Check your Freight Auditor’s shipment data – Part 2

Collecting and cleaning historical shipment data is one of the most time consuming tasks in a freight RFP process. It is also one of the most important tasks in the RFP process. Historical shipment data forms the basis or shipment profiles, analysis baselines and modelling. The data is often divided over multiple locations, available in various formats and has a wide range of quality standards. Companies that use a Freight Audit & Payment (FAP) vendor often have an easier job in collecting the data. A FAP vendor can be a single source for actual shipment data and shipment cost. This sounds like an ideal situation, but be careful, there are still many things to look out for.

In this 2 part article we will give you a checklist that you can use to check your auditor’s data (and that of other sources) before you use it for freight RFP’s. Here is part 2 of the checklist.

Check 5 – Data quality

In the data quality checking process you need to review your historical shipment data sets against standardised data tables. It is important to ensure that a number of key data fields are showing 100% harmonized data. For example, make sure that your origin & destination countries are all stored in a harmonized way (Full ISO country name or 2 digit ISO country code). Also ensure that place names are consistently spelled exactly the same way. There are few things  more annoying then running a query across a data set only to find that the result is incomplete due to spelling inconsistencies in the data.

Inconsistent data (e.g. misspelled place names) can lead to big errors in RFP’s. Carriers will be able to tell you how often they have been asked to quote for the same trade lane 8 times because a name was spelled in 8 different ways. If you use a FAP vendor you need to agree on rules and responsibilities when it comes to data quality. What do you accept to be imported in your data set and who is responsible for picking up on the errors? Is your own organisation at fault for providing wrong data in the booking process, is it the carrier who keys it wrong or should the FAP vendor be made responsible for cleaning and harmonizing the data? If you do not figure this out up front it is you (the client) who ends up cleaning a data set when you want to go out to tender.

Check 6 – Missing data

FAP data sets do not always need all details for the Freight Audit process. This means that shipment data might have data gaps. For example, your agreed rate with your carrier may be based on country to country. This means that the carrier invoice for the related shipments will most likely not contain details such as zip/postcode, state or place name. Information that is not relevant to audit the shipment, but it might be essential data for your next RFP project. When you create your shipment profiles, this level of detail could make the difference between getting a competitive quote and a bad quote from your invited carriers.

When you work with a FAP vendor make sure you perform regular checks on missing data. If essential data elements are not captured in the process you need to address this with both the carrier and the FAP vendor. Otherwise you might end up with an incomplete data set. Augmenting the data at the back end of the process is time consuming and at times impossible if you are no longer able to link data sources because of missing data elements.

Check 7 – Oddball data

Oddball data is data that seems out of place in the historical shipment data. For example zero weight fields (weight displayed as “0” or null), or excessive weight (e.g. parcel shipment of 20000 KG). In a data set that comes from a FAP vendor these types of oddball data elements will be present. In the audit process the related shipment costs may have been corrected, but the wrong shipment data is not most of the time. When you download your data to use for a RFP you need build in a validation process or even manually perform a check on these types of oddball data items. If you don’t you may end up using this type of data to e.g. calculate your average parcel weights. Or you end up using the incorrect (weight)data to calculate the shipment costs based on the new carrier quotes leading to incorrect analysis - either overstating the new costs or even more dangerous - understating the new costs. Oddball data can impact your shipment profile and analysis baseline significantly. It may misrepresent your shipment profile to the carriers and/or it may impact your ability to analyse the RFP results.

Check 8 – Cost data split

The more detail the better is the mantra for Freight RFP’s. This is especially true when it comes to the cost data part. The more detail that is available the more analysis tricks can be applied. For a RFP it is preferred to have base freight, discounts, fuel surcharges, all accessorial charges and taxes and duties split as separate items per shipment. In most cases FAP vendors are perfectly capable of delivering data this way. There are a few things to watch out for however.

§  Understand what is included in “freight” – some carriers have a number of costs backed into the base freight cost item. You need to understand what is included and excluded to be able to make an apples for apples comparison.

§  In the rate agreement some carriers may have split the accessorial charges from the base freight, but on the invoice they may present the cost as a lump-sum amount. FAP vendors will be able to audit it this way in most cases, but it will present an issue in the data set. When this happens you need to work with the carrier to ensure that the costs are split as separate items on the invoice. It also happens that FAP vendors log the costs as a lump-sum in the system to lower processing costs. Here you need to accept lower processing costs and a bad data set or accept higher processing cost but better data which may result in better quotes from your carriers.

