Finding savings within transportation, especially in the complex world of omnichannel supply chains, is a top priority for shippers of all sizes. But how does a shipper go about keeping spending in check when carrier rates are continuously changing? The answer is simple: shippers need to find savings opportunities through a freight audit. But the value of freight bill auditing is often misunderstood. There are ample ways to apply the data from audits to optimize your freight network, but it all begins with understanding the basics of an audit. Let’s take a look at what a freight audit is, the challenges associated with manual auditing, how an audit benefits your business, and why a transportation management system (TMS) with embedded freight auditing is a great solution for shippers.
Defining a Freight Audit
Broad definitions of a freight audit focus on finding errors within freight invoices, and there are varying levels of invoice auditing to help shippers recapture costs. A freight audit is simply defined as a business process where the company’s freight bills are examined, adjusted, and verified for accuracy. The goal of a freight audit is to uncover savings by ensuring shippers only pay actual costs for transportation. While auditing sounds relatively simple, there are a few challenges within auditing that shippers need to consider.
The Challenges of Freight Invoice Auditing Without Technology
Take a moment to think about what goes into a typical freight invoice audit. A team member pulls the invoice, matches it to the quoted rate, reviews information within the invoice, including general ledger codes and delivery data, and determines whether the information matches. Depending on the shipment-specific data, this might only be a single invoice for a load that was consolidated, sent by truckload, scheduled for air transport at another stop, and then a separate charge for white-glove services. There’s also a chance that multiple carriers might each send invoices for this one move, and that’s a very real concern as volumes surge in tandem with e-commerce logistics expansion.
Assuming that it takes 20 minutes to fully audit an invoice, that amounts to conducting 120 audits per FTE per week. Even at a doubled speed, 240 invoices taking 10 minutes each per week, that’s still a $800 weekly expense. Yes, invoice errors that result in overcharges happen, in double-digit rates depending on mode, such as 25% among ocean carriers, according to David Biederman of JOC.com. Here’s the kicker: that statistic comes from a 2013 report, and as volumes have increased, the chances of errors has further increased.
The Benefits of Freight Invoice Auditing Within a TMS
The standards for efficiency have increased dramatically in the supply chain, and with advancements in software-as-a-service (SaaS) platforms, including the MercuryGate TMS, freight audits are easier and more automated. Embedding invoice auditing within the TMS, leveraging the collective resources of MercuryGate freight auditing partners, puts the technologies that power automated auditing at your fingertips.
Tracking the costs for each movement, even when consolidated into other larger shipments, helps to bring total transportation costs under control. Additionally, the insights gained lead to improved decision-making when choosing a carrier for a given shipment. It also provides a treasure trove of information that’s useful when executing shipments, such as whether a carrier was able to deliver on time and in full, whether service guarantees were applicable, and the next steps TMS users need to take. Unless user-defined rulesets in the TMS require manual intervention, it can all happen autonomously within the MercuryGate TMS. This is a marked advantage that helps shippers focus on top-priority needs and manage by exception, which boosts throughput and lowers barriers to efficiency.