Freight costs often represent a significant percent of a manufacturer or retailer’s expenses. While many companies have highly qualified CFOs and VPs of Logistics or Transportation, the management of freight costs is often sub-optimized. This appears to be a result of a lack of collaboration between these executives with each having a different set of metrics and perspectives. Here is my take on why this is happening.

Business Strategy versus Transportation Strategy

CFOs are focused on the strategic direction of the business, on earnings, cash flow and return on invested capital. They are under pressure to reduce the amount of inventory tied up in supply chains. To a CFO, lean inventory means “reduction in working capital tied up in inventory.”

VPs of Logistics and Transportation are preoccupied with efficient supply chains. Leaner inventories mean smaller production lots and faster transportation, which can command premium rates since they preclude the use of cheaper, longer-transit modes, and may even require paying a premium for expedited freight. On the inbound side, this can cause plant or production line shut-downs due to lack of raw material or parts. On the outbound side, it can lead to empty shelves or the loss of a customer and its associated revenue stream.

Inventory is a component of working capital. Investors look at the levels of capital tied up in the supply chain – the lower the better. However, if you take your inventory, and therefore working capital, too low, your profit margin may suffer.

Different Perspectives on the Strategic Importance of Transportation

CFOs are intimately involved in evaluating new business strategies. Business acquisitions can lead to production overlaps and duplicate supply chains. Expansion to a new market may require the costly creation of supply lines that don’t exist. Reducing order-to-delivery cycle time to achieve a competitive advantage means faster, more expensive modes of transport.

Too often, however, transportation is an afterthought in these evaluations, despite the fact that freight costs can significantly impact the viability of new business ventures. Evaluating the payback on new business strategies requires an accurate read on transportation costs, which can account for a good chunk of a manufacturer or retailer’s operating costs. This demands that the CFO have a more granular understanding of these costs and how they are determined. Unfortunately, a lack of clear communication between logistics and finance can result in an incorrect financial evaluation and adverse financial consequences.

Another area where CFOs and VPs of Transportation may differ is whether or not to outsource the logistics function. Outsourcing transportation to a logistics company – one that provides the required people, carrier capacity, warehousing and IT systems – helps convert fixed costs to variable costs. The asset-light approach to transportation may also help reduce personnel costs, lower SG&A expenses, reduce or eliminate insurance costs, improve return on assets, gain fast access to extra capacity to support unplanned or future growth or facilitate the reduction in capacity in case of a business downturn.

However, the decision to outsource transportation demands a certain level of expertise in the selection of an outsource provider, and in putting controls in place to ensure customer service levels are maintained. Also, the true costs of a dedicated fleet may not be fully allocated. For example, the outsourced fleet doesn’t always have its own insurance and may just be piggy-backing on the corporate insurance policy. Finally, if the transportation function is outsourced, will the company retain a minimum level of management expertise to provide proper oversight?

To sum up, reductions in working capital related to inventory carrying costs should be balanced against the potential for increased freight charges and lower customer satisfaction levels caused by stock-outs. CFOs need to work closely with their logistics colleagues to figure out what level of in-house and outside assets will best serve the company’s needs. To make this decision, it’s critical to understand the total cost of owning transportation-related assets, such as a truck fleet or software system and the value-added from carrying a full-time professional and administrative staff. CFOs need to collaborate with their transportation counterparts to understand the true cost of transportation and the impact of these costs on the viability of various business strategies.

Many of us receive information from multiple news sources on a daily basis. You may start your day with the morning newspaper in hard copy or on your iPad, Kindle or Kobo. If you are in the transportation industry, throughout the day you are likely receiving trade magazines in hard copy and/or digital form, news feeds and white papers from various sources, updates from your LinkedIn groups, Twitter feeds, Facebook updates and of course dozens or even hundreds of e mails and text messages. Of course many of us have interests beyond freight transportation that may include Business, Investing, Sports, Technology, the Arts and/or a range of other topics. Trying to stay abreast of the news in these areas can often result in another set of publications and news feeds. The management of information can be quite a challenge.

Using software developed by paper.li, I have tried to make life easier for transportation professionals. Dan’s Transportation Newspaper is published daily, 7 days a week, 52 weeks a year. The primary focus of the paper is freight transportation. Stories on truck, rail, air and ocean shipping are included. Since many of us are keen students of Business and Sports fans, the scope of the newspaper includes important stories in these areas.

