So, the Freight Audit has been completed, (for this week, month or year; depending on the scope of what you are covering), and overcharges and errors have been found, now what? It’s time to look at the Payment Process and how to eliminate Logistics Errors.
Please note: this article follows upon a series of articles on the topic of Freight Auditing. It is advisable to read these first:
Freight Credit Notes
A good Freight Auditing process, with automation at its heart, should provide an output report, typically as a Excel file, that is a line-by-line or per consignment list of overcharge error amounts and should have the reason for the discrepancy stated, e.g. not our con note, duplicate con note, incorrect zone, etc.
This may, or may not, have also been reviewed by a freight clerk who will find those last nuggets of savings that automation cannot find e.g. redelivery surcharges; depending on the processes and capabilities of the provider, as well as the individual business’s requirements.
It is then a matter of emailing the Credit requests to the appropriate carrier contact with a summary file that outlines the locations, service(s), invoice references covered and dollar amounts owing.
The back and forth of email and phone communications with various carriers and their relevant staff members takes a bit of time and organisation, and so some prefer to outsource this aspect of the project as well.
As mentioned in our previous article: Freight Audit Checklist, you would want to have appraised the carrier’s relevant staff of the imminent arrival of these requests for Credit well in advance to ensure negotiations go smoothly; particularly of course if this is going back several months in time, for invoices already paid.
Freight Audit Payment Process
Obviously the bigger the scope of the Freight Audit project in terms of months covered, the more effort required for negotiating payment of overcharges.
For larger amounts you may need to agree to payback in installments or payback through a discounting process of future invoices until complete.
Whilst it’s great that you’ve captured all your savings from this process and therefore retrospectively reduced your freight costs, the audit should also provide you with the information required to ensure the same issues do not repeat.
Troubleshoot Logistical Errors
Although technically finished with the Freight Audit you will need to take steps to ensure that lessons are learnt from the process, and improvements implemented.
Not all Freight Auditing services do this; they may simply provide a freight invoice auditing process; which could mean that the same errors keep cropping up again and again, keeping them in business of course, but not eliminating the errors and helping you to optimise and streamline your logistics processes.
The Freight Audit project may highlight issues at your warehouse end or at the carrier’s end for systemic issues; patterns of issues that crop up consistently over the review time period.
Therefore, you should isolate the source of the error(s) and work though the errors in conjunction with your carrier. Errors may include:
- Zero rating for a postcode in your FMS system, requiring updated postcode files or a new quote that incorporates that town/suburb
- Unauthorised changes outside of the contract, e.g. change in cubic conversion or change to surcharge(s) will need to be discussed, and negotiated with new contracts and rate cards signed
- Re-syncing of data between systems could also be a requirement to ensure everyone is working with the same pricing current pricing data moving forward
- And many more issues that may be niche to a business’s clientele or operating procedures
Finding these issues takes a highly trained expert to conduct the data analysis. The negotiation between carriers and shipper to get back to alignment on agreements and systems also requires a high level of knowledge on how each carrier operates and the right people to work with within that organisation.
Some Freight Audit providers might not go this extra step to ‘hone in’ on the cause of the errors, like a doctor diagnosing a disease correctly rather than just dealing with the symptoms. And so, if you’re not careful in your scope, or defining the process, the same issues will crop up again and again, and you will just be putting a bandaid on it, if you miss this crucial step.
If the issues uncovered were as a result of the procedural steps your warehouse staff take to complete the consignment orders, and price them correctly, e.g. measuring of carton dimensions, or ensuring a good process for shrink-wrapping pallets so that the cartons don’t extend over the pallet, then that needs to be assessed and trained on as well.
External Issues with your Carrier
External issues are a bit trickier as they are outside of your direct control. Outside issues might simply mean requesting their accounts team take a bit more care! Or it might include issues such as ensuring specific rates provided in your contract are properly connected to postcode file zones in your freight software system so that they carrier doesn’t just lazily provide a manual quote for a consignment via their generic ‘house rates’ schedules; which would be a higher rate.
Carrier’s might have upgraded their transport or accounting systems and there could be bugs in the system that need ironing out. Some shippers might have fairly niche needs that the new upgrade or system doesn’t cater for as well as it used to.
Using a Freight Auditing specialist company can assist with this as they have the both the finance and technological expertise and the right contacts in IT & Accounts departments, and are often negotiating on behalf of a group of customers that have that carrier in their distribution network which enables them to get to the heart of the matter and negotiate effectively with the carrier’s team on their behalf.
As you can see there’s quite a bit of work to complete the Freight Audit project at best practice level, but it is well worth going through the steps we have outlined to ensure that you have all systems and processes running smoothly and that the Freight Audit has a long lasting impact for continued freight cost reductions.
If you would like to learn more about this whole process, please contact us and we will be happy to help you.