Gearshift? Yes. Top gear? No.

20 May 2010 - By Dr. Yvo Saanen - Industry Blog

Cautious, low on CAPEX, companies are thinking of the future. Planning ahead, with contingencies all over. Bold planning is out of the question, which in my mind is a good thing. Where decision-makers were afraid to do too little in 2007 - missing opportunities, staying behind in an economic boom - they are now afraid to do too much.

Is there a way to shift up gear without spending large sums of money? I think there is, and it may be time to follow this path for a while. Capacity problems used to be solved by purchasing more land and more equipment. Written off over long periods of time, these huge sums of capital were not a problem (as the share in OPEX of these capital expenses are quite limited compared to other operational expenses). Nowadays, with refinancing problems, insecurity about market stability, capital intensive long term commitments are remaining unpopular, so we may seek the gear shift in other directions. More intelligence for instance.

Intelligence in terminals comes mainly from humans. Humans throughout the organisation, as many decisions affecting cost and service levels are taken decentrally - in operational positions. Humans use the available information to make the decisions the best they can, however, here we observe room for improvement.

First, the information that they have access to is limited, inaccurate, or lacks context. It is typical only looking at the here and now, and not at the near future. Therefore, terminal operations can be characterized as fire-fighting. Reacting to problems as quickly as possible, instead of pro-active management for 80% and 20% (inevitable) solving problems.

Here, information technology (in the broadest sense) can play an important role in providing information, bringing various sources of information together, preparing decisions, or even taking over decisions from humans if possible.

In addition to bringing in this type of technology, is likely to require organisational change as well, shifting decisions that matter to people with access to integrated information, allowing informed decisions with ability to look ahead.

The good thing of this way of increasing productivity, reducing costs, and creating the ability to handle more volume through the same footprint, is the low CAPEX associated, and therefore less risk. The burden here is that many terminals associate high risk to IT implementations; rightfully compared to implementing new equipment, or expanding the physical footprint of a terminal. Therefore, also IT implementations need to be approached with good planning, from technical and organisational point of view. Nevertheless, they provide a way forward, a gearshift, without the drawbacks of large funding.