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Why You Need to Audit Parcel Shipping Spend

With annual rate increases, accessorial charges, high fuel costs and dimensional pricing, the cost of parcel shipments add up. In the latest QAD Precision Report we look at the necessity of auditing your parcel invoices.

If shipping is a critical component of your operations, so is controlling your transportation costs. Transportation is a major factor in the final calculation of the cost of getting your goods to end user. Rising fuel costs, capacity issues, dimensional pricing, unexpected accessorial charges and customs delays all contribute to rising transportation costs.

Globally, the market value of logistics accounts for about 10 percent of GDP. Logistics spend is forecast to reach $10.6trn in 2020, with transportation accounting for 70 percent of the costs. Parcel volumes are rising — largely driven by e-commerce — and are likely to surpass 100 billion by 2020.

Why You Should Track Parcel Shipping Spend

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.

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. What’s more, it is now possible for consumers to buy car parts and accessories on marketplaces like Amazon. As a result, aftermarket parts suppliers are sending more express shipments than ever before.

As parcel shipping has grown, tracking these costs has become critical. Gartner forecasts that by 2020 the demand for same-day delivery will drive up logistics costs as a percentage of revenue by 50 percent.

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. To control costs, 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 performance indicators.

The Pros and Cons of Outsourcing Your Parcel Auditing

Outsourced freight and parcel invoice auditing is a straightforward process. Here’s an overview of how it works:

  1. You send your freight and parcel invoices to your freight auditor

  2. Your auditor compares invoices and bills with pricing agreements to look for errors

  3. If the auditor does not find any discrepancies, they authorize payment

  4. Should there be a discrepancy, the freight auditor tries to resolve the issue

  5. 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 line item.

However, it also means that you must rely on an outside organization should you 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 of your data to report on as you see fit.

The Advantages of Freight Bill Auditing Software Solutions

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

How QAD Precision Can Help

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 logistics operations.

The solution 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.

About QAD Precision – Trusted Global Trade and Transportation Execution

QAD Precision (Precision Software), a division of QAD Inc., provides industry-leading global trade management, transportation execution and multi carrier shipping software solutions from a single, integrated platform. Preeminent industry leaders in every region of the world rely on QAD Precision’s global support centers to leverage thousands of carriers and manage millions of shipping transactions every day. Our open architecture easily integrates with Enterprise Resource Planning, Warehouse Management Systems and legacy solutions. An ISO-certified company, QAD Precision assists companies to minimize shipping costs, optimize first mile and last mile deliveries, automate free trade agreement compliance, avoid customs delays and mitigate the risks associated with dynamic trading environments to maximize their competitive advantage. QAD Precision’s customers span multiple industries including banking and finance, life sciences, high technology, retail, industrial, automotive, higher education and public sector as well as logistics providers. For more information about QAD Precision, visit www.precisionsoftware.com.

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