It all started with the cancellation of a major initiative to replace the core transportation systems that we use at Pitt Ohio Express. Pitt Ohio Express moves approximately 12.5 million pounds of freight with over 9,000 shipments every night for more than 2,500 customers in the mid-Atlantic region. Before I joined the company in May 2001, a decision had been made to replace its existing core transportation system with a single integrated ERP product that could handle the transportation system and billing operations. Chuck Hammel, owner and CEO, explained to me that the reason for the replacement was to improve our ability to leverage customer data, which involved upgrading our infrastructure to access customer data via a relational database.
After a year of trying to implement this new system, however, I realized it was not going to satisfy Pitt Ohio Express’s needs. The system required too many software modifications that would take an excessively long time, and we had doubts about its overall technical performance. So I elected to cancel the project during the testing of the first release. However, I realized that a number of side projects initiated to support the implementation didn’t have to go to waste. For instance, as part of the ERP project, we had started a data-cleansing process that was going to be used to convert customer data in the new product. I figured we could use this data-cleansing process as a first step to building a customer database without replacing our core systems.
As I laid out my plan to Chuck Hammel and our CFO, Raymond Johnson, I explained how we could move forward in leveraging our existing customer data through the use of business intelligence (BI) tools. These tools could help us measure customer activity on a regular basis and rank them based on their value to the company. And it could be done through a single-user interface or portal so that client information would no longer be scattered among various letters, e-mails and spreadsheets.
I also explained why we needed a senior-level business sponsor who would work with IT and help us redefine the company’s business processes regarding the use of customer information. As we were discussing the various options, it dawned on us that Ray had both an engineering and finance background and would be just the right person to sponsor this initiative. We could leverage his engineering background in redefining the business processes and dealing with the IT developers on a day-to-day basis. And his finance background would be helpful in convincing the sales department of the importance of using customer data to drive business results.
Next on the agenda was defining what makes up a customer. When I started at Pitt Ohio Express, I was told we have over 450,000 customers. Basically, anyone who touches Pitt Ohio Express was considered a customer: the shipper, the consignee (who receives the goods) and any third-party freight payers (who pays the bills for the shipper). In reality, each one is a touch point that we need to service. So we started to segment our customers by complexity (how many shipping locations they had, for instance) and the number of shipments and amount of revenue they provided on a monthly basis. Using these criteria helped us narrow and prioritize our list down to about 8,000 active customers.
We then developed a process for data cleansing and merging our transaction data into the new BI system for customer analysis. We receive billing information every night (known as the bill of lading in the transportation industry). This information is either electronically transmitted or inputted into the system for handling our billing and collection processes. From a technology standpoint, we extract the data file by way of a real-time, custom-built polling service that performs a data translation process and sends this data over to the transportation planning system and our data warehouse. Our transportation (operations) department uses this information for their next-day delivery process to perform their route optimization for our freight movements.
We decided to merge this information, once it was cleansed, with new BI analytical-processing tools and connect the software to key business departments via a single-user portal. Within the first three months of implementation, we were able to deliver important customer data to the sales managers and representatives. They used this information to make key decisions when renegotiating contracts to ensure that our price and service were in-line with our customers’ needs. Providing the sales department with access to this data ensured their buy-in and helped us gather feedback and make needed adjustments to the system. The entire project took about 18 months to complete.
Too Much, Too Soon
As we went through this process, we had numerous issues to work through. For example, sales representatives were accustomed to getting hard copy reports on their revenue numbers. Now they were getting mounds of information about customers electronically and had the ability to slice and dice the data to fit their needs. It was too much information for them, too soon. So we took the information and created a single view of customer data following a Balanced Scorecard approach that outlined some major indicators such as year-to-year revenue, year-to-year service, freight movement, claim processing and overall value to the company. The sales reps found this scorecard easier to absorb and analyze.
After analyzing the information on a customer-by-customer basis, they realized that 30 percent of our most profitable customers were being impacted by general rate increases that were basically subsidizing unprofitable business. So the company stopped giving our most valuable customers general rate increases. The rest of our customers receive rate increases based on market conditions annually.
Six months into this implementation, our executives noticed what could be construed as an increase in customer churn. Senior executives and our cross-functional team began obsessing: Could it be because of the differential way we were treating customers based on our new ranking system? Was it OK to lose some of our less valuable customers? After much discussion, we realized we were overreacting and continued down our course. Customer churn soon returned to normal.
More important, over the past 18 months we have realized ROI beyond what we were ever expecting. Even after pruning undesirable business, Pitt Ohio Express saw a 9.3 percent jump in revenue in 2004. Before the initiative, the company delivered on time 98 percent of the time; that figure remained constant in spite of the changes. In essence, in the last 18 months, we have seen some of the best profits in company history, without impacting the overall level of service we offer to our customers. And we have laid the foundation to becoming a marketing-driven, customer-centric organization. What I have learned from all of this is that killing a major project does not necessarily have to be an ending. It can also be the beginning of something great for the whole organization.
Scott Sullivan is vice president of information technology and services for Pitt Ohio Express. He can be reached at email@example.com.