§   Make sure that you have captured all costs for a shipment. In some case the shipments costs may have been billed across more then one invoice. For example in the case of Ocean freight the actual ocean freight may have been billed separately from the accessorial charges. On the other hand there may also be costs for customs charges that have been billed separately. You need to make decisions on which costs you will include in your baseline. And also make sure you consolidate shipment costs from different invoices to one shipment in you baseline to allow for a correct analysis.

Check 9 – Calculations

Last but not least, check the calculations in your data set. If you have downloaded your data to MS-Excel format it is easy to perform a few quick checks. Especially data coming from a FAP vendor requires some attention. The data set will most likely contain billed and paid cost data and these can differ. You need to ensure you use right data (the paid costs data is mostly the most accurate). In the US paid data is often the source to use, because of the “short pay” process (deduct the over-billed amount from the charged amount when paying the carrier) that is in place. In Europe and APAC however short paying does not apply in most cases. Here billed and paid may be shown different but the paid data may be offset further by a credit note for which a separate invoice line is created. In your data set this can look very confusing and can lead to misrepresentation of data if it is not interpreted is a correct way.  

It is therefore always useful to perform a sense check on your data (did we really spend this amount for Parcel this year?). Besides that, quickly do the following checks to ensure the cost data columns and rows add up correctly:

§  Do base freight plus fuel surcharge plus accessorial charges add up to the total shipment cost?

§  Are you sure that the total shipment cost excludes taxes (VAT)?

§  Do the totals of the individual cost columns add up to the total of the total shipment cost column?

Some conclusions

Freight Audit & Payment companies are a great source of actual historical shipment & cost data. But don’t take things at face value. The quality of the data largely depends on the work you put into it up front. Work with your FAP vendor and your carriers during the FAP process implementation to get the most out of your data. Give clear instructions to your carriers on what data elements and what level of detail you expect to see on the invoice. Also make sure you understand the limitations of your FAP vendor’s database and reporting system. For example, your data requirements may exceed the available data fields in your vendor’s database. During the selection of your FAP vendor you need to get a good idea if your required fields can actually be captured. And even more importantly, if they can be reported on in the way you need.

For FAP vendors checking on data quality besides checking on financial items will become an every greater requirement from clients. The promise of data availability on a single platform is great, but this is only as valuable as the quality of the data in the database.

Most steps in the checklist we presented apply for shipment data coming from all sources by the way, not only data provided by your FAP vendor.

Check your Freight Auditor’s shipment data – Part 1

Collecting and cleaning historical shipment data is one of the most time consuming tasks in a freight RFP process. It is also one of the most important tasks in the RFP process. Historical shipment data forms the basis for shipment profiles, analysis baselines and modelling. The data is often divided over multiple locations, available in various formats and has a wide range of quality standards. Companies that use a Freight Audit & Payment (FAP) vendor often have an easier job in collecting the data. A FAP vendor can be a single source for actual shipment data and shipment cost. This sounds like an ideal situation, but be careful, there are still many things to look out for.

In this 2 part article we will give you a checklist that you can use to check your auditor’s data (and that of other sources) before you use it for freight RFP’s. Here is part 1 of the checklist.
 

Check 1 – Does the data cover the whole scope of your RFP?

This seems an open door, but FAP vendors do not necessarily cover the whole range of carriers or shipment lanes for which you might need data for your RFP project. FAP is still not a fully global service, so it might be that your vendor does not cover certain regions or trade lanes that are included in your RFP. Also a lot of the spot buy freight activities and inbound freight activities are often not part of the service contract with a FAP vendor. Be clear about which carriers, services and shipment lanes are covered by your FAP vendor before you start your tender project. Any gaps that you find need to be covered via other data sources, which often proves to be a time consuming process.

Check 2 – Is your data categorized correctly?

Freight Audit companies receive shipment- and cost data from your carriers. It is the FAP vendor’s task to categorize the data correctly. But it is your task to set the requirements for this categorization. Data needs to be categorized in such a way that it can be easily grouped and sorted. Each shipment should be categorized on correct mode, direction (e.g. inbound, outbound), type (e.g. return, inter company, etc.), region, etc. Now, this seems logical, but it is not a given that this not always the case. A shipper and the FAP vendor need to ensure that during the implementation process of the FAP services clear categorization rules are established. Wrong or no categorization can lead to data that is meaningless. You can imagine that Parcel data that is categorized as Air data needs a lot of rework before you can use it for a RFP project (if you can find it at all if you run a query to extract all your Parcel data, when it is wrongly categorized as Air). A FAP vendor has its main focus on receiving data that can be used to audit invoices, the quality and categorization for later reporting is often a secondary priority. However, getting the data right is a top priority if you intent to use it for more than auditing.

