Can Transportation Contribute to Operating Cash Flow Generation?

by Mike Starling

October 24, 2012

On the subject of how companies generate Operating Cash Flow (OCF), let me ask you, in this fragile economy (domestic or global) would you rather earn A Dollar Today? Or A Dollar Tomorrow?

I’m a career Transportation guy. In my world I have tended to work in the “here and now,” dealing with execution reality and continuously conscious of expense control. Traditionally I was viewed as an EXPENSE center, not a PROFIT center. My marching orders were strictly tactical in nature, and my success was measured by how I collectively minimized carrier problems, shipment damages, freight expense, and customer complaints. Executive Management was more interested in pushing the glorified and flashy SALES lever or plant production utilization than taking time to have a meaningful discussion with me as their transportation manager, on how transportation could be used as a strategic function to contribute to generating OCF.

So let me ask you:  If I can accomplish a task and it comes in under budget, does that contribute to company OCF? If I conduct a carrier competitive bid RFP to generate freight expense cost reduction/savings, does that contribute to OCF? If I can shorten the cash-to-cash cycle by working directly with my carrier base to reduce transit time (In, Out, or both) does that contribute to OCF? If the reduction in transit time helps facilitate reduction in safety stock on hand, does that contribute to OCF? If I improve the reliability of delivery—thereby motivating the client to increase orders with my company—does that contribute to OCF? All these provide me with a “Dollar Now” solution.

Well then, how about if I spend considerable time and effort to get our company involved with and participating in the EPA Transportation sustainability project? Work to ensure that all my carriers are participating in the EPA SMARTWAY program? Does that contribute to OCF? If you operate a private fleet, most likely you can. But does this provide your company with “A Dollar Now?”

If you rely on for-hire transportation get your sustainability ticket punched, you’ll find it more challenging to measure, document, quantify, and justify your actual contribution to OCF. This is the sandbox where most transportation managers play. I suspect that more often than not, these sustainability initiatives do little to contribute to OCF, and may not provide “A Dollar Later” ROI.

My point is, when it comes to generating OCF, faster is better. Tried-and-true delivers OCF regardless of whether you are involved with sustainability. Beware of agenda-driven government programs that suck up time, effort, and working capital that detracts from timely generation of OCF. Your company’s survival just might depend on it!

Vertical communication within the organization is critical to raise awareness of untapped resources that can contribute to company OCF. Alignment of strategic goals and objectives with departmental goals and objectives is essential to make this happen. Cash is Real. Cash pays the bills, and syncs nicely with the SCM prime directive:  “Make more money NOW, and in the future!”

How then do we raise the awareness of this at the company executive level, and with the transportation manager population in general?

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