With annual rate increases, accessorial charges, high fuel costs
and dimensional pricing, the cost of parcel shipments add up. In
this QAD Precision Report we look at the necessity of auditing your
If shipping is a critical component of your operations, so is
controlling your supply chain costs. Transportation is a major factor
in the final calculation of the cost of getting your goods to the end
user. Rising fuel costs, capacity issues, dimensional pricing,
unexpected accessorial charges and customs delays all contribute to
rising transportation costs.
The true size
of the global logistics and transportation industry is hard to
pin down. However, estimates suggest it is worth between $8 trillion
to $12 trillion annually. Other estimates find that the logistics
industry represents around 12 percent of global GDP.
How frequently inaccuracies creep into freight invoices is also
disputed. This is partly due to different — and complex — pricing
models and freight rates across different transportation modes.
Some estimates suggest that 6-7
percent of freight bills are incorrect. Others have argued that
as many as 53
percent of invoices are too high. Whatever the true percentage
of freight bill errors, for large volume shippers, these costs can
quickly add up.
Most enterprises understand the importance of tracking and auditing
their transportation costs. But if small, express shipments have not
been a core part of their distribution model, many have been slower to
apply the same principals to parcel shipping. However, e-commerce has
changed the way many enterprises reach their customers. Enterprises
are supplementing traditional distribution channels with an increasing
number of parcel shipments.
E-commerce has been the initial driver of increased parcel shipments
for many B2B shippers. However, the global pandemic has accelerated
Take automotive aftermarket parts as an example. Most aftermarket
parts suppliers sell the majority of their products to dealer networks
and authorized repair shops. However, it is no longer possible for
every dealership to keep in stock every possible part. This is because
around 30,000 different parts make up an average saloon car.
The average age of a car and light vehicle on the road is almost 12
years. This means that more and more of us are repairing our vehicles
instead of replacing them.
In the United States, for example, the online market of replacement
parts is forecast to reach $19
billion by 2022. This trend is echoed in other countries as
well. German online shoppers spent over €1.7
billion on car and motorcycle parts in 2020.
As smaller package shipping has grown, tracking the parcel shipping
cost has become critical.
But even before we get to a time when same-day deliveries become
standard, shippers have to deal with the express carriers’ annual
General Rate Increase, accessorial charges and dimensional pricing —
all of which can have a sizable impact on carrier costs.
As part of their cost saving undertakings, shippers need to be able
to easily identify consolidation opportunities; cut down on excess
packaging; monitor accessorial costs; and invest in transportation
execution software with real
time analytics. Shippers need a detailed view of their freight
spend, including parcel shipping with actionable insights into key
Outsourced freight and parcel invoice auditing is a straightforward
process. Here’s an overview of how it works:
You send your freight and parcel invoices to your freight auditor
Your auditor compares invoices and bills with pricing agreements
to look for errors
If the auditor does not find any discrepancies, they authorize
the freight payment
Should there be a discrepancy, the freight auditor tries to
resolve the issue
If the carrier has overcharged you, the freight auditor files a
claim for you
The big advantage of outsourcing is that it is hassle-free,
especially if you ship large volumes of parcels. Invoice
reconciliation is a time and labor-intensive task. By using a third
party, you free up resources to concentrate on your core business. On
the face of it, this makes sense.
The downside is that you must share your data with a third party and
rely on them to process it.
Generally speaking, your freight auditor will receive a file of your
shipments and receive invoices from the carriers. They then match,
audit, resolve discrepancies and pay the authorized invoices and/or
return an “authorized for payment” file back to you. The vendor can
generate reports for you, such as cost breakdowns by G/L and sub-G/L
account. This will give you the fully laden cost of your shipments by
Companies outsourcing freight bill auditing must also rely on this
third party should they need to customize a report.
What if you want to include additional data beyond what your vendor
offers? Will they create and format data so that you can populate your
data warehouse and run the reports you need? How much will they charge
you for this service? How long would that take?
If your organization uses data-driven insights for decision-making,
then an in-house freight bill audit and pay solution may be a better
solution. With an in-house solution, you have access to all of the
data: that’s the shipping data; the freight invoices; the resolution
details; the audit trails; and authorized payments. This data gives
you more options and visibility. Simply put, you control all of your
data to report on as you see fit.
Companies can bring parcel auditing in-house by leveraging a freight
bill audit and payment solution. This will allow a company to easily
audit their parcel spend without relying on time-intensive manual
processes. A comprehensive solution should offer the following
functions and benefits:
Accessorial identification to reduce unnecessary charges
Address correction functionality to avoid additional charges for
incorrect or non-existent delivery addresses
Connectivity so that your freight and parcel invoicing systems
can electronically communicate
Globally enabled automation to simplify the auditing of all
invoices, regardless of carrier, mode, geography, language or currency
Complete visibility into your transportation operations along
with in depth reporting
A solution that is affordable to obtain, implement, staff and run
QAD Precision Freight
Bill Audit and Pay makes reconciling shipping operations easy
and efficient. The solution automates the process of approving freight
bills and identifies discrepancies between expected freight costs and
carrier invoices. As a result, your organization will avoid
overpayment and ensure better ROI from your transportation and
Freight auditing software uses smart automation to alert you to
shipments that exceed your predetermined thresholds. You can evaluate
the parameters or conditions that drove the alert, such as package
weight variance or unexpected accessorial fees.
In-house parcel auditing and freight cost verification has several
advantages. It helps you to identify consolidation opportunities and
cut costs by making smarter transportation decisions. Plus, freight
bill auditing provides an analytical, financial review of invoiced
costs versus supplier agreements.
QAD Precision Freight Bill Audit and Pay consolidates shipping data
and provides insights into critical KPIs. Organizations gain a
detailed view of their freight spending along with complete visibility
into their transportation operations.
To subscribe to our blog, or to receive notifications about QAD
Precision events, webinars and news, please click here.
BILL AUDIT AND PAYMENT — WHY OUTSOURCING MAY NOT BE WHAT’S BEST FOR
MINUTE EXPLAINER: WHY AUTOMATE FREIGHT BILL AUDITING?
WAYS MULTI CARRIER SHIPPING LOWERS PARCEL DELIVERY COSTS