Cost drivers in Freight Audit

April 20, 2015 Pieter Kinds

ControlPay. freight audit

 
 

Companies that are looking to buy Freight Audit services often are surprised by the pricing vendors give them. Typically across the industry pricing is made per transaction whether that be shipments, deliveries, invoices or invoice lines. Once pricing is delivered, you see often the start of a some new processes with the prospect which evolve around these questions:

At this cost, could we not keep this process in-house and do it ourselves?

How are we going to sell this to management?

I think the first reaction is a very general one and is a normal reaction which most people overcome themselves so I would like to focus on the second question. It seems that selling Freight Audit services to the higher ups triggers a tendency with potential buyers to simplify the offering for comparison purposes and because the offering is difficult to sell. As such specific value offerings often get trimmed down as they are too tough to explain and only understood by the insiders. This simplification process not only leads to a faulty buying process but also to a price buying approach.

The reality why Freight Audit pricing does not always meets the expectation is that the transaction which serves as the identifier for the pricing actually is by far not the only price driver. The cost drivers in Freight Audit are really more based on the number of carriers, the number or frequency of rate updates, the communication needed, management of the database, the issues that need to be handled, testing, maintaining the system, the number of sites involved, the level of complexity of the work involved,…There are many handlings involved and it takes good structure, people, management and technology to do it all.

As most companies buying Freight Audit do not outsource a process they already do fully themselves they have a hard time to quantify the real work involved.


ControlPay - Freight Audit platform

ControlPay. freight audit

In fact Freight Audit hides not only more work than most companies realize, it also brings more benefits than possibly can be foreseen in the decision making process. There are obvious benefits such as cost savings and logistics visibility but process efficiencies in Finance and in working with the carriers for example often are hidden.

I would like to see a situation where buyers put more understanding and trust into the provider’s capabilities to help them, instead of trying to push a simplified concept to management as this reduces greatly the value the customer ultimately will receive.

In my opinion first time Freight Audit buyers are price conscience buyers as price is the main differentiator for them to work with while second or third time Freight Audit buyers do mind the value being offered and understand the complexities that come with Freight Audit. Next to that it seems that there has been a shift in decision making from people that actually understand the business to the people that are budget holders and only want to see a clear pre-defined business case with clear returns. A solid business case for Freight Audit however can only be made when implementation is done as so many factors are not known upfront. In my opinion budget holders should more rely on the people that actually understand the business and approve or disapprove investments instead of trying to sign off on a simple business case. Freight Audit is not an easy concept but definitely brings a lot of value if understood and bought right.


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About the Author

Pieter Kinds

Pieter Kinds (40) 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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