Freight Payment 2024: Useable, actionable data now table stakes

The freight bill payments industry is really a microcosm of American business. The sector is split among giant, bank-oriented corporations such as U.S. Bank and Cass Information Systems and people like Allan Miner, president of 100-year-old, Cleveland-based CT Logistics.

Companies like Cass pride themselves on their size and scope. Cass, for example, processes more than 36 million freight invoices in a year with more than 14,000 carriers in its database. Those freight bills exceed $44 billion in freight spend annually.

Impressive as those figures are, and with no offense meant to the giants of the freight bill payments sector, Miner says that there’s always room for a fast-moving, fast-thinking innovations expert from a slightly smaller provider.

“We’re doing pretty well, because it seems there are some larger providers who are bank-oriented and aren’t doing the ‘blocking and tackling’ that these mid-sized clients are looking for,” says Minor. “We hold the hands of shippers and carriers and walk them through processes. It takes time. But it’s something that’s lacking in the marketplace.”

Craig Cameron, vice president of sales at Memphis-based A3 Logistics, says he’s seeing a surge in business, especially in the medium-sized market. “Lots of people hunkered down during the pandemic, but with capacity increasing in the market, everybody is going back for more bids,” he says. “They’re saying: ‘Maybe I need to look for a better solution than what I had.’”

As we’ve charted over the last few years, the freight bill payments sector has morphed from the “green eyeshade era” to the “we-go-anywhere laptop set” without missing a beat. And with plenty of experienced, “old guard” professionals leaving the sector due to retirements, new blood has energized the industry. They’re faster, more internationally comfortable, and much more data-driven.

“We’re seeing LTL carriers living in a post-Yellow tsunami period…Six months ago, they had no problem hauling your oversize freight. Now, they want to charge you an arm and a leg for the same shipment. The carriers now understand we had excess capacity in LTL that has gone away.”
    — Mike Regan, TranzAct Technologies

Harold Friedman, who recently retired as president of Data2Logistics, says the focus remains on information. Those companies that can translate data into useable, actionable information prove their value to shippers almost immediately, he says.

Shippers are the main beneficiaries of this knowledge base. They’re tapping into more auxiliary services such as freight bidding, modal analysis and more international services—and savvy shippers are benefiting by realizing lower, better-managed freight bills with analysis thrown in for good measure.

The growth in freight bill payments involves much more than achieving accurate bills, although that remains a part of it. Now, there’s an emphasis on where shippers and manufacturers would prefer to put their resources—performing game-changing shipment planning rather than managing routine inquiries from carriers over a random overcharge claim.

As we start 2024, let’s take our annual deep dive into the freight bill payments sector. We’ll examine the financial health of the sector; explore what new services are available; and then take a look at how last summer’s cessation of less-than-truckload (LTL) giant Yellow Corp. caused some freight shifts that may or may not be permanent.

State of the sector

The state of freight payment is “healthy,” according to key industry leaders. There’s a growing emphasis on global trends, better data utilization, and analysis and information that goes into modal choices.

In fact, carriers say that working with representatives from the freight bill sector has several advantages, including the following:

• Helping carriers convert them to electronic data interchange (EDI) billing.
• Offering carriers different payment options.
• Visibility into the shipper’s network.
• Knowing carriers will get paid and when.

The splintering of the sector between the mega auditors, such as Cass and U.S. Bank, and the smaller “foot soldiers” is akin to the difference between shopping at Target or Nordstrom. The smaller entrants are like Nordstrom, which puts a premium on face-to-face service.

According to Mike Regan, chief relationship officer at freight audit and payment company TranzAct, the bank-oriented competitors “are ginormous. It becomes an issue of focus. It’s just a different business model from ours.”

Regan says that there are basically three disciplines a company can choose: low-cost operators such as Walmart; technologically-superior like Amazon; and high-end service at Nordstrom. “With each experience we have different expectations,” he says, adding that when you’re going up against Walmart and Amazon, you’re not getting into extended conversations with sales reps—and he believes the same thing is true in freight bill payment.

