An
established industry in North America, a fast growing industry in Europe and an
emerging industry in Asia. Freight Audit and Payment is a fast growing
outsourced service. But which vendor to select and trust with the audit and
payment of your logistics service providers? Do you just go for the cheapest or
are there other things to consider?
While
freight audit as such may not be a mission critical activity – not paying your
carriers on time as a result of badly managed freight can affect your
logistics. So when considering outsourcing your freight audit and payment
activities it pays to consider the following aspects.
1.
Regional or Global Requirements
Not all
providers have global capabilities. A
number of them will project a global footprint but it is not just about having
an office in the region you are looking at. Make sure to truly evaluate if your
provider can handle various currencies, various languages, local legal, tax and
finance requirements.
2. Just
Audit?
Are you
just looking for an audit? Or do you also require complex GL coding? Matching?
Rate claim handling? Payment? Data Mining? Freight audit providers continue to
expand their service offerings to include e.g. shipment order entry and
tracking – but they may not be specialists at those additional services. So you
need to decide which part you outsource with them and which part you keep in
house or outsource somewhere else. Make sure to know what you need (now and
in the future) and that your provider can truly cover your needs.
3.
Payment
Payment can
bring complexities (and costs) with various currencies as well as regional and
local financial and tax requirements. Sometimes it may be wiser to outsource
the audit but keep the payment in house. Some freight audit and payment
providers have an interest in also taking over the payment part of the process.
That can allow them to subsidize their service through the interest accumulated
between the moment you pay the provider and the moment the provider funds the carrier. That
interest is known as ‘float’. There is nothing wrong with float as long as it
is transparent to all parties. Off course with the current level of interest
rates being less then 1% the incentive for a float based model has largely
disappeared. That also has the added
benefit of keeping control over your funds.
4.
Information and Reporting
As the
emphasis in the freight audit industry has shifted from pure audit to
information gathering and reporting, it is essential to truly test and evaluate
your provider’s coding and reporting capabilities. Is the reporting on line?
Does it allow to slice and dice data, can you feed data into your own systems. Freight
audit can potentially create a wealth of detailed logistics and financial
information. But can your vendor untap it for you in all its details? And against what cost?
5.
Additional Costs
Beware that
your price per audit transaction may not cover everything. Allocations?
Payments? Rate updates? Reports? Implementation? Will these add to your overall
costs? And you need to make a distinction between the transactional fees and
the one time fees such as implementation and set up. Freight audit pricing can
be notoriously complex. Make sure to account for all the costs and calculate
them back to a price per transaction. Better yet, let your prospective
providers quote in fixed pricing format so you truly compare apples with
apples.
6.
Implementation
Selecting a
provider is the first step, not the last! How will they implement? What
resources will they commit? Can they convert carriers to EDI? What are the
timelines? Depending on the provider and what system and process they offer the
impact of implementation can vary. In some cases implementing the solution may
mean truly integrating your financial and operational systems. In other cases it
can be as simple as diverting the carrier invoices to your provider and
receiving a data feed after audit. On whichever side of the implementation
spectrum you may end up – make sure your provider has enough resources to
ensure a timely implementation – but also ensure your own organization and
carriers are ready to spend time and effort to get off to a good start.
7.
Beware of just price!
Just going
for the lowest price per transaction may not always be the best way. The freight
audit market is a competitive market where the emphasis is on price to win business.
This can be at the expense of quality. Cheap may be expensive on the longer
term through missed deadlines, re-implementations, or incorrect audit.
Xzisu is a global transport
& logistics tender/RFP management specialist. With a proven track record of
service excellence Xzisu uses its industry knowledge, combined with technology
to manage complex tender processes .www.xzisu.com
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