Moving beyond Freight Payment/Auditing theexpectationof information
Once the domain of the green eyeshade set, today’s freight payment and auditing companies are enjoying new markets with sophisticated online data mining and analytics capabilities. Best practices are saving big dollars for industry and shippers.
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For logistics management professionals, there’s no getting around the age-old fact that freight invoices are complicated. And, of course, there’s always a chance for errors in billing or occasional overcharges—intentional or not.
However, top executives from leading freight payment and auditing companies say that the big savings don’t come from catching UPS or FedEx in a few small mistakes. They contend that millions of dollars can be saved by utilizing freight invoice management tools that not only eliminate incorrect billing errors, but allow shippers greater visibility into their entire supply chain to better control administrative processes.
“The freight payment and audit industry has been changed by the same trend that’s changed most other industries—the explosion of available data,” says Harold Friedman, president of Data2Logistics, a freight payment company.
As recently as five years ago, it was enough to calculate if a shipment was billed incorrectly or if it was delivered on time. But now, analysts and industry stakeholders say that shippers expect much more information to be gleaned from their data. “In fact, we’ve moved beyond the expectation of information,” says Friedman. “Now, shippers expect to be provided with intelligence before, during and after the shipment occurs.”
It’s clear that the marketplace will continue to demand and devour as much actionable information that can be squeezed from freight bill data, contends Friedman. And for savvy shippers, this data can be matched to and married with shipment information from a client’s transportation management system (TMS).
Besides better control of product delivery, experts say that these systems can reduce paperwork through freight invoice consolidation, data harmonization and better invoice handling. And with this in mind, technology providers contend that the best use of money when it comes to freight payment should be spent on the analytical aspect of the business, not merely performing rote inspections of billing information.
This can be accomplished though the combination of eliminating incorrect billing and by allowing shippers to better control their internal administration processes through greater visibility—which will create more efficient processes.
And what can this new level of attention to detail mean for shippers? Top executives at leading freight payment companies say that they can easily save 3% to 5% in overall freight transportation costs through sharp auditing processes. However, they believe that even greater savings can be achieved through improved internal processes that reduce the time spent on rate updates and the handling of freight exceptions.
Automated cost allocation, consolidated reporting and a rationalization of the number of carriers that shippers use can also be achieved through these methods. So, let’s examine some of the hottest trends in freight auditing and see how shippers can benefit from this new generation of auditing power.
When Mike Regan founded freight payment and analytics company TranZact Technologies 32 years ago, his customers may have been scattered across the country—but they certainly weren’t on the other side of the world.
“Gold mine” of data put to new uses
Big Data analytical capabilities have grown so rapidly in the past few years that they’re changing every industry from baseball to transportation—and the freight payment and auditing industry is certainly no exception.
G. Scott Knight is founder and president of ParcelShield, a freight payment vendor that utilizes machine learning, proprietary statistical modeling and data science methods to offer shippers predictions regarding package delivery probability.
Knight, a former UPS executive, says that he discovered what he called “a gold mine of data” captured from more than 13 years of auditing parcel shipments. ParcelShield now combines that data with historical weather, commercial aircraft delays, live traffic feeds, and other data sources to feed its computerized learning system so that it can predict ahead of time the probability of on-time delivery.
“In industries such as service parts replenishment or specialty pharmacy, this intelligence carries much more value than the calculation of the correct invoice amount,” Knight says.
—John D. Schulz, contributing editor
“The issue of supply chain visibility was a nice concept back then, but it was theoretical,” says Regan, now the company’s chief relationship director. “The capability didn’t exist for global visibility, but now you must have integration capabilities to distribute across a global platform to create visibility that customers are looking for.”
Regan delineates three major changes as a result of this globalization trend:
Integration. “When we started the business, all we needed was auditing, payment and reporting,” says Regan. “Now you need to be integrated with customers’ internal systems. We have our own TMS, but you better make sure that system is capable of being integrated to customers’ systems.”
Single sourcing. In the past, companies used freight vendors for different tasks. “Today they want vendors who can do it all,” says Regan. “That puts additional burdens and pressures on freight payment companies.”
Information gathering and management. Done nearly entirely electronically, how that information moves from carriers and shippers around the world is rapidly changing. Thirty years ago, Regan adds, it was hard copy printed reports. Then it moved to the personal computer. Now it’s up in the Cloud.
This constant activity of buying or selling goods and services in all the countries around the world has certainly inflamed the shipper’s desire to better control their global supply chain environment. “Today clients are seeking vendors that can support all modes of transportation on a global basis,” says Data2Logistics’ Friedman.
Today, freight payment companies wishing for a global reach need staff fluent in local languages, the ability to process bills in local currency, format dates and amounts in a manner that’s familiar in those countries, and provide actionable information in metric measurements.
“In an ideal situation, all a client needs to do is login and they enter into an environment where they feel most comfortable doing their business,” adds Friedman. “Providing a top down control tower visibility allows clients to make service and modal shifts, leverage carrier spend and determine landed costs for the products they buy.”
Where is the market headed?
The freight payment and auditing industry is changing so rapidly, industry insiders say, that it’s risky to even speculate six months out—but let’s give it a try.
Five years ago, shippers were happy to gain access to data and to have their bills audited. Today, they’re looking for actionable information from a trusted advisor.
Back then, shippers wanted the freight payment company to provide dashboards and alerts that identify opportunities for cost savings through optimized modal selection. Today, with dimensional freight pricing all the rage, correct packaging and new thresholds for time management are being developed by the freight payment companies in their effort to keep shippers’ costs under control.
These efforts are just an example of the types of new services freight payment companies are developing. Freight payment experts contend that this new level offers complicated analytics that will be necessary in today’s more complicated freight world.
Pittsburgh-based ShipMatrix, a shipment analytics visibility and rating technology solutions vendor, performs rate invoice verification for less-than-truckload (LTL) and parcel clients. According to company president Satish Jindel, the reason his business flourishes is because carriers have created so much complexity in their billing and rating processes.
“You can have 600 columns and quotes for one shipment,” says Jindel. “If you use UPS, for instance, you have to look at four different columns to see what charge you should have been charged. Those combinations can be staggering.”
The LTL sector can be just as mind-boggling. A carrier’s tariff may have different ratings, but they all might not be charged on a particular shipment. “It’s technology gone berserk,” says Jindel. “In the LTL industry, you’re never sure that you’re being billed correctly. The complexity with parcel is even greater since it’s so needlessly convoluted.”
However, as long as that system exists, there will be an evolving need for more and better freight payment billing and analysis. Shippers are wedded to the notion that using a third party payment and auditing company insulates them from overcharges—and they might be right. However, it’s nearly impossible to know.
“The knowledge, database, coding, it’s all too complex—and you have to constantly update it,” says Jindel. “If you try and do it yourself, you wouldn’t do it correctly. In fact, some carriers offer two identical services: for one you pay $10, and the other you pay $30.”
Jindel, an avowed fan of the deregulated transportation marketplace, admits that transportation was simpler in the regulated era prior to the Motor Carrier Act of 1980 that economically deregulated surface transportation. However, that has invited more complexity as well, he says, increasing the need for more sophisticated analytical tools offered by freight payment auditing companies.
“The focus should be on the information side of the business,” concludes Friedman. “Auditing is binary—either the invoice is correct or it’s not. A creative mind accessing easy to use business analytics can archive the best value for dollars spent.”
About the AuthorJohn D. Schulz John D. Schulz has been a transportation journalist for more than 20 years, specializing in the trucking industry. John is on a first-name basis with scores of top-level trucking executives who are able to give shippers their latest insights on the industry on a regular basis.
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