. Now that is scalable.

Here is a simple example. I used to have

a rule of thumb when we ran a trucking company,

for every $250,000 of revenue I needed one rig costing $125,000 but if I used owner

operators with their own rigs I could get $250,000 of revenue without any additional fixed costs.

All of a sudden this is scalable. I realize there are other considerations that come in play, but we followed that logic to its conclusion sold all are equipment and became a pure brokerage. But let’s assume you want/have to own your own equipment, this does not mean that you can’t scale your back office. As we saw in the previous phase the integrated system allows you to grow your business but not to scale it.

Louis Biron is CEO of Stratebo Technologies. He earned his B.Eng. at McGill University, his MS in computer design at the University of Montreal and his MBA at HEC in France.

So we have covered the various phases that a company can go through to tame costs and position itself for scalable growth. In practice most companies are stuck in non-scalable phase. This can be due to internal politics (one of our vendors who shall remain nameless never ceases to amaze us how the employees manage to get themselves in the way of their software) or just a poor choice of software. Fortunately, you can now get a fully integrated system out of the box for brokerages and shippers alike without even needing much of a back office at all.

“...as volume grew, the

number of envelopes

kept growing so not

scalable. So we integrated

ourselves with an external

vendor that prints for us.”

22 IT MAGAZINE Vo l . 10 , No . 2

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