Gagan Goraya

With the focus on cost cutting during the recession period, all companies are looking ways to stretch a dollar. In my experience, IT budgets in transportation industry are already very tight so many of you wonder if that option even exists.

I have read many articles on cost cutting strategies, and some make perfect sense and are simple to exercise; others however, require a complete shift in the IT strategy along with significant initial investment. Knowing that spending a lot on capital investments might be out of question, my focus would be to highlight strategies that can result in some “quick wins” without changing the entire IT strategy or high initial costs.

Over the next few weeks, I will try to discuss my Top 10 lower you IT expense techniques. Due to the lack of time, discussion will be kept at high level. I will be breaking this discussion into three separate blogs so it is easy to read and digest. If there are any question, comment or feedback please email me, I will try to clarify as much as possible.
Please keep in mind that the importance will vary from company to company based on their environment.

1) Automate time-intensive repetitive processes

In market slowdown organizational focus shifts to business process automation. Simultaneously, managements might be looking for an overall reduction in IT costs. Since both of these cannot be achieved at the same time therefore either we can trim our expectations by shortening IT to-do-list, or maintain IT costs while trying to accomplish more. There are many things you IT department can do to help reduce overall operational costs. Things to keep in mind are that priority should be given to projects with defined objectives; significant returns; and realistic expectations. Any long term projects, which will extend over multiple months, should be kept on hold until business conditions starts to improve.

There are number of administrative tasks that can be quickly automated with little IT support. These types of projects result in quick ROI due to onetime upfront cost resulting in ongoing savings. Some of the examples of time intensive tasks are Time-card entry, POD entry, A/P entry, A/R entry, and so on. Often accounting departments require a segregation of expenses into proper G/L accounts by terminal or cost centre. In many cases, work might be performed at separate physical locations making the business process inconsistent, complex and costly. Automating manual processes that fall in these categories can result in quick cost savings, as well as, help improve the overall business process. In addition, projects like this are not platform specific; they can be programmed into your legacy application or a separate auxiliary application with an interface back to your legacy system.

2) Document Management / Optimization

Document management is abroad topic. This can be a system, methodology, or a process. In all cases, the focus is to create, maintain, and to provide access to electronic documents effectively and economically.
Transportation and logistics industry tend to be highly paper intensive and part of the service offering includes maintaining paper work for suppliers and customers. The key is to take correct approach; one that will allow organization to do it quickly and easily while maintain low costs. There are plenty of cost effective solutions available in the market to support your needs in this area. Most large companies already have some electronic means to capture documents and file them. For those who don’t can easily find local vendors selling document management software. In my opinion this is a key system that every transportation company should have, especially for those who are required to keep documents for a long period of time. When searching for a solution, aside from cost, scalability is also a key factor. A good system will grow as your needs grow, and comes with good vendor support.

The biggest pitfall is that organizations don’t have a defined plan for their imaging system. Most organizations start with a decentralized model where terminals, departments and employees start to maintain their individual repositories of scanned documents. By the time, they seriously start looking for an organization wide solution; there are so many sudo-imaging systems which need to be integrated. To make things easier priority should be to spend time on analyzing individual business requirements before selection of a tool and implementation.

3) Implement an Email Policy

This may be a simple yet very fruitful venture. Email is probably the most useful technical achievement of the 20th century. It has certainly transformed the way we conduct business. However it has also created our business lives very demanding. Although it is not an easy task to control external senders there is certainly something we can do to control number of emails. Promote using phone calls over emails. Ideally if the email message that you are reading is going to take longer than five minutes to read and respond, it needs to be a phone call. In the future articles, I will list the golden rules that can keep your inbox empty.
What can an email policy have to do with cost savings? Well, perhaps not at individual level; however to an organization, an ill-managed email policy can result in significant management costs. You may ask what kind of things an Email policy encompasses. Few of things that can be part of an email policy are:
• Deletion of redundant emails; especially duplicate ones
• items that should be handled by phone versus emails
• Education on who gets CC’d on the emails.
• Limiting number of mailing list within an organization
• Creating rules to delete older items and automatic filing
• Enforcing email quotas

more to follow soon...

Gagan Goraya

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Note: Special thanks to ctl.ca for allowing me to write a blog on their platform, especially Mr. Lou Smyrlis.

4) Centralize IT payment processes

Just like other departments like Finance, or H.R., I.T. services need to be centrally managed. It is critically important to have company I.T. policy clearly established and managed centrally, along with contract negotiations and telecommunication. Now here’s a kicker, one of the best spot to look for savings is in the bill payment area. If you organization is it setup such that all the reoccurring bill payments are going straight to Account Payables; you may want to change it. Just like the old say, “if you cannot measure it, you cannot manage it.” Having these costs go through I.T. allows you to constantly assess your costs, identify discrepancies, manage contract due dates, and look for new opportunties. In addition, having a centralize purchasing group allows organizations to get the best deal as well allows them to establish better vendor relationships. Without it, it would be impossible to proactively manage the expenses that are occurring at each location. Often IT department doesn’t want to get involved in the administration of these types of expenses due to lack of resources. A case can be made to either outsource these activities or manage it in-house with some administrative assistance. There are companies that specialize in this area and can do it in very cost effective manner.

5) Outsource IT

There is a convincing argument that we need to manage key IT processes in house. However, keeping everything in-house may lead to additional costs in some cases. Tapping in external resources to get expert opinion can result in long term cost savings. External hosting, software development and externally managed network services are good candidates for outsourcing. In addition to the cost savings, this allows you to get expert services; it also allows you to start focusing on your business rather than IT. You can take comfort knowing that IT is managed by experts. There is a word of caution when it comes to outsourcing; this is a major undertaking and the cost of change is very high. Therefore you must take into account the following:

* Vendor support – Does the vendor have necessary infrastructure to handle your current and future needs? On one side, small vendors might be able to customize a solution for your company; on the other side, they may not be able to grow with you needs.

* Agreement terms – Make sure the agreement spells out clear terms, cost, and responsibilities of the vendor as well as yours, the customer.

* Cost – it is a very important factor. Obviously companies would choose this route to save on their IT costs. The important thing is to compare apples to apples. If the company is offering you a better alternative, you cannot simply compare to your in-house option. Do account for hidden costs; and non-financial benefits of

* Business complexity - It is a complex decision; you may need an independent expert advise. This is especially true for businesses that require specialized business knowledge. There may be tacit knowledge within your organization that cannot be easily replicated or replaced.

6) Establish computer and equipment renewal policies

There is large number of opinions when it comes to server / PC replacement policies. Some would definitely want the latest and the greatest. Others would let systems fall to bits before replacing it. The cost of ownership at both ends of the spectrum is very high. If you replace the systems too quickly and acquire the best available in the market, you are bound to over spend. On the other hand, if you let equipment die before replacing it, it can lead to high administration cost, as well as loss of productivity. You could see your IT department spending valuable time fixing problems which could have been avoided. My opinion it to have a 4 to 5 year recycle plan. Every year you would replace a portion of your computers with whatever is readily available in the market, while sticking to one or two product lines. The focus is to get middle-range servers and computers. The cyclical replenishment approach can allow you to distribute costs over time. When replacing hardware, most companies will acquire brand new equipment; just keep in mind that there are some amazing deals in the pre-owned or after lease market. If you are not taking advantage of this, you might be paying too much. In terms of servers, keep in mind that your main servers can still play a key role as secondary servers once they are replaced. A similar approach must be taken for network and office equipment. Every time you purchase new equipment, I.T. must assess the business requirements as needs do change over time.

Gagan Goraya

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