Freight Audit: understood or underestimated?

September 28, 2016 Pieter Kinds

In my talks with potential customers I have noticed that there are many different views at Freight Audit. Companies look only at achieving cost savings, others want help in changing their logistics landscape and some are looking for better visibility in their financial costs and want to have an automated cost allocation process.

Actually, very few companies take a holistic and strategic approach towards Freight Audit. These companies see the broad spectrum of benefits that is being delivered by Freight Audit. Most companies however treat Freight Audit somewhat as an afterthought that should not cost too much and should not take too long to implement. This is often due to the fact that corporate buy-in is thin and selling Freight Audit internally is difficult and a lengthy process which not everyone is positioned for or willing to do. Logistics Management most of the time do see the broad spectrum of benefits or they easily grasp the full power of Freight Audit once explained. For Finance and the upper echelons however this is much harder as they think in a symmetric way while transportation is  asymmetric. It is difficult to explain why logistics contracts are so complex, why invoices are not one to one, why unforeseen costs occur. Next to that managers further away from logistics think very simplistic about transportation and believe DHL or Schenker to name just two out of many, are invoicing out of 1 centralized system or entity. If you then explain that many transportation companies actually do a poor invoicing job due to for example lack of the right systems people just get lost and find it hard to believe. Or worse, they think it can be easily changed by just demanding from the carrier to do it “right”. Clearly, a seasoned logistics manager will not easily chose such a battle or will need to spend a lot of time to get the buy-in for investment.

Nevertheless, it is interesting to see that once Freight Audit is on its’ way during the implementation process, also these once skeptical managers do acknowledge the benefits for their department. Having accruals, no more gathering excel data from different sources, cost to serve reports, product related cost allocation, etc.

The reason for these pleasant surprises is typically that companies have no clear view on their hidden costs associated with handling of invoices. How much time is spent on processing of invoices, exception management, communicating with the carrier, solving disputes, gathering monthly reports from different sources and creating accruals and financial reports,etc? Nobody can tell you that. People become quickly fans of Freight Audit once they see the improvements but upfront it is very difficult to create a hard business case based on these hidden costs.

It is important for every organization to have control over their costs especially in transportation where cost structures are complex. Next to that many unforeseen benefits could be achieved. Organizations should be more open to explore opportunities in this area without building ironclad business cases before you even start. A pilot project would be a good option in such a case as it limits your risks, the costs are limited and it gives a great insight in the potential benefits. Most Freight Audit providers are open for running limited scope pilot projects.

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About the Author

Pieter Kinds

Pieter Kinds (41) is Director at ControlPay, a global Freight Audit provider and the CEO of TenderTool, a cloud-based logistics sourcing platform. Active for over 14 years, Pieter is eager to share insights, thoughts and experiences via his blogs.

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