No matter the size of an organization, allocating freight costs is a priority in supply chain operations. This article explains why conducting regular freight audits is a key factor in unlocking financial, operational, and strategic advantages.

Types and Processes: Freight Auditing in a Nutshell

Without a reliable Freight Audit and Payment (FAP) system in place, it’s easy to miss unnecessary freight spending.

By performing regular freight audits, shippers gain better visibility into all operational elements of the supply chain. This gives them the opportunity to not only lower transportation costs but also gain competitive advantages in the market.

Three Key Advantages Unlocked Through Freight Audits

There are numerous positive outcomes of freight auditing. Three areas of particularly high-impact include financial benefits, operational advantages, and strategic planning.

1. Freight Auditing and Financial Stability

Financial benefits are the number one reason leaders in this space seek out high-tech freight audit and payment software. Freight auditing leads to financial stability.

As many as 20% of freight invoices may contain billing errors. These can be issues with incorrect weights applied by parcel carriers, wrong monthly invoice charges, as well as inconsistencies with billing currency. All of them amount to wasted resources or wasted time.

FAP processes can catch these problems early, before they make a significant financial impact. By eliminating human errors through automated FAP processes, companies can optimize freight spend by 4.5-8.5%.

When a company has verified freight invoices and a system in place to review each one based on established criteria, it avoids unnecessary detention charges, such as delays in the return of a container. Additionally, it will bypass unexpected accessorial charges for services like reweighing.

If an FAP process is automated, the organization recovers lost time as well as stopping the slow leak of unmonitored errors. Administrative fees go down as processes that were once manual get streamlined by software.

Using a proven, tech-based FAP process lowers costs, ultimately improving ROI.

2. Freight Auditing and Operational Excellence

The supply chain is vast, and clarity is imperative for success. Without an FAP system, an organization faces the insurmountable challenge of siloed data. When using siloed tech stacks and systems that aren’t communicating seamlessly, operational delays are inevitable.

This is especially apparent when the distribution channels experience a phenomenon known as the bullwhip effect in supply chain analytics. The bullwhip effect (Forrester Effect) refers to increasing swings in inventory as a response to consumer demands, and it often leads to forecasting problems, scheduling issues, and tension between partners as well as customers.

When the data is stale or skewed due to swings in demand, companies risk investing too much in inventory or delaying production. Production delays alter the shipping schedules and lead to problems with customer service. Since providing excellent customer service is one of the highest priorities in the supply chain, if a company isn’t prepared to account for the bullwhip effect, it risks higher churn rates.

By using a reliable FAP system and improving operational communication, dynamics like the bullwhip effect can be diminished. A solid FAP process allows operational leaders to forecast demand and inventory changes despite major disruptions to the marketplace. As forecasts become more accurate, supply chain operations become more efficient.

3. Freight Auditing and Strategic Planning

Leaders at global enterprises require extensive data analysis to enable intelligent visibility in the supply chain. FAP processes facilitate advanced data compliance and analytics across all invoices and shipments, allowing leaders to make strategic decisions that are backed by objective data.

Both descriptive and predictive analytics and insights are unlocked by a thorough freight audit. For those companies striving to keep up with the pace of the market, having a TSM system that utilizes the latest FAP capabilities leads to meaningful and actionable insights.

For example, calculating cost to serve (CTS) is straightforward when freight audit and payment reviews uncover insights into spend, speed, and sustainability.

By understanding the spend across different modalities, regions, and operational approaches, leaders can make changes that improve business strategy going forward. Optimizing inventory requires a thorough analysis of the speed at which shipments arrive, which is possible when implementing a reliable freight auditing protocol. A bonus benefit: with the increased focus on environmentally sustainable operations in the supply chain, freight auditing plays a prime role in the all-important first step of measuring environmental impact.

The Power of Freight Auditing for Future Strength

Not all auditing systems are purpose-built for our field and selecting the right partner for freight auditing and everything that comes after is mission critical.

Not all FAP systems are created equally. Implementing unreliable software, or technology that isn’t configured to your company’s business rules, will not yield these three positive outcomes.

Freight audit systems should produce credible and enhanced data insights, sophisticated audit management systems and be customer-centric focused.

Deploying any new freight auditing software requires setup for automation and defining rules and parameters. There is some effort involved, but the negative effects of freight billing errors are a driving impetus, as is the reality that tech-fueled processes alone are capable of driving future growth.

 

Chris Cassidy is the chief revenue officer for Trax Technologies, the global leader in Transportation Spend Management (TSM) solutions. Trax elevates traditional Freight Audit and Payment (FAP) with a combination of industry leading cloud-based technology solutions and expert services to help enterprises with the world’s more complex supply chains better manage and control their global transportation costs and drive enterprise-wide efficiency and value. For more information, visit www.traxtech.com.