For decades, shippers have been using freight audit and payment services to provide core needs such as issuing payments at the right time, using the right rate, and providing accurate information for reporting. While that remains the same, this service has been evolving greatly to meet the current demands for better analytics and faster communication.
Mike Regan, Co-Founder and Chief of Relationship Development at TranzAct Technologies, recently explained in an article for the Journal of Commerce that two major changes are occurring in this sector.
One major change is in the speed of how data is exchanged. “The speed of that has changed, and as we transition from EDI to API platforms, we are getting much closer to a ‘real time’ environment where data is available much sooner than it has been in the past,” Regan said.
A second change is greater integration of data from the freight audit and payment process into other enterprise-wide data platforms. For example, by integrating data from the freight payment process into a company’s enterprise resource planning (ERP), companies can get a much more comprehensive understanding of the correlation between freight and sales activity, as well as freight and procurement activity.
Since freight data can be shared with multiple departments within an organization, he said, “we see representatives from these departments involved in the decision-making process. Five years ago, the decision to select a freight payment provider was primarily made by transportation and accounting personnel. Today, it is not uncommon to have representatives from these departments plus personnel from procurement, sales, IT, and finance involved in the decision-making process.”
A good freight payment and auditing system can help bridge the gap between what is happening at a company’s “front” door (i.e., how and when customers are buying things) and what is happening at its “back” door (i.e., the freight dock, which is where, when, and how the sales orders are being delivered to customers), according to Regan. If a shipper doesn’t bridge this gap between the front and back door, he is “missing some really important things,” he said.
Take, for example, a scenario in which the shipper maintains a “free freight” policy, which goes into effect for all orders valued at $2,500 or more. If a customer understands how this process works, he may order something for $3,000, and get the free freight factor applied on his internal systems, but later cancel a portion of that order. If the ERP system doesn’t flag the fact that this is now a $2,000 order, the shipper will still apply the free freight label to the order, thinking it is a $3,000 order. After they integrate their shipment history data with their sales data, they can make better decisions.
“Five years ago, shippers had a tactical orientation toward freight payment applications,” Regan said. The emphasis was on providing solid audit and payment controls and producing data and reports on spending. “That’s changed in a big way. Today, shippers want great controls and analytic capabilities that can be used to help them understand how they can run their business better. That is why today, an effective freight payment and audit system can be a valuable strategic asset that can reduce costs and improve bottom line profitability,” he said.
If you’re interesting in learning more about how freight audit and payment or have any questions, we encourage you to give us a call at 630-833-0890 or send us an email.