From paperless to wireless, ready-mix producers can thrive in a digital era
By: Craig Yeack
The log jam is broken. Our industry has clung to paper-based processes because, when each day brings countless things that break the fulfillment cycle, who has time to change what already works? Covid-19 broke paper.
Indeed, 2020 was the year of the electronic ticket. Now everyone is waking up to the productivity gains of the “digital enterprise.” Compressing time and cost by instant access to information just makes sense. Early adopters have used digitization as a competitive advantage; 2021 will bring a stampede of ready-mix producers trying to convert as a competitive necessity.
There’s a small catch: Let’s call it Catch-21. A producer with outdated business processes in 2021 needs digitization to stay competitive, yet enterprise digitization requires modern business processes. Modernizing business process takes years and fundamental cultural change. Captain Yossarian would be proud.
To understand what’s possible in 2021, we first have to look down the road as far as possible. The battle to improve is no longer with technology, but with how much change our organizations can handle.
DECODING DIGITIZATION
What is this “digital enterprise?” To understand, first stop listening to all the high-priced consultants and Fortune 500 technology peddlers who line their pockets by mastering “buzzword bingo.” The digital enterprise is simple: Do everything possible electronically, get all possible information to everyone in a way they can use it, and then act upon it. That’s it. Let’s take a look at some real-world examples.
Disputes happen. When balancing the time it takes to research a claim versus the dollar amount requested, a 50-50 split with the customer has historically been the least bad alternative. With today’s technology, every aspect of the delivery cycle can be recorded and made available electronically for all concerned: batch weights, truck-on-job times, slump, temperature, air, age of concrete, and so much more. The research cost is all but eliminated, and for a good operator, only the legitimate claims remain.
Self-order sounds scary, and indeed there are whole categories of customers who should never be empowered with such tools. Larger, professional customers can use this 24/7 tool to lower everyone’s costs by expediting the process without phone calls and delays. Available, reserved, or committed plant and fleet capacity details are logged and tracked electronically. While it will be some years before most producers allow customers to automatically confirm an order, most customers can now be empowered to request an order online pending electronic confirmation from a dispatcher.
Stop being the bank. Days Sales Outstanding (DSO) costs us working capital that can otherwise be employed to drive profits. Typically, we try to nibble it down by providing prompt pay incentives and going to daily invoicing, but what if we can fundamentally eliminate it? The pizza guy doesn’t send an invoice; it’s a transaction. We now have all the information and proof we need to process a transaction for every load with ACH or low fee credit. DSO can feasibly approach zero, which would increase working capital by about 8 percent of total revenue.
Customer scorecards are a reality. We now have dozens of factors to establish a “concrete score” much like the widely used consumer credit score. As the score improves, especially in given dimensions, we can automatically provide differentiated services and pricing.
Intelligent quoting is here. We have an immense store of data about our customers’ behaviors, such as slow pay, partial pay, disputes, bump loads per order, holding trucks, and just about everything else that drives profit. Producers can tap into all of this information; the tools exist. In the process of creating quotes, real data on customer behavior can be factored into product pricing, as well as fixed and material costs, company overhead and desired net profit. Of course, we might want to reduce the price to drive volume, but let’s at least know when and how much we are giving away.
Self-quoting follows. Once we are comfortable with the calculations that drive intelligent quoting, then we can open this up to responsible customers. We used to do this by giving “price levels” to customers. Now, we can reward customers for profitable behavior and charge more when customers create profit leaks.
Sales is transformed. What’s a salesperson to do when all of the information a customer needs is readily available? The salesperson will transcend from quote-maker to business improvement partner. Small and mid-sized contractors are great craftsmen but often could use a hand with the business. Armed with a wealth of data and experience, producers can now help contractors understand how to reduce cost and improve profit, thus strengthening long-term loyalty.
We have already ended the paper trail; e-ticketing is a competitive necessity. We now have the tools to capture the competitive advantage of the digital enterprise. 2021 is going to be a great year.
Craig Yeack has held leadership positions with both construction materials producers and software providers. He is co-founder of BCMI Corp. (the Bulk Construction Materials Initiative), which is dedicated to reinventing the construction materials business with modern mobile and cloud-based tools. His Tech Talk column—named best column by the Construction Media Alliance in 2018—focuses on concise, actionable ideas to improve financial performance for ready-mix producers. He can be reached at [email protected].