“The big thing now is where the market is moving. It’s bifurcated,” says Regan. “There are large companies that want their bills audited and paid along with some data. That’s all they’re looking for, and that’s fine.” Where TranzAct and others are finding a foothold is in providing “a partner with a more diverse portfolio than is being offered elsewhere in the market place,” he adds.

Indeed, experts in the freight bill payment sector say the smaller operators need time to fully understand a shipper’s business to be most effective.

“No knock against the bank-oriented guys, but some of them are just using contractors and they’re not focused on the important things such as benchmarking, best practices, modal choices,” says Miner. “They would just rather pay and audit bills.”

“The pressure to have some sort of AI solution is increasing…It’s like transportation management system optimization back in the day. Everybody said they had the better mousetrap… We can use AI, but we’re a freight audit payment company—we’re not an AI company.”
    — Craig Cameron, A3 Logistics

Miner adds that his company is “doing a lot of business” in modal bids and analysis. “That’s a plus for us besides the ‘blocking and tackling’ of freight audit payment,” he says. “Clients want to see what the competition is doing. We do all the analysis after putting the freight out for bid.”

Artificial intelligence continues to be the “Holy Grail” of some freight shippers. But Cameron of A3 says that there are limits to what freight bill payment companies can provide.

“The pressure to have some sort of AI solution is increasing,” says Cameron. “It’s like transportation management system optimization back in the day. Everybody said they had the better mousetrap. We can use AI, but we’re a freight audit payment company—we’re not an AI company.”

The Yellow effect

When Yellow closed last Aug. 6 as the 13th-largest trucking company, it did more than put $5 billion in freight up for bid and idle some 30,000 workers.

“When Yellow went out, it was a blessing in disguise,” says Miner. “All that capacity was picked up by people who were soft in the market. Now they’re just treading water instead of being under water.”

“We’re seeing LTL carriers living in a post-Yellow tsunami period,” says Regan of the rash of new freight going to competitors. “Six months ago, they had no problem hauling your oversized freight. Now, they want to charge you an arm and a leg for the same shipment. The carriers now understand we had excess capacity in LTL that has gone away.”

What rival carriers are discovering is that shippers are in the midst of a significant freight recession—especially in truckload freight—but that will not last forever. “The LTL market is balanced between supply and demand right now,” says Regan. “We eventually will come out of the freight recession, and there will be a capacity issue when the economy rebounds. That will happen.”

That capacity challenge will make the importance of freight bill payment companies’ strategic arms even more important, says Cameron of A3 Logistics.

Another benefit coming out of a solid relationship with a freight bill payment company could come when LTL carriers roll out their dynamic pricing models, which change nearly constantly.

“With Cass and U.S. Bank, they might not have the bandwidth to support smaller shippers,” adds Regan. “We’re customized like a smaller shop. We can act very quickly. We have the ability to respond and capture data, which is vital.”

Going forward with optimism

Freight bill payments people say the future is bright and can be summed in four words—diversification, data, global and analytics.

Leveraging their decades of veterans’ experience, freight bill auditors perform many more value-added services than merely checking payments accuracy. Auditors can often identify wasteful spending practices simply from their audit findings.

There can also be significant savings from examining spending on parcel delivery freight. In the LTL sector, finding optimized packaging can mean savings because of the recently installed dimensional freight machines that measure virtually every piece of freight.

And then there’s global expertise. “We have boots on the ground in the U.K. who focus on nuances of international trade and commerce,” says CT’s Miner. “That’s their background. They can walk the walk and talk the talk. They can help clients navigate through difficult times. You better know how to walk the walk when it comes to international trade.”

As for the overall prospect of exiting the freight downturn, Miner says: “There’s a lot of pent-up demand. I think it will be a solid recovery.”