How to get more out of your Freight Pay And Audit Service?
A freight pay and audit service is a must for any company that deals with multiple carriers for its shipping needs. These services help to streamline the Accounts Payable (AP) process and reduce the risk of overpaying carriers. However, many companies may not be utilizing their freight pay and audit data to its full potential.
Having a centralized location for all of your billing data is a great start. By leveraging advanced analytics tools that combine Freight Pay and Audit data with other enterprise data, you can turn this data into actionable insights that can drive significant savings and higher profits from sales to logistics. Here are a few examples of what leading companies do with freight pay and audit data, when combined with other enterprise data:
Carrier Performance Monitoring - You can establish new trends and patterns in carrier performance. This information can be used to evaluate and compare carriers across key measures, determine which ones are providing the best value, which ones are ‘nickel and diming’ where rates appear competitive but accessorials creep in, and make informed decisions that aid in carrier negotiations and selection.
Invoice Auditing Cost Recovery - Invoice auditing, by definition, is part of the freight pay and audit service. However, if billing data is used in isolation, there are certain areas that Freight Pay and Audit may not catch, leaving you paying excess fees. Smart intelligence that ties costs to the order line can surface anomalies that you can action. For example, you can help identify incorrect charges being billed to the company when order terms require a customer to pay freight. This can save you time and money on top of what Freight Audit & Pay can do alone by catching errors in your billing process.
Cost Recovery through Pricing - Freight Pay and Audit can tell you how much you are paying. It falls short of telling you how to adjust your customer shipping and handling rates to better recover these costs. Rather than attempting to decipher 400 pages of carrier contract information to determine your freight rates (which will undoubtedly become outdated within weeks of your update), you can let your billing data do the hard work to reveal your costs. Know which SKUs, locations, times of year, weight and dimensional weight breaks, and packaging combinations drive your costs.
Cost Optimization - Advanced analytics can be used to identify areas where you can reduce costs, such as errors and inefficiencies in the shipping process. For example, you can spot and size the various causes contributing to low shipment utilization and adjust the planning process to improve it.
Network Optimization - Your freight pay data can also provide valuable insights into your shipping network. By analyzing this data, you can identify areas where you can improve inventory positioning, in-stock levels, and transit times, and optimize your shipping lanes for maximum efficiency and service delivery.
Here is our guidance on how to achieve the above with your data:
MATCH your carrier bill to the order lines that traveled on the shipment. With different matching approaches between tracking IDs (Bill of Lading, Waybill, Tracking number, etc.), you can reasonably expect to achieve a 94% match rate between bills to the order lines shipped 60-90 days after confirmed delivery. Why 60-90 days? The lag is due to carrier billing delays and invoice processing time. 30 days after shipment, you can expect to match 82-86%. More on how to achieve this coming soon in another post…
SEGMENT your business on dimensions that matter and that you can act upon. Now that you have actual cost tied to the order line, how do you want to compare and contrast? One carrier vs. another on cost per pound or mile? Cost to ship to a common destination region from two different warehouse origin points? Cost to ship by customer bill-to across ship-to locations - most expensive to most efficient? There are many possible ways to view the business that may have been previously hard to get at or inaccurate because standard costing ‘peanut-butter spread’ the costs.
DETECT anomaly charges slipping through that shouldn’t be. Where freight terms on the order are collect or third party but charged to the customer? Or mileage (or zone) on the bill vs real distance isn’t tying out suggesting out of route miles traveled? Or there are multiple charges for the same order line which may be an error or inefficiency in your operation or something not caught by the freight audit process?
UNDERSTAND and size the cost drivers. When looking at a shipment level, you can see the makeup of charges - accessorials, base, fuel. Are there certain SKUs that drive accessorial over-length or over-width charges more than others? What locations saw increased cost - unloading equipment like lift gates, rural surcharges?
COMPARE actuals to your shipping and handling standard rates charged at time of order or charged at time of shipment? Where is there variance where you are overcharging or undercharging? How much are you losing on shipping alone? Stack on top the cost of packaging, warehouse fulfillment activity, and cost of goods…what are you retaining from the sale? How does shipping cost compare on an account if freight is a contracted percentage of unit price?
In the end, a freight pay and audit service can provide a wealth of benefits to any company that deals with multiple carriers for its shipping needs. What could you gain if you took it further? By leveraging advanced analytics solutions, you can generate higher savings and recovery from your billing data with actionable insights for your operations and commercial & marketing teams.
If you have a freight pay and audit service, you are well positioned to get more out of your data and take your logistics operations to the next level. If so, we should talk! Synapsum can help you do this in a fraction of the time and effort with our pre-built data models and software connectors.