Check 3 – What data items are included in the data set?

 

FAP data is not necessarily the same as RFP data. In a FAP data set you will also find rejected duplicates, credit notes and other audit related items. These types of financial data items can pollute your data set. Data pollution in a historical shipment data set is very risky. Duplicate shipment data in your data set can mean you overstate your actual shipment quantities. Keep in mind that a FAP vendor’s primary focus is to report on financial audit results. This means their data set includes all audit findings such as duplicates, overbillings, wrong billings, unauthorized billings, etc. If you do not comb through a downloaded data set from your FAP vendor and manually clean the data you run the risk of creating a wrong shipment profile for your company. A misrepresentation of your company in a RFP can be very risky and potentially costly. 

 

Check 4 – Quality of the carrier’s data set

When you use a FAP vendor you need to work with your carriers to ensure that you get the maximum number of data elements that the carrier can provide. Invoice data is not necessarily useful as shipment data for a RFP. In a RFP you need a lot of details about each shipment. If a carrier only provides the FAP vendor consolidated shipment data in its invoices, your data set stored with the FAP vendor is often less valuable or even useless for a RFP. When you appoint a FAP vendor you need to be very clear about what you expect to be able to do with the data. If you do not specify this in detail and do not work with both the FAP vendor and your carriers, you risk ending up with a lot of data that you cannot really use.

At the time of implementing a carrier into a FAP process ensure that the carrier can provide line item shipment data in the invoice feed instead of consolidated shipment data. Also ensure that your FAP vendor captures the data on line item level and not on consolidated level (which is often done as a compromise to lower processing cost).

 

 

In the second part of this article we will look at the remaining checklist items, being:

 

§  Data quality check

§  Missing data check
§  Oddball data check
§  Cost data split
§  Calculation check

 

Ocean Container Facts and Figures

Term used to indicate the maximum size and capacity able to pass through the Panama canal. Currently the maximum length is 290m. This will be increased in 2014 to 366m as work on the Panama canal is completed.

 

 

10000 - Estimated number of containers lost at sea each year. This is less then 0,01% of total containers shipped

 

The annual income generated by Ocean shipping is estimated to be USD 500 billion.
 
The average cost of shipping a 20ft container from Asia to Europe is about the same as an economy fare for one passenger on the same lane.

 

Information sources: Port of Rotterdam, Alphaliner, Marisec.org, Worldshipping.org, Maersk, US Army Corps of Engineers,desk research. www.xzisu.com

 

 

Successful transport RFP response teams – Part 2

Why are certain bid response teams more successful then others? What do these teams do to get a higher success rate than others? We identified 10 things that successful response teams do to win more business. In this series of two articles we share some of our observations about the characteristics that successful transport RFP response teams have.  In this second article we review the remaining 5.

Getting invited to respond to a transport RFP can bring pressure to a sales team. Pressure to deliver a competitive proposal in a short period. Many RFP response teams have been burning the midnight oil to get their responses out on time. All this hard work does not bring a guarantee to win the business though. And is that not what it is all about, winning the (new) business and have a high success rate?

 

So, why are some RFP response teams more successful than others? What traits do they have that give them a higher success rate? Having a successful RFP response team means your business can grow and become more profitable. Based on our experience we will share some of our observations on how the success rate of tender responses can be increased.  Here are the remaining 5 of their top 10 traits:

6) Don’t overpromise or under deliver

No one wants to start off a new business relationship on the wrong foot, by failing to deliver on promises made during the RFP process. The biggest question a Tender Manager may have after he awarded the business is: “did I make the right choice”? A Tender Manager may also see a new vendor as a potential risk and not necessarily only as a nice new relationship to explore further.

RFP response teams that understand the number one concern of a Tender Manager, ensure that people from the operations team are involved before a response goes out to the bid initiator. The response team reviews the proposal upfront with operations to understand if their proposal can be implemented successfully. When this is done, this should be made clear in the submission as well. It shows the Tender Manager that you have taken into account his concern about risk and that you can mitigate this.

