Freight Auditing and Logistics Visibility: Cost to Serve

July 18, 2016 Pieter Kinds

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With Logistics Visibility set as one of the main focus points for transportation management for the coming years, many companies are demanding the ability to report on the full Supply Chain cost of customer delivery, covering all related Supply Chain movements.

Cost to Serve Reporting in the Supply Chain

In order to make a setup work, all the costs of the entire chain, from inbound transport, inbound handling, storage, outbound handling and outbound delivery, should be made available for Cost to Serve reporting. Next to the cost of an outbound delivery, the cost of moving an SKU through the Supply Chain up until the supplying location should be reportable.

This because SKU's delivered to a customer don't necessarily follow the standard route towards the sending location. Different routes will be associated with a different cost in freight, handling, and storage.

One scenario is to calculate the cost based on actual costs for a given period at the actual moment of reporting. Second to use a calculation based on a recent historic average cost of supplying an SKU to the sending location. The latter solution seems more practical to implement, as the historic costs can be calculated separate from the actual report creation and simplifies analysis for user on possible fluctuations that need to be explained. The first scenario would put a high pressure on calculation power.The recommended setup in systems and audit flows, however, does not limit itself in the scenario that eventually is chosen as the preferred way to calculate the cost to serve.

The Cost to Serve process set up in combination with the Invoice Audit process

How Freight Audit Reduces Your Freight Spend

Outbound deliveries, inbound deliveries, and inventory status data are the required basis for performing a comprehensive Supply Chain cost calculation and freight invoice audit. A Supply Chain Invoice Cost Auditor will provide data into a BI (Business Intelligence) environment.

Next to this, for instance also budget data can be stored in the database and also provisional data can be taken into account as selection criteria in order not to wait until data is final. The combination of these data elements will enable to report costs on (but not limited to):

1. SKU
2. Product category & brand
3. Volume
4. Weight
5. Category
6. Period
7. Actual cost vs budget
8. Site
9. Sold/ship to
10. Market
11. Sales organisation
12. Delivery
13. Transport mode
14. Geographical area

Freight invoice Audit Process flow

The set up of a solid Cost to Serve reporting set up in, combination with the Freight Invoice Auditing process, is based on:

1. Shipment/inventory data to invoice audit service provider
2. Freight Invoice audit by freight audit service provider
3. Approved freight invoice data interfaced to financial department (incl. coding and .pdf image)
4. Invoice audit service provider data to Business Intelligence Suite
5. SKU per delivery/sales data client to Business Intelligence Suite

The ControlPay Business Intelligence environment allows the customer to set up a dedicated Cost to Serve database and structure and have customized standard reports and dashboards setup. Next to that, it has push-reporting capabilities. It is a web-based platform accessible 24/7 for authorized personnel who have a login and the proper user rights. Because of the reporting capabilities from lowest detail to high-level results, and the ability to easily query and look at data from different angles, the tool delivers intelligence quicker than any other tool to support corporate and strategic decision making. Thanks to the setup of the freight audit processes and using the clients data as a basis, the provisional cost is already next day available and can also be taken into account in the Cost to Serve analysis if desired.In the BI platform, data can be loaded and reported on SKU level as this tool is designed to handle large data sets. Besides, complex calculation methodologies and data combinations can be set up in such a tool, like the requirement to consider the entire supply chain cost in the model.

More benefits from a Cost to Serve process set up in combination with a Freight Invoice Audit Solution

1. Improved freight invoice audit accuracy

Outsourcing the freight invoice auditing function is very likely to increase savings by taking out incorrect invoicing. A freight invoice audit service provider is specialized in auditing logistics related invoices, auditing not only on costs but also business rules like conversion, rounding, and consolidation. Next to that an auditor performs duplication checks, manages the settlement of exceptions, special charges and is knowledgeable in logistics and understands the European complexities and rate cards.The first saving is accomplished during the implementation phase when rate cards are analyzed and any gaps will be closed and differences in interpretation will be clarified.

Freight Audit: the pre-audit process

In the pre-audit process, the carrier is receiving the instruction how to invoice. This prevents so-called tolerance costs. As carriers will have to provide a matching invoice, our customers will not have to apply a tolerance, which is common practice in a reactive process where the freight invoice audit only starts when the freight invoice is received. Next to that, also carriers benefit from such a process. They are instructed how to invoice, preventing errors in freight Invoice headers details (invoiced to a wrong entity for instance) and amounts. This also prevents unnecessary workload in issue resolution and potential delays in freight payment.

4 Ways Logistics Technology Improves Visibility and Cuts Costs

Improved Accounting efficiency

- Finance is moving more to a monitoring function, rather than a processing center.
- Reduction of manual operations in Finance as invoices are automatically being booked including all the necessary details like Account Coding, Tax coding, etc.
- 24/7 access and insight in the accrual, including cost center and GL.

 financial consolidation of shipments

Compliance

- Thanks to the pro-active nature of the freight auditing process, where audit and cost settling is taking place before final invoice is created, the process is proven to be quicker and numbers like accruals are more accurate compared to a reactive process where the received invoice is taken as a basis.
- The Shipping date is the basis for auditor to report and assign costs to a period.

ControlPay Global Freight Audit & Payment provider

To learn more about the freight auditing capabilities or our Business intelligence possibilities, please contact us via info@controlpay.com
We are always happy to support you and your company with your freight invoice audit, Transportation Data, Spot shipment and freight tender challenges. For more information, we'd also recommend taking a closer look at our special BI and Freight Audit page.

Swiss Army Knife of Freight Audit

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