With parcel shipment volumes growing almost everywhere in the logistics industry, I feel that it makes sense to highlight some of the complexities involved in parcel billing. In contrast to popular believe, the correct billing of parcel shipments can be quite complex.
Just because of the nature of parcel, being a light weight package sent at a relatively low price people think savings are not really to be achieved when you apply freight audit to parcels. This is far from the truth and I hope I can interest you for some inside information on this.
So what is so complex in parcel billing?
This diversity fits it’s purpose but results in different lane set-ups, different zonings, a wide variety of pricing ranges, different accessorials, different discounting structures.
And these points are still the obvious ones. In general you can say that outside of the USA there is no standard in place in the logistics industry for rate structures. The less obvious points with rate structures are the business rules behind them, how are shipments rounded, what is the standard for the fuel surcharge or currency, how is consolidation be done and how are calculation methods applied.
Then you have to realize that you work with different country organizations within 1 carrier making the process just a bit more difficult as there may be different systems and of course different people within those organizations. This is important to realize as parcel rates are not only complex for you as the client but also for the carrier himself. Often their systems work in peculiar ways or simply cannot handle the complexity present in the contracts. Why? Because there is a often huge disconnect between people who make the rates and the people actually making the invoices. Strange but true.
Doing the audit as a Freight Audit provider takes a customized approach to each and every carrier. Data mapping is unique and the rate structure is often unique. This leads to customized programming and analyzing almost every time we set up a carrier for a customer. Even though we have implemented this carrier multiple times before. Because even within 1 carrier there can be a lack of standards with regards to rates so that different customers have completely different rate set-ups. So it is not so cookie cut as many would think. It takes quite some effort to set up the rates and the structure to be able to calculate correctly all the rates with all of their associated costs.
Errors in billing
Carriers make more mistakes than you can see with the bare eye when you do a random check off the big stack of paper you receive from your carriers. You know they send you that for a reason right?:
Here is what we find on an ongoing basis:
- Duplicate shipments invoiced
- Duplicate invoices sent
- No consolidation applied
- Wrong rounding rules applied
- Old rates are applied
- Non-contracted lanes are charged at a premium
- New surcharges are added without any reason or agreement
- Weight brackets are wrongly interpreted
- No application of discounts
- Unclear application of remote area surcharge
- Invoicing of wrong service levels
- Not meeting service levels but charging for them anyway
INFOGRAPHIC: Parcel invoice mistakes you can expect as a shipper
Eliminating all of the above via Freight Audit can save you up until 5% of your freight spend in general. Managing this process in-house is a very daunting task as you need to have a good system and you need to maintain it all the time as rates and surcharges can fluctuate on a regular basis.
About the author
Pieter Kinds (40) is the Director of Sales for ControlPay, Europe’s largest Freight Audit provider. He is not shy of sharing strong opinions, thoughts and views about the logistics industry and about logistics procurement, Freight Audit and TMS systems in particular. He writes on personal behalf and his views are not necessarily the ones of ControlPay. Feel free to get in touch:firstname.lastname@example.org