Schneider National CIO on Supply Chains, Risk Calculation

As chief information officer for Schneider National Inc., a leading provider of premium transportation and supply chain management solutions, Steven J. Matheys has overall responsibility for the information systems strategy, direction and the technology product portfolio for both Schneider National and its wholly owned-subsidiary, Schneider Logistics, a provider of supply chain management technology and services.

Matheys joined Schneider in 1994 as director of data center operations and technical services. In 1998, he was promoted to vice president of information technology support services, where he led and managed all technology-based transportation and logistics infrastructure products and services across all platforms. In 2000, Matheys was promoted to chief information officer with accountability for delivering against the corporate business strategy by providing technically excellent information systems, which deliver effective, global customer solutions. Matheys holds a bachelor’s degree in business administration with a minor in computer science from the University of Wisconsin La Crosse, Wisc.

Q: What are you focusing on with regards to enhancing the logistics supply chain?

We will spend more dollars on transportation side than on our logistics business. It really comes back down to business drivers. On the transportation side of the house we see a great opportunity to take some of our current business models and extend them with additional technology capabilities that will make us more efficient with better productivity and extend our capability for services to our customer base.

Services that are very interesting to us are the intermodal business and our brokerage business. Intermodal is a service we offer where a customer’s freight is moved and one leg is on a train so it’s an offering where you’re using the train to do some of the transition. So a typical move would be a truckload move from an origin to a railyard and put it on a train, run it cross country and take it off the train and truck it to its destination. Typically the rail provides a more cost effective means to move the freight, given that service parameters can be met, which are expectations for delivery — can it be delivered in three or four days. The more timely the delivery, typically the more often you’re going to lean towards a truckload move; meaning if you need it somewhere sooner, you’ll lean towards truck. The cost savings varies, depending on the origin, but it’s a significant savings going by train and most customers will consider that option when they’re looking to manage the cost out of their supply chain. We run about 5.3 million truck miles a day.

We’re primarily looking at productivity-based enhancements. Intermodal space is the capability to help us manage what’s referred to as dray capacity, more effectively. We’re looking to build that out. Dray is from the railyard to the final destination. It’s looking at making those moves more efficient; better use of capacity and better options for the customer that are more cost effective solutions. We’re trying to use technology tools to improve our visibility to the freight — when can it be moved, when is it available, to see a better audience of options, different carriers to be the dray provider and to be able to provide visibility to those moves so we can leverage our own capacity to move that freight to meet customer service requirements…These would be systems we have written internally and we manage our asset based business with technology we’ve built internally and logistics with software we’ve also written internally. So the changes are what we’re building into our own technology.

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The other component in the intermodal space is about improving our equipment management, meaning trailers or containers. The place where the product goes, like a container that sits on a chassis on a train, so it would be managing the trailer and container capacity more efficiently. Driving those assets more efficiently. We’re doing that with technology…some enhanced tracking capabilities, knowing where the capacity is, if it’s truly available to be used and then loading it and utilizing it and knowing when it’s done being used and available for someone else so truly the use of the capacity most effectively and that’s through tracking software. So we’re adding better logic, more information regarding the status of the assets and better decision making logic about what can be done, when, where and how.

Q: What’s your view on implementation of new technologies and bleeding edge versus a more conservative approach?

I think it’s all about how much calculated risk we’re willing to take. I would frame our company as a fast follower in general terms. We will be bleeding edge in most cases where the risk associated with being way out on the plank is justified by the value you can create if you can figure out that technology. We will be bleeding edge when it make sense from a business model perspective — not just to say we’re bleeding edge.

Q: How has the economic downturn affected the pace of technological change and change management in IT?

There’s a couple of things that have happened. The rate and pace of change has slowed down dramatically. The economic downturn has had a lot to do with it and the disappearance of a lot of dotcom energy has had something to do with it. I don’t see technology change as having stopped as much as becoming much more focused. You’ll see change where folks truly believe there’s a true value case. You don’t see as much fishing as you used to. You see less of that exploration and you see things that seem to be more tangible; where there’s more of a definitive business case for the technology and the risk portfolio isn’t as great.

Q: What are the ingredients of a good vendor relationship?

First and foremost there has to be a value proposition. There has to be reciprocol value in the relationship. The vendor and customer both have to be getting something out of the relationship…I truly believe vendor relationships are no different than other relationships. There’s an ingredient of trust and commitment that have to be established. If you’re going to have a vendor relationship that drives significant value above and beyond what you’d typically expect you have to establish a level of trust and both sides have to get some value out of the relationship. Then you have a recipe where the relationship can sustain and endure the obvious tough times that will occur.

Q: Did you spend more money on network security this year?

Network security, security in my organization would be a top 10 area. We continued to invest in security this year but we didn’t change our security pattern dramatically as a result of Sept. 11, but certainly we have a commitment to provide security to our customers. I would define our 2002 investments in terms of security as having continued to invest in secured solutions at an equivalent rate pace we had established in previous years. We did not hire a CSO.

Q: Will your IT department receive a larger budget next year or do you anticipate any cuts?

