What You Can Learn From Your Company's Shipping Data
Auditing your shipping invoices saves money. But just as importantly it yields valuable business intelligence through a rich depository of captured data that helps you make informed decisions as you improve operations.
As distribution giants Amazon and Wal-Mart flex their supply chain muscles in a race to get goods into their DCs and out to the customers quickly and perfectly, one thing is clear: shipping is a key part of any retailer’s competitive edge. Your logistics operations can be optimized as keenly as any profit center in your business. No surprise that the road to enhancement and efficiency begins with data, and it comes from your carriers’ invoices.
Freight and parcel invoices contain a wealth of information. Auditing and processing these invoices electronically and prior to payment yields three crucial benefits for supply chain management:
1. Savings, excluding duplicate invoices, of $4.25 per bill. It’s not unusual for shippers to see savings of tens of thousands, if not hundreds of thousands of dollars.
2. Administrative cost savings of $10-$12 per bill. Your accounting people are freed up from processing and paying dozens of carrier invoices each week.
3. Game-changing data that offers opportunity for significant logistics improvements.
Using freight auditing software in-house or partnering with a third-party auditing and payment vendor allows businesses to save money and gain insight into their operations. If you work with a freight auditor, you will have access to your shipping data through web-based dashboards, as well as have the option of importing the data directly into your ERP system.
The Data Freight Auditing Captures
More than 150 data points are captured and examined in the freight auditing process. Examples include origin and destination addresses, customer and vendor names; shipped and delivery dates; weights; freight, accessorial and fuel charges; product classifications and descriptions; GL codes; service levels and numerous other elements.
Criteria checked during the audit process include checking for duplicate invoices; ensuring proper rate bases and discounts; and identifying late deliveries, improper accessorial charges and fuel surcharges. Fuel surcharges change weekly and make up a substantial portion of freight, parcel and ocean invoices.
Identify Your Greatest Shipping Expense
Data from freight invoice auditing gives you a complete breakdown of costs in numerous categories. This can help you make better decisions regarding your shipping practices. For example, you can identify how much you spend by parcel service level. Are you shipping next day when ground delivery will suffice? You can also allocate costs to account or general ledger codes, and allocate your freight spend by vendor, region, store, business division and taxes.
Other cost savings opportunities can be identified with this data. An example is address correction charges. Fees for repeated shipments to wrong addresses can add up quickly. You’ll be able to identify these charges and make the appropriate changes to eliminate these ongoing fees. Without data from the audit, retailers are unaware there is a problem or an opportunity for improvement.
Freight audit data also aids in rate negotiations with your carriers. These agreements are typically renewed annually, and the more information that a shipper can bring to this discussion with a current or prospective carrier, the better the result. Just as each shipper has a forecast for the next 12 months, so do carriers. They want as much information about your shipping practices as possible in order to give you their best possible pricing. By providing information regarding tonnage by shipping lanes, number of minimum weight shipments and requirements for additional services, the more competitive pricing you’ll receive.
In these negotiations, shippers typically too often focus only on the discount that they receive. However, up to 25% of your freight expenses may be in the fuel and accessorial charges category. Knowing where your spend is in these areas will allow you to focus on these items during the negotiation process.
The Impact of Proposed Carrier Pricing
Another benefit to companies that have access to data garnered from freight audits is a real view of how proposals from new or existing carriers would look in terms of real dollars. With the complexity of factors involved in carrier pricing, comparing one proposal with another is not always an apples-to-apples comparison, especially since definitions of charges can vary between carriers.
However, knowing you historical shipping lanes, minimum shipment volumes and accessorial requirements, you can calculate the total amount you will pay under different proposal scenarios. This allows you to identify best value carriers, and make decisions based on numbers rather than gut and perception.
Supply Chain Visibility
A full analysis from audit data likewise aids retailers with route optimization. The data reveals which shipping lanes are common without relying on carriers for this information. This allows you to identify possibilities for shipment consolidations where you’re shipping from the same origin to the same destination within a short time period.
The shipping data also includes origin and destination points, as well as the cities packages are routed through. All this information can be used in decisions regarding locations for new distribution centers and stores.
Conclusion
Shipping today is obviously an integral part of the retail business. Whatever improves your shipping operations helps your business. Freight bill auditing pays for itself through the savings that it generates. And the business intelligence made possible by capturing and analyzing all of your logistics data allows you to drive cost reductions while implementing operational improvements.