The freight sections include stories from the Journal of Commerce, Transport Topics, American Shipper, Logistics Management and from other American and Canadian sources. The Business section contains features from the Wall Street Journal, Harvard Business Review, ISM, The Economist, Report on Business and other leading publications. The Sports segment provides articles on the NFL, NHL, MLB, NBA and the CFL. There are 25 major news feeds that supply articles to the newspaper on a daily basis.

Busy transportation professionals can now obtain the latest news in all of these areas in one daily newspaper. The good news is that there is no charge.
Here is a link to the paper. http://paper.li/DanGoodwill/1342211466?utm_source=subscription&utm_medium=email&utm_campaign=paper_sub

If you are interested in obtaining a free subscription, just click on the link. Over the coming weeks and months, I will be monitoring the quality of information supplied from each news service. As improvements are made to the software, they will be incorporated into the newspaper. Watch for daily editorials and other value added features such as a “Discussion Corner” in the future.

For those of you who do subscribe, please send me e mails to let me know what you like or dislike. They will be most welcome and every effort will made to refine the newspaper on an ongoing basis. I hope you enjoy the format and the content.

A well-developed sales pipeline is a key component of any well managed sales management system. When properly utilized, the tool is an invaluable resource in measuring the number of quality leads in the system, the true number and dollar value of prospects versus suspects, the number of proposals submitted, the number of verbal commitments and the number and dollar value of signed deals. It is extremely useful in evaluating the effectiveness of individual sales reps and of the sales team as a whole.

As the utility of social media becomes well understood, skilled practitioners of sales management systems are beginning to take advantage of its value. Social media can play a key role in every facet of sales pipeline management.

Lead Generation

Individuals and companies that are active social media participants are likely to generate leads, some anonymous, from individuals who visit your web site, participate in a LinkedIn group, respond to a question on LinkedIn or who follow your tweets. The key is to set a plan in motion to provide quality thought leadership on a consistent basis, to make useful white papers and other material available “free of charge” and to create a process of generating and identifying quality sales leads.

Turning Suspects into Prospects

As suspects appear, this should trigger a well-defined process to convert these suspects into prospects. This must be done with skill and finesse and not in a crass direct sales approach. With a minimal amount of work, you can find the individual’s twitter address and LinkedIn groups. This will tell you the individual’s interests and point of view on specific issues. You can follow the person’s discussions with others and get a sense of buying intent and motives.

Armed with this information, you can engage the suspect in a dialogue on the topic of mutual interest and steer the conversation in a meaningful direction or back off if there does not appear to be a fit between the needs of the individual and your service offerings. Qualified prospects can then be targeted with a multi-media strategy.

Keep in mind that before the advent of social media, there was no way to “flush out” and identify these potential prospects. Effective management of these opportunities can help build a more robust sales pipeline. Failing to employ social media in the sales process leaves your company vulnerable to competitors that are savvier in this area.

Sales Opportunity Management

When a lead is qualified, social media can then be effectively employed to move the lead through the sales pipeline. To take the prospect across the “finish line”, there is a need to strengthen your personal and business relationship with him or her. This can be done in several ways. It is important to look for signs of “sales readiness” of “sales anxiousness”. Some people come online and need help immediately. In the transportation industry, you see customers that have freight to move immediately. This demands quick action. To enhance the odds of success, there is value in alerting other members of your team and in trying to arrange a face-to-face visit with the prospect.

Once you establish some level of rapport, one method of relationship building is to invite them to join your LinkedIn network. For many, but not all people, this sends a message that you are welcoming them into your inner circle of colleagues. If you run your own LinkedIn group, you can send them an invitation to join this as well.

Build Customer Engagement and Loyalty

Those of us who have been in sales a long time know that the time of the first/second purchase decision is a critical one. The prospect has crossed the line and become a customer. The individual will be comparing your company against the one that he or she just left. A few mishaps can send the customer running back to his former vendor.

Therefore customer engagement becomes very important, particularly at this stage. Certainly it is essential to monitor your new customer’s comments on social media. Does he or she give any hint of satisfaction or disappointment? Careful nurturing on a personal and social media basis can help take these relationships to a new level. As satisfaction turns to loyalty, this can be affirmed by obtaining a LinkedIn recommendation (which may leave the customer vulnerable to competitor poaching). Over time, if the business relationship becomes a personal relationship, he or she may warrant an invitation to become your “friend” on Facebook.

The use of Social Media in sales pipeline management is still a “work in progress”. However, the potential is very apparent. Laggards run the risk of leaving excellent sales opportunities available to their competitors that are more advanced in social media utilization.