 

7) Talk in benefits

Successful RFP response teams understand that the bidding party is mostly interested in understanding what is in it for them. So, what you’re going to do for them, how you are going to deliver those results and what will be the benefit for them. You need to make clear you have a full understanding of their requirements and talk about benefits, instead of talking about your features.

 

8) Demonstrate success

Success stories make great stories. Everybody wants to join a winning team, so tell your prospective client what is so great about joining your winning team. Professional RFP response teams list any great ‘claims to fame’, if you have any. Doing this proves that your company has ‘been in the trenches’ and suggests to them that they can also get results from you.

Pro-actively list your results, giving a brief description of the project, industry and the results which you have achieved. Also present real live KPI’s as proof and offer references.

 

9) Make response documents look extremely professional

You never get a second chance to make a first impression. How you present your proposal directly affects how your company is perceived. A professional presentation makes you look professional. A poor presentation makes you look inadequate.

Many people are ‘visual’ and they need to see things in a graphical format, so that they can understand how it works. Winning RFP response teams make extensive use of graphs, a graph says more than words. Also include some flow charts so your prospective client knows how your business and processes work.

Include action plans as well. Your prospective clients will know what to expect and when to expect it. Offer plans for multiple scenarios so that it is clear you are ready for every eventuality.

Ensure your document always contains at least an executive summary, contact details and a table of contents. Furthermore deliver your presentation in PDF format rather than DOC format. PDF format ensures the layout stays fixed despite the settings of individual PC’s.

To sum it up, make a document that your team can be proud of and does their efforts justice.

 

10) Evaluation cycle

For a professional RFP response team a bid process does not end at the submission of the proposal. The process needs to come full cycle through an evaluation process. Every tender response needs to be reviewed in detail. You need to get as much feedback from the client as you can on what they liked and did not like about your proposal.

The response evaluation step is part of the continuous improvement process of your RFP response team. It brings out best practices and creates success formulas for next responses. A team learns something from every tender. The evaluation process teaches a team where they are strong and where they need to improve. The lessons learnt need to be shared with the rest of the organization. This will bring the service offering as a whole to a higher level and improves the success rate on winning RFP’s.

We hope that many people who read these two articles think “we already do this”. If this is the case, great, you are probably on the right track. A good RFP response can give you the edge to win a tender - a poor RFP response will make sure you will not win the business.

 

 

Successful transport RFP response teams – Part 1

Why are certain bid response teams more successful then others? What do these teams do to get a higher success rate than others? We identified 10 things that successful response teams do to win more business. In this series of two articles we share some of our observations about the characteristics that successful transport RFP response teams have. In this first article we review the first 5 and in the next article we will review the remaining 5.

Getting invited to respond to a transport RFP can bring pressure to a sales team. Pressure to deliver a competitive proposal in a short period. Many RFP response teams have been burning the midnight oil to get their responses out on time. All this hard work does not bring a guarantee to win the business though. And is that not what it is all about, winning the (new) business and have a high success rate?

So, why are some RFP response teams more successful than others? What traits do they have that give them a higher success rate? Having a successful RFP response team means your business can grow and become more profitable. Based on our experience we will share some of our observations on how the successrate of tender responses can be increased. Here are the first 5 of their top 10 characteristics:

1) Preparation and planning

A well prepared team understands that the clock starts ticking the moment a RFP lands on their desk. Their preparations don’t start at that moment though. These have started well in advance. A tender RFP team should not be formed when a RFP invitation is received, it should already be in place. The roles and responsibilities of the team members are clear. The team consists of subject matter experts which should at least include one “writer” that has experience in creating professional RFP responses.

A number of RFP response components are always the same (e.g. your company profile, your service description, your competitive advantages); these can be prepared in advance and applied  to any RFP response. Of course you need to customise part to the individual RFP (e.g. focusing on the service that are requested in the RFP) but having the basic framework prepared will save a lot of time.

Winning teams are equipped with the right tools. They have access to company data, modelling tools, the latest MS-Office software (it will scare you to learn how often people are not able to open a document because they work on old software versions) and Desktop Publishing software to create professional response documents. Of course, fast internet access is a must for online tenders and research. 

A team that is prepared in advance will hit the ground running and does not loose valuable response time. Great responses are not created in a last minute do or die effort. They are based on preparation thus allowing more time to be spent on the RFP specific part of the response (e.g. pricing and services)

2) Understand what you are bidding for

Most professional RFP response teams don’t shoot at everything that is thrown their way. They run a received RFP methodically through a standard checklist to verify if it meets their minimum criteria for putting in the effort of creating a response. Once it is established that the RFP is interesting for them, they perform a detailed study on the received documentation.