Right now we would anticipate our budget would get larger. We could be one of the organizations that grows significantly. We’re look at an increase in the 20% range. We live by the mantra that we earn the right to invest. Right now we think we have several significant business-led initiativies where if they come to fruition and we drive those through they could be enabled by technological capabilities and if that happens we will certainly spend at a higher rate than in 2002. We will ultimately come back to the business case justification to determine whether the projected technology spending actually occurs. Our budget is put in place so we know what it is but it’s simply that — a plan. Just because we have a budget doesn’t imply we have the authority to spend it. We will scrutinize all requests for spending and when there is a solid business case and when the time comes to put these things forward they won’t get approved just because we have budget money for them. IT does not drive or lead any major projects. IT is an enabler. Business leaders establish the case because when all is said and done value is only going to accrue back to the business. Typically you’re doing something from an IT perspective so you’re driving value.

Q: Who do you report to and what goals have been set by you or upper management for 2003?

I report to the president and CEO of the company. I sit on the executive leadership team of the organization. I would say the primary goal if you will, at a strategic level, is that our intent is to build a leveraged portfolio of solutions. So we’re about creating leverage. Our business units right now — all business units are in the transportation and logistics sectors and we truly believe there’s a lot of similarity across these business units in the area of things like orders and customers and locations and rates and other solutions that can be leveraged lines of business so our focus strategically is to drive leverage across our information technology portfolio. That’s our strategic focus.

I would say we have intentions to provide significant enhancements to our asset management systems (meaning truck, tractor or driver) so computer systems that help us manage our assets. We’re going to provide significant investments to our freight payment systems and be providing certain very targeted investments to our logisitics-based applications, especially those that allow us to increase our network, and our network in that business is defined as additional suppliers, shippers, and carriers in the supply chain. So the focus is on our ability to interconnect trading partners in the supply chain.

Q: What else is occupying the bulk of your attention these days?

There are two things that occupy a lot of my time — we talked about one of them: business value is one. What’s the value of IT? And how is IT differentiating our business and enhancing and augmenting the services we offer to our customers? That’s an issue that continues to occupy my thought cycles. We’re significantly engaged in process work. We are actively looking at processes across our business and using the process reengineering methodology to be the catalyst that’s going to drive change into the business and ultimately create the functional requirements that will drive our information technology investments. So linking up with the business process work in the organization as the ultimate feeder of the information technology requirements is also occupying a significant amount of my time.

Q: How large is your IT department and what skills are you in most need of right now?

We have just over 400 associates in the information technology department. The areas I guess I would identify as of prime interest to us are a few product managerr positions, folks that are typically product managers, those folks who own the software you have and the life cycle of how the product evolves, what are the market needs, current customer needs, implications of expanding and growing this product, how much will it cost, how you develop a life cycle for what you need? Folks in that area are interesting talent we’re adding to our business. In general, the whole area of creative thinking. We are continually looking for folks interested in this profession who can take the thought process to the next level. People who can build the organization from the top. Specifically we’re also looking for folks who can make sure we’re building our portfolio to support the international needs we currently have and expand that market. We manage freight in 38 countries. So people who know international freight management.

Q: Which of your skills has served you best in managing IT?

Probably the skill that has served me best over time is my leadership skill. One thing that’s apparent in IT, certainly in my company, is a visionary part of our business, a part of our business that we use to stretch our thinking. The information technology organization is typically in front of where the rest of the business is in terms of capabilities and how we might be able to solve a problem, the international nature of things going on and the solutions that could be done differently than before. Within our organization IT helps to stretch the business so we have typically used information technology to help create a vision of where we want to go and aligning people to that vision and motivating them to want to deliver against that vision becomes very, very important. You’re always trying to paint that picture and communicate that out not only to the information technology organization but the broader business of Schneider and to our customers and our customers’ customers…So that certainly has been a skill. The ability to acquire talent is an important skill in this industry. It’s overused but its true — if you can surround yourself with truly talented people you can make a leader look really good. Being able to do that is a critical part of success. I sometimes think of things like the three Ds-I provide direction, then I typically will delegate to a team I think is very, very competent and then I look for delivery. If you can get into that model you have a chance to do things that are pretty successful.

Q: What advice would you give someone looking to advance their career the same way you have?

I think that in today’s day and age the CIO role is 60% or more business and 40% technology and it might even be more strongly aligned to business than that. If someone wants to advance to the CIO level they have to be comfortable with the fact that they have to be a business person and not just an IT person. In fact as you get more and more involved in the role of CIO the need for you to know the details around the information technology changes and it kind of dilutes pretty significantly. So the role of CIO is a role that has a strong business requirement, which kind of drives you to understand things like business strategies and what product or service do you sell, customer issues, operational issues, marketing issues, branding, image, financial literacy and an aptitude for running the business. You spend more time in those spaces than in hardware and software procurement.

Q: What keeps you awake at night?

Knowing how we’re going to continue to deliver and meet our customer needs in what is a rapidly evolving, increasingly complex international market space and we have to do that with shrinking investments in technology, shorter timelines for delivery and lower or less tolerance for any type of missteps or failures. That might encapsulate what keeps me awake.

Q. What do you do in your spare time?

There is no spare time. I’m a family-oriented individual. I have three children who are extremely active in sports and other things so there’s never a dull movement when I’m not in the office. I’m a guy who’s somewhat active — particularly playing golf when the opportunity presents itself.

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