Many shippers will say that they audit their freight bills. But what does that mean? Is it a cursory comparison of the invoice to the contract? Is it every bill or only a sample? Does it take into consideration potential consolidations, cube rating and all of the accessorial charges?
Once the audit has been completed, do you have access to a consolidated database of all your shipping transactions so that you can monitor performance – or more importantly, answers those pesky, time-consuming questions from executives on why your costs are going up (or down)?
Auditing freight bills has always been a necessity due to the complexity of rate structures, the frequency at which they change (perhaps weekly with changing fuel prices), and the sheer volume for some shippers. The work is time consuming, but what does the average shipper save as a result?
In a recent study conducted by Nulogx, Canada’s largest freight audit and payment provider, a sample of $500 million in freight invoices were studied. For the most part these invoices were from companies with long-term carriers, and stable operations – meaning that any systemic billing issues have probably been identified and eliminated.
Surprisingly, only 1.4% of all invoices contained errors. However, catching these errors resulted in direct savings of 2% on freight costs. As you can see, the 4 major error types are shown on the graph below – ranging from invalid and duplicate invoices (more common than you would expect) to rate and accessorial errors.
So what does this tell us about freight audit?
The first is that your audit process needs to be sophisticated and robust to catch the small percentage of bills that contain errors. The second is that for shippers with a critical mass of volume carving 2% off the top of your freight spend can be an easy and low risk way of reducing costs. And this is for companies with established audit procedures. If you are implementing a comprehensive freight audit process for the first time, the savings are likely to be many times this amount.
But the costs don’t just stop there. Consider that when you outsource your freight audit, nobody needs to receive the bill, enter the information into a computer system, take calls from carriers looking for payment, resolve discrepancies, prepare reports, and so on. The elimination of non-value work from your organization is significant.
Furthermore, with access now to a consolidated database containing every detail of your freight transactions you are poised to use this information to better manage your transportation network. improve customer service, and assess carriers – and yes – even have answers to all those pesky questions at your finger tips!