The right ROI: determine your goals and costs prior to buying technology.

IT'S THE KIND OF DECISION that makes a career, a technology purchase that offers a clear return on investment (ROI) by lowering costs, increasing, revenue or simplifying business decisions.

But making the right technology decision isn't always easy. Consider the trucking industry, for

Over the years there have been a number of technology-based solutions developed for the transportation industry addressing everything from supply chain management and logistics to communications and trailer tracking. While some of those solutions deliver measurable value that directly impacts the bottom line, others result in only modest improvements in efficiencies. But it all comes down to one basic question: Does the expected benefit outweigh the investment?

Simple though that question may be, many companies who know they should calculate ROI think they lack the expertise to do so. Remember, everything has a value and there are steps that can be taken to accurately compare the cost of an investment to its expected value. It starts with determining the cost of the investment.

Finding the Real Costs

Most technology-based solutions require an initial investment for hardware, accessories, installation, shipping and activation. There may also be ongoing fees for service or routine maintenance.

While these are direct costs that are easily determined, other indirect expenses also impact ROI. For example, if installation and retrofitting an entire fleet is a complex and time consuming process and if revenue will be lost from downtime, make allowances for these extra costs.

Measuring the Real Returns

After determining the true cost of a technology investment, measure the return--or the ultimate benefit--the investment will deliver. Since a trucking company's ROI goals typically fall into three categories--trimming capital expenditures, increasing revenues, and improving operational efficiency--measure all technology purchases against at least one of these goals.

Analyzing Your Real Expenditures

In the trucking industry, not buying additional trailers is one obvious way to cut capital expenditures. While this is an easy answer, it's often not a good one since loss and theft frequently plague decentralized trucking operations and trailers permanently lost must be replaced. The costs soar even higher if trailers are stolen with their cargo still on board.

Determining The Real Value

Potential revenue opportunities should also be quantified in order to determine if a proposed solution would deliver value. For example, a trailer detained at a customer location--either because it has not been unloaded or it is being misused for storage or other purposes--isn't generating revenue.

Since it's often difficult to determine the status of a trailer due to lack of documentation and the inability to determine when it is emptied, an average of 95 percent of delayed days go unbilled. So, when considering ROI, estimate the number of days trailers are detained at customer locations and multiply that by the cost per day. The resulting number is the ROI you will experience from documenting delays and billing customers for the full use of the trailer.

Benefiting From Real Efficiencies

Trucking companies spend a great deal of time locating and retrieving empty trailers. While these costs are high enough even when everything goes smoothly, expenses (and frustration) go through the roof when drivers arrive only to find that a trailer is not at the specified location. Systems that provide an accurate location of all trailers improve operational efficiencies and reduce traffic headaches. The ROI in this case is seen in the labor savings realized by keeping your drivers busy increasing profits--not out looking for trailers.

Guaranteeing A Real ROI

It's the best of all worlds and the only way to make certain a solution will meet your business goals. Every technology provider should be willing to stand behind its product by guaranteeing ROI. The guarantee should be based on a formula that considers a company's goals as they relate to capital expenditures, revenue increases and improvements in operational efficiencies. It should also include a reasonable and mutually agreeable time frame.

Just as important, since technology purchases often impact more than one business goal, be careful to measure both expected cost savings and revenue increases before making a final decision. If a vendor is not willing to be accountable for delivering results, it may be time to investigate other alternatives.

Nobody wants to be the one responsible for a technology purchase that doesn't live up to its promises. Instead of shying away from new technology, take the time to do your homework--and the math.

Editor's note: Andy Wood is CEO of SkyBitz, a provider of satellite-based asset tracking and information services for the transportation industry. ROI@skybitz.com.