There are two fundamental things to know in logistics: never assume the given rate is the best rate, and always validate what you think is happening, even when the bill suggests otherwise. These ideals aren’t just pretty words. Their strength rests in how shippers leverage technology and how they apply the data from myriad data sources to make sense of what’s happening and how it all affects transportation spend. This is where shipping execution meets data-driven management, and its roots grow from freight audit and payment best practices that rely on factual, clear, and actionable insights. Of course, there are a few best practices to follow, beyond the standardized list of best practices we’ve noted in a past blog here, that can help your team maximize ROI and reduce shipping spend.
Use Electronic Invoicing
The first thing to know in the digital age of freight audit and payment best practices is the importance of the digital twin. With advancements in technology, all processes and functions have a digital twin. In freight auditing, that amounts to using electronic invoicing. Of course, not all carriers use the same invoicing features. This first step in our list of freight audit and payment best practices combines with data normalization as a result. This ensures all data is accurate and comparable, regardless of how the invoice originated. Shippers can seek out a partner that will work with your carriers to digitize all your invoices for faster auditing and increased efficiency.
Streamline Invoice Matching
The next step is to streamline invoice matching with analytics that combs through countless general ledger (GL) codes to validate quotes against billed rates. This is perfectly suited to connect with anomaly detection to identify inconsistencies and correct them automatically. Invoice matching is the next natural step of checking costs and ensuring your team is following the right freight audit and payment best practices. Invoice matching provides validation of actual cost per general ledger and even down to the SKU level to provide accurate data on profitability. Of course, there will be inconsistencies that arise, making this best practice a natural precursor to anomaly detection and correction.
Automate Anomaly Detection and Correction
Anomalies will inevitably happen. They might result from problems with GL codes, incorrect user data entry, and more. In some cases, anomalies might occur due to region-specific issues, such as missing postal codes from portions of the world where ZIP codes do not exist. In other cases, an anomaly might arise from a misspelling of a location or address.
Anomaly detection allows for benchmarking on extremely detailed KPIs when the shipper steps out of its determined guardrails. For example, if there is a higher cost per shipment in a specific lane the system will notify the shipper when they are outside of the “norm.” While they may not change an overall high-level KPI, the higher cost will still affect spend and shippers need a mechanism, such as a platform, to view these instances in a detailed view. A great freight audit and payment provider will aid with the anomaly detection to address any anomaly and course correct so everything is all good with correction.
The right freight auditing tools can identify these issues, make the correction, check the data, and move it along through analytics to understand total landed costs.
Track Average Cost by Zone, Mode and More
Measuring and tracking shipping KPIs is among the best ways to control shipping spend, and using analytics helps shippers identify their average cost by zone, mode, carrier, and other granularities of preference. Together, this helps shippers understand how their costs vary based on origin/destination pairs and avoid waste and make data-driven insights to operate more efficiently when selecting services or carriers by getting actionable insights.
Hold Carriers Accountable With Predefined Variance Thresholds
Even in the best of circumstances, carriers will make mistakes on invoices. Past reports from Intelligent Audit have uncovered a general rule regarding inconsistencies and errors in invoices: they occur on up to 80% of all invoices.
Now, that might seem excessive, but it’s important to remember that not all inconsistencies result in added costs. Regardless, the invoice inconsistencies that do add to costs need to be found prior to initiating payment for transportation. After all, it’s easier to avoid an overpayment in advance rather than try to initiate a chargeback against a carrier. You must ensure your team follows established variance thresholds and avoids wasting time on errors that account for pennies and focus on the bigger opportunities to lower total spend. Doing so will also help to hold carriers accountable along the way.
Generate Automated, Customized Reports
The advantages of following industry-leading freight audit and payment best practices come from the application of data across both automated, on-demand reports and customizable reports.
Shippers have different needs, and shareholders may be more interested in understanding how historical and real-time data compare across unique geographies and different granular views. That’s where having a partner like Intelligent Audit can generate on-demand reports and allow for customization of metrics to suit the most demanding of enterprise shareholders. This was further explained by Intelligent Audit’s now CEO, Hannah Testani, in 2019 via Inbound Logistics, “The reporting capabilities also include trends and historical dashboards that can help shippers identify spikes and anomalies as they occur; relevant KPIs that provide insight to the trade-offs between cost, speed, and performance; and interactive heat maps that pinpoint bottlenecks and problematic or high-cost locations. The system’s 700-plus prebuilt reports provide real-time reporting and tracking, time-in-transit analysis, and data on accessorial management, carrier performance, and hub injection analysis, among others.”
Put These Best Practices to Work With Intelligent Audit-Powered Solutions
The best practices for gaining efficiency and increasing productivity align well with advanced freight payment and analytics capabilities. It’s time to stop wasting resources and ensure your team pays for what’s actually shipped and delivered based on the money-back guarantees of your transportation partners. Find out how your team can put the right data and analytics, as well as freight audit and payment best practices, to work by contacting Intelligent Audit today.