How Prepared are you for an Economic Downturn?

It's certainly not something we like to think about on a day-to-day basis, but planning for a potential national or worldwide economic downturn may be the #1 thing you do to ensure long-term success for your company.

2008 Global Financial Crisis

In 2008, when the GFC hit, I was a student at Victoria University in Wellington. The GFC hit New Zealand hard. Really hard. We didn't have a booming mining sector to soften the blow, and we saw unemployment rise by over 60% in a single year.

For me personally two years later when I graduated the complete lack of job opportunities in the electronics and programming sector acted as a major catalyst to move to Australia.

Fast-forward to 2013 when we had just built our first version of the CartonCloud mobile app within Roving Logistics, and I recall sitting in an extremely frustrating meeting with one of our largest clients, a national importer and food distributor (I won't name names).

Going Paperless to Cut Costs

Nic and I were on a mission to convert all of our clients over to accepting electronic PODs, allowing us to operate 100% paperless and cut down our operating costs. They were the only company left to convert, so we'd gone to visit them personally to plead our case.

We were shown their self-proclaimed "state of the art" POD digitizer. A scanner connected to a computer that had a person sitting there keying in the invoice numbers as the scanned image flashed up on the screen.

Their archaic paperwork-handling processes were so deeply rooted into their organisational processes that they stated (paraphrasing): "When we move to e-POD, all our carriers will adhere to our requests and provide exactly what we want electronically, and until then, all paperwork must be returned and we won't accept anything electronically".

Shocked, I remember asking what they'd do in a downturn. If they lost sales and needed to cut costs, would they still see value in paying a full-time wage to someone to work as a human OCR? Not to mention the other roles they had assigned to manually check over every single POD to ensure it had a signature.

They took offence to my question and showed us to the door.

What Happens in a Downturn?

The question however stuck with me over the years. How much bloat is in this industry and how well equipped are logistics companies when the next recession hits?

Transport and Warehouse operators running on 5% margins will quickly go to -5% when their volumes drop only a fraction. Their reliance on a human's data-entry means they cannot cut wages by 10% because volumes are down.

What we did at Roving, and what we continue to do today with our clients is to look for ways to automate and streamline their businesses. Not only will this increase margins now, it will also offer protection when the market turns sour.

There's no better time to grow your 3PL business than when your competitors fall over, and if your operational costs are lower than theirs, you'll be the business still standing 12 months after the recession has taken hold.