Successful RFP response documents demonstrate clearly that the bidder understands what they are bidding for. They demonstrate where the offered business will fit in their current business model and how they can deliver maximum value to the client. RFP response teams that truly understand the business opportunity they are bidding for also reflect this in their quotation. Their pricing is not necessarily low, but it excludes the “safety buffers” that others build into their quotes when they are unsure of what to expect. If the issued RFP does not contain sufficient detail to determine what the business opportunity is, it is the responsibility of a professional RFP response team to ask the right questions to get the answers on the table. Don’t bid for something you don’t fully understand, it will only provide nasty surprises for both parties in the end.
 

3) Understand why you are invited and who the competition is

Successful RFP response teams understand why their company was invited to participate in a RFP. If you don’t really know why you were invited for a RFP, don’t bother spending time on creating a response. It is clear that you don’t have a fit with the client and the requirements. It must make  sense to you why you have been invited and how you can bring value to your potential client.

Insecure or under-prepared RFP response teams often go back to the RFP issuer to ask who the competition is. Prepared teams know this without having to ask. Based on the scope of the tender and their knowledge of the marketplace, they understand who their main competitors are and don’t have to ask or guess. Knowing who your competitors in the RFP process are is important because you need to show differentiation from them (also see point 5).
 

4) Follow the guidelines and complete all requested information

Most (not all!) RFP documents give a clear set of guidelines on what is expected by the RFP issuing party. These guidelines (rules) should be treated as absolutely non-negotiable by the RFP response team. A deadline is a deadline. Missing a deadline or asking the RFP issuing party to extend the deadline especially for you puts your company in a bad spot from the start. It shows you haven’t done your planning right. If you cannot get the planning for a RFP response right, how do you perform in day to day practice with your deliveries? Make sure if don’t negatively influence your changes by something like this. Keep in mind that the RFP issuing party also has a time plan which is based on receiving responses at a certain moment. If not everything is in on time, they cannot start their analysis which will mess up their time table.

Having said that, the given timeline for a response has to be realistic and achievable for the parties responding. For example, asking providers to quote for a global airfreight tender within one week is unprofessional and will not lead to competitive responses. However, deciding whether your are able to provide a credible RFP response within the given deadline needs to be part of the initial scoping (point 2). If, based on that scoping, you have decided to accept the invitation you have also committed to the deadlines.

Nothing can lower your chances of winning a RFP as much as submitting an incomplete response. The RFP issuing party needs to make an apples-for-apples comparison. This can only be done by having all the requested information in the RFP responses. Many RFP analysis teams will not take the time to contact you about missing details, but will ignore your submission altogether. If you were requested to submit information (e.g. quotes) in a prescribed format, don’t change it. The prescribed format has a purpose. If you change it, you will most likely make it impossible to upload your submission to an analysis tool and ruin your chances of winning any business. If the required format does not completely fit your mould you have to adapt to this. The RFP format that was requested often only serves the purpose of allowing the RFP issuer to equally compare data, a final format will be agreed upon in the negotiations.

A winning RFP response team always submits a complete and timely proposal to the issuing party.
 

5) Differentiate from the competition and mitigate risk of change

Winning RFP response teams don’t just hand in a list of their services, they make clear what their unique selling points are. They clearly demonstrate what their edge is over the competition. Being able to do this means you need to have a clear understanding of the marketplace you operate in and who your competitors in the RFP process will be (also see point 3).

Especially if you are not the incumbent you need to make it clear how you intend to limit the risk of change. Risk of change is a factor in the RFP process that can make or break your proposal. It is difficult to quantify as it often is linked to maintaining un-interupted service, switching IT systems, changing service levels and changing client interaction. Your quotes and services may be superb, but if you are not able to convincingly mitigate the risks of change you risk not being selected because the client feels uncomfortably with the risk.  

 

In the next article we will review the remaining 5 traits of successful RFP response teams.

Outsourcing Freight Audit - things to look out for

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.

Outsourcing freight audit to a specialist can bring benefits - savings between 1% and 5% over freight spend are regularly achieved - it pays to take the time to go through a comprehensive selection process to make sure the vendor you select really delivers the benefits you expect.

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.globalroutingguide.com

www.xzisu.com