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E-Commerce in Transportation at the Shop Level 

 Are we ready for e-commerce in trucking?  Is all the hype about e-commerce in other industries, such as the computer industry providing any insight for trucking companies to follow?  I think so, but the wheels are turning slow.  How to make shops ready for the evolution and bring the suppliers into the fold is the challenge.

During a conversation recently with a sales manager from a major after market supplier the question was asked about how he felt e-commerce would be implemented in his customer base.  It was particularly interesting in what this company  thought about the subject, since they were already involved in developing a site for the purpose of increasing buying power among its associates.   It appears that they feel the biggest draw backs to jumping into the e-commerce arena are;  1) the lack of an internet connection at the shop level and  2) they still think sending a sales person around to visit the fleets gets the best results.  I have to agree at this point on the internet connection, but that will change rapidly in the future as cheaper hardware cost and fast internet connections continue to be made available.  According to Washington Technology, 40% of businesses are online.  How many of those are trucking companies is unknown at this time, but whatever it is, this number will definitely increase in the years to come.  It's for sure, there are enough connected users in the trucking industry to give serious thought to e-commerce.  As to the real value of having a sales person calling on fleets, there are varied opinions.

 

Where can  we go as an industry

Ask the Information Technology Director of any company how they purchase computer hardware, software, and supplies, and you will hear that it is done through various web sites.  These web sites provide simple component lookup and ease of purchasing from a large number of participating manufacturers, along with several options for delivery.   These successful e-commerce sites can serve as working examples of how many parts, tires, and supplies can be purchased and delivered to trucking companies.  So far, nothing worthwhile exist to serve the vast potential that exist in the trucking industry.  Some suppliers have joined together for buying power, but their web sites are not open to fleets for true online purchasing.   These buying groups still use "strong arm" tactics  with the manufacturers to squeeze price cuts or get rebates.  As a result, some of this money is offered to the fleets in order to maintain customer loyalty.  What needs to happen is the development of an online procurement and purchasing program designed to take cost out of the supply chain.  The order needs to be placed electronically as close to the manufacturing process as possible by the end user, and the distribution handled through the most efficient means to get the product delivered to the end user based on how urgent the need is at the time.  It can be done, and it can be a win win for all involved.  

Do the Taxes and Do the Time

 Did it ever occur to you, as a fleet manager, just how many hours are spent, either by you or one of your purchasing staff, dealing with sales tax?  I am referring to the time spent figuring out how to enter the sales tax, using a computerized Purchase Order  system, and have the total match the invoice from all the vendors dealt with during the course of a year.   Sound like a petty gripe?  Does  your accounting department insist that the P.O. total amount and the invoice total amount match?   Ok, you receive your parts, close out the Purchase Order, look at the totals, and they don't match.  What do you do?  Savvy programmers say it is near impossible to create a program to handle all the variables involved to make it happen.

Do you think your computerized purchasing system handles the sales tax calculation properly?   Chances are it does not and  you let it go, thinking it's just pennies and you definitely have bigger issues to worry about.  However, it is a labor problem if you want accurate accounting of unit cost, and it gets bigger as the number of vendors you deal with increases.   Recent inquiries show the average number of vendors listed  for a fleet size of 100 power units is close to 100 vendors, from multiple states. Out of this number, 10 or 15 vendors are used regularly while the others are used for specialty items or are listed just in case.

 In most fleets the accounting department does not deal with unit cost as you do in your maintenance program, they just add total invoice amounts to account codes in a general ledger.   Their main concern is that everything balance to the penny.   Therefore, the total of your unit cost numbers, or your facility cost numbers never come close to matching their numbers.  Here's some of the reasons why when it involves calculating sales tax on parts.  If your computerized purchasing system calculates sales tax on each line item and your vendor calculates sales tax on the total amount, then the odds are the sales tax amount will vary.  It can vary from a few cents to several cents depending on the number of line items.  What if the vendor rounds every sales tax calculation up to the next cent regardless of whether it is greater than $.05 or not.  It happens more than you think.  What about sales tax on freight?  Some states charge sales tax on freight and others do not.  Do you add freight charges to the price of the part?  Do you include the sales tax?  Do you know which vendors in which states are adding sales tax to freight?  To get the sales tax calculated right, it takes somebody's time to look at each invoice and figure out how to handle each vendor, and then remember or record how it was accomplished.  It's just labor, right? 

Getting the correct price to charge out on a work order from your inventory can be difficult.  It really does not matter which inventory method you use. LIFO, FIFO, or weighted average, they are all affected.   For instance, if you are expecting to have your computerized purchasing system add the sales tax to the part so it will get charged to the vehicle, you have to add the sales tax to each line item as you receive the part into your inventory.  If your vendor uses this method as well, then you won't have a problem, provided the vendor calculates each item using the same number of digit to the right of the decimal as your purchasing system uses.  If you use two digits to the right of the decimal and a vendor uses three digits to the right of the decimal you will have a problem getting the totals to match.

Say your vendor adds the sales tax to the subtotal instead of each line item and you add the sales tax as a line item when you enter it into your purchasing system.    You do this just to make the totals match, (to satisfy the accounting department) now you have a sales tax total that is not divided among the line items on the invoice. You could have a part master record created in your inventory just for sales tax, but this "sales tax part master" dollar amount would grow with no easy way to relieve it from inventory.  Your inventory would never balance.   You could receive the sales tax as a non-stock item or a one time buy, but how do you get the sales tax amount on each line item charged out when you use the part?  In both options it is difficult to manage.  It's just labor, right? 

What is the answer?  Buying your parts from fewer vendors will decrease the amount of time figuring out how to apply the sales tax on parts and freight. Another option is, buy your parts online through a portal where you get one invoice regardless of what manufacturer provides the parts.  Can't do it yet?  Well, maybe it's closer than you think. 

A. Richard Massengill

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