Go beyond cost recovery and drive lasting efficiency with the best freight post audit practices.
Reviewing a freight invoice after payment is often done only to recover overcharges and fix billing errors. While these are key parts of every freight post audit, their true value extends far beyond. The right freight audit strategy can be a powerful tool for cost optimization and long-term planning.
Freight post audits follow straightforward steps: data collection, validation, and recovery. This simplicity provides an excellent opportunity to go beyond the basics. Implementing the right solutions and best practices is essential to unlocking that potential.
With the right practices in place, in-house freight post audit can even improve operations and prevent issue reoccurrence.
If you've been looking for the same, you're in the right place. In this article, we'll explore ten practices that transform your freight audit system into a strategic asset, shaping the future of your operations.
The freight audit industry is a 781 million-dollar space, highlighting the immense potential effective freight audit and reconciliation can unlock. Here are the top ten best practices to elevate freight post-audit processes in this expansive field.
In freight post-audit, data analytics transforms raw shipping data into actionable cost-saving insights. Organizations using advanced analytics uncover 2.8x more opportunities to save.
The power of analytics lies in:
For some context, let's say a retail chain used analytics to tackle rising shipping costs. Machine learning found fuel surcharge errors, predictive models forecasted holiday cost surges, and dashboards revealed costly lanes. This enabled timely carrier