Transportation Best Practices/Trends

Freight payment
enters a dynamic,
global era
Using analytics and Big Data, the next generation of freight bill
payment and auditing companies comb all aspects of freight
transportation operations to highlight supply chain efficiency
improvement opportunities.
BY JOHN D. SCHULZ, CONTRIBUTING EDITOR

ne thing is for sure: These

are not your grandfathers
freight payment companies.
The freight bill payment
industry has evolved from
the manual, green eye shade era of
correcting regulated trucking rates to
a high-tech, globalized industry that
attempts to make the most of Big Data
to analyze freight shipping trends and
help streamline overall supply chain
operations.
Although post-payment auditing
is still part of a freight payment companys repertoire, analysts and senior
officials within these organizations
say increasingly that their most important value to clients is in pre-payment
auditing, planning, benchmarking, and
analytics.
While shippers can still do some of
this data analysis in-house, experts say

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that the information systems required

to stay on top of these analytics are
expensive and constantly changing. And
shipments are now going around the
globe, not just around the corner, making data collection and analysis even
more complex for do-it-yourselfers.
Our view is that you dont need to
audit every invoiceyou need to verify
one every so often, says Satish Jindel,
president of ShipMatrix, a company
that performs rate invoice verification,
mostly for parcel and less-than-truckload (LTL) clients. The company has
several hundred customers who spend
in excess of $3 billion on transportation, he says. They need help in finding efficiencies, not merely auditing
freight bills, he adds.
Today, freight payment is merely a
fraction of what most of these companies do. Instead, computer-driven

L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2015

technology has taken the lead, trying

to maximize efficiencies not merely
through audits, but rather by close
examination of a shippers freight
trends and tendencies.
However, the introduction of computerization into the freight payment world
is just one of the changes affecting the
market. The other is merely the scope
of the industries that todays freight payment companies are tracking.
The biggest change in the freight
audit payment space is that now we
encompass the entire globe, says Allan
Miner, president of CT Logistics, a
freight payment company founded in
1923 that has grown to 1,000 clients
with operations around the world.
Our ability and need to be able to audit
in different currencies and different
languages, and put that into one common corporate data base for corporate

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SEPTEMBER 2015 | L O G I S T I C S M A N A G E M E N T

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Transportation Best Practices/Trends: Freight payment

intelligence, is very important.

Mike Regan, president of TranzAct,
an operation that began in 1984, says
that the marketplace for freight payment services companies has changed
in three ways. First, he says, the nature
of the competition is different. Previously, competition came in the form
of mom-and-pop operators, he says.
Today were competing against Oracle, SAP, as well as C.H. Robinson.
Second, Regan says that what customers are expecting and what theyre
willing to pay for has changed. Theyre

People used to have traffic departments with stacks and rows of tariffs,
says George Pezold, executive director of the Transportation Logistics
Council. People would pull down
the tariff and make sure the trucking
rate checked out with any accessorial
charges. Nowadays, very few companies have that.
Todays modern, lean companies
may have one logistics manager who is
busy arranging moves with freight forwarders in India, for instance. Meanwhile, freight bill payment verification

The freight bill payment industry has evolved from

the manual, green eye shade era of correcting
regulated trucking rates to a high-tech, globalized
industry that attempts to make the most of Big
Data to analyze freight shipping trends and help
streamline overall supply chain operations.
looking for better data quality, better
reporting, better services at a lower
price. You can have price, speed, or
service, but not all three.
The third change, according to
Regan, comes along with the data
information revolution. When TranzAct was formed, it concentrated on
processing and payment of freight bills
exclusively. Now, he says, it uses transportation management systems (TMS)
to provide automated load tendering
and tracking, a company-developed
system called ShipperShield to look at
carriers Compliance, Safety, Accountability (CSA) scores, and a technology
group that rates carriers risk and performance metrics against the freight
rates they are offering.
Shippers are looking for a lot of services other than just freight payment
ability, Regan adds.
How customers have changed
The surge in popularity of freight payment services companies reflects the
overall downsizingor elimination
of entire traffic departments within
this countrys large manufacturers and
retailers.
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may lie outside that persons field of

expertise.
In theory, the larger freight bill
payment people are specialists, says
Pezold. They have all the software to
make it much more efficient, and the
cost per bill is in the pennies. If you
did it manually, it would take 10 to 15
minutes for each one. These companies pay these by the thousands, and it
takes seconds.
These companies can also perform
pre-audits to check weights and classifications. If the bill is approved for payment, most will send list of approved
bills for payment and shippers will
transfer funds into a separate account
to pay the carriers.
However, problems arise when
freight payment companies dont maintain separate accounts for each of their
customers. In recent examples where
there has been criminal activity, those
funds paid by shippers were comingled
with other operating companies.
If youre going to work with freight
payment companies, find out exactly
how they handle payments and what
kind of accounts they keep and how
funds are transmitted, adds Pezold.

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If youre smart, make sure they have

a good fidelity bond, and make sure
that theyre scrupulous in the way they
maintain funds, he says.
What they do
Freight bill payment and auditing companies use huge mounds of data to
analyze multiple levels of combined
services. These can include freight
bill auditing that provides visibility of
all process stages, closed-loop client service analysis of carriers, collaborative exception management portal,
spending analysis and management
reporting, as well as comprehensive
data and image retention.
They also can provide specialized
audits of the major small package companies. These services provide validation of your carrier contracts, visibility at the package level, service level
audits, and constant monitoring that
eliminates the need for manual intervention of your freight payment, audit,
and accounting processes.
Most freight auditing companies
also offer some form of proprietary
routing software that provides the ability to auto-rate the most complex shipment scenarios, allowing for the audit
of freight bills or invoicing shipments
with complete accuracy.
And, of course, most of the companies still provide post-audit services
to correct billing errors. However, the
companies say that a much more valuable tool is on the front end where analytics can be used to speed efficiency
in increasingly complex worldwide
supply chains.
We spend a lot of time homogenizing
supply chains to vertical tower people
who have control over different aspects
these aspects of their operation, says CT
Logistics Miner. Creating these business intelligence dashboards requires
a big investment to homogenize these
supply chains into what makes sense for
those clientswhether its in dollars or
pounds or Euros or other different measure of units.
Todays freight payment companies are offering expertise in all
modes, processing and reporting for
all move types, advanced accounting
capabilities, commitment to continuous process improvement practices,
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Transportation Best Practices/Trends: Freight payment

advanced systems for the most complex transportation infrastructures,

business rules, and detailed, accurate business intelligence to support
supply chain analysis.
Cass is perhaps best known for
partnering with high-volume shippers
to create solutions that solve difficult
transportation expense management
challenges. Experts say that the more
complex your transportation infrastructure, the more you have to gain by
implementing a best-practice solution
through companies such as Cass.
Cass and other companies say
that shippers can achieve cost savings through their detailed audits and
advanced duplicate protection with
system integration with a shippers
ERP or accounting system. They also
provide one integrated source of business intelligence for transportation
expense data, offering visibility that
enables process improvement and
further savings initiatives by handling
exception invoices only.
Some freight payment companies
are even pooling their clients shipping
needs to offer shipping co-ops by
which individual smaller shippers can
receive discounts like a major national
account. These services can produce
premium discounts, eliminate many
accessorial charges, offer competitive
fuel pricing surcharges, and give shippers access to online rating and customized routing guides.
The audited freight bill service is a
three-legged stoolthe client, the carrier, and the payment company need to
collaborate to ensure things dont get
delayed, says Miner. This ensures that
our clients carriers have a say so. We
dont want to outright reject a freight bill
because the tariff isnt updated.
Savings in action
Harold Freidman, senior vice president of global corporate development
for Data2Logistics, says that his payment and audit company recently analyzed the operations of a large clothing
retailer. This company had sales of
more than $13 billion, but was facing
the challenges posed by rapid growth
in a complex retail environment.
Their operation required coordination and tracking of over 400,000
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Some freight payment companies are even pooling their

clients shipping needs to offer shipping co-ops by which
individual smaller shippers can receive discounts like a
major national account.
incoming and outgoing merchandise
shipments every month. The retailer
had little access to freight payable
information and no real-time reporting capability. Visibility into this critical area of their supply chain was
limited, and there were also problems
coding freight cost information by two
full-time employees. This resulted in
numerous late payments.
According to Freidman, the company worked closely with this client to
customize a solution compatible with
their ERP system. Data2Logistics did
an electronic data invoicing (EDI) test
using actual shipping history to prove
that the company could auto-code
shipments down to the specific commodity and general ledger code level.
Once implemented, Data2Logistics
allowed the clients internal users 24/7
access to detailed standard and ad-hoc
reports with actionable shipping information via the Internet.
As a result, the clothing chain was
able to reassign the two full-time
employees that had been required
to code shipmentsone has been
assigned to another department, the
other is now overseeing value added
analysis and reporting internally.
Data2Inform reports and web-based
querying tools have also given this
retailer the ability to carefully analyze
and improve their business processes.
The retailer used this information
to renegotiate contracts with FedEx
and UPS and reduced their rates with
each carrier. Within one year, the estimated cost savings from these services
exceeded $1.7 million due to audit
recovery, process improvements, and
labor savings. While not every shipper may achieve this much in savings,
Friedman says that the information
provided makes it possible.

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It will vary by client but the real

thrust for saving money comes from
the fact that we give them quality
information, which they have been
lacking for decades, says Friedman.
At first blush, its not unusual for people to hit the jackpot in the first year of
processing.
Another example is TranzActs
17-year-old relationship with Maurice,
a 90-year-old sporting goods company.
Maurice came to TranzAct partially
to save money on their LTL shipping,
but more importantly because of the
reporting capabilities offered through
the companys freight audit an payment services.
By outsourcing those services to
TranzAct, that brought all processing into one location so there could
be a single database containing all of
Maurices shipment activitywhich
allowed complete visibility for analytics. Such greater visibility yielded
better traction on implementing compliance programs, such as least cost
carrier compliance and vendor shipping practices.
TranzAct provided routing tools that
helped Maurice get more control of their
inbound shipments. In turn, the better
reporting capabilities ultimately provided
visibility into Maurices distribution and
sourcing practices to identify opportunities for savings and improvement.
According to TranzActs Regan,
such savings are possible, but shippers
have to be willing to pay for it. If you
want the highest service and fastest
delivery at the lowest possible price,
thats not going to happen. We dont
get to write the rules of engagement.
We need to respond to those rules.
John D. Schulz is a Contributing
Editor to Logistics Management
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