SPECIAL ADVERTISING SUPPLEMENT FREIGHT PAYMENT SERVICES: BOOSTIING INVOICE IQ
In today’s economy, freight charges represent up to 10 percent of a company’s total expenses. Fuel surcharges are driving that cost even higher, and shippers are looking to get a handle on the numerous expenses that are adding to their freight costs. Many shippers are turning to freight bill payment and auditing services to gain insight. Traditionally a misunderstood part of the supply chain, freight bill audit and payment (FBAP) may be viewed as a mundane clerical process, but smart shippers recognize it as a source of business intelligence. While some choose to maintain con- trol of this process internally, industry data shows that outsourcing freight payment is becoming the preferred option.
In 2008, approximately 54 percent of North American firms outsourced some part of their freight payment activ- ity, according to The State of Logistics Outsourcing , a third-party logistics ser- vices survey conducted by Capgemini, the Georgia Institute of Technology, Oracle, and DHL. This figure is up from 45 percent in 2006, indicating that ship- pers appreciate how outsourcing FBAP can contribute to service improvements and reduced transportation costs. The benefits of FBAP boil down to simple math. It costs a large company about $11 in fully allocated costs to pay a freight bill internally. If the FBAP pays the same bill, the cost to the com- pany will be five to 10 percent of the internal expenses. Subtract another two to five percent by reducing incor- rect or duplicate bills, and the savings can be significant. In fact, most ship- pers claim that outsourcing FBAP helps them recover three to five percent on their overall freight spend, according to data from supply chain consulting firm Spinnaker Management. It’s no wonder that more companies are giving FBAP services their business. “In this economy, cost cutting is a moti- vator,” says Clifford F. Lynch, executive vice president of Memphis-based CTSI,
a global supply chain technology and services company. “The overcharges we uncover in freight bill audits provide sig- nificant cost savings.” HOW IT WORKS To begin the auditing process, a freight bill payment company receives its clients’ freight bills directly from car- riers. When the bills are received, either via electronic data interchange (EDI) or manually, they are entered into the contractor’s system, providing immedi- ate visibility. Once the bills are entered, they are audited for accuracy. Auditors verify the bills’ validity, mileage, dupli- cate payments, accessorial charges, and use of correct tariffs. After auditing, the charges are coded and reconciled, and the bills are paid. Shippers reap the benefits of this close attention to their bills. “It’s imperative today that a company audit its freight invoices,” says Garry Oswald, vice presi- dent of sales and marketing for National Traffic Service, a freight audit and bill payment service provider located in Amherst, N.Y. “Too many benefits are missed by skipping this process.” One key benefit a provider can offer customers is robust reporting and data flow of transportation activities. FBAP
54%
45%
2006
2008
Percentage of North American firms outsourcing freight payment activity.
98 Inbound Logistics • September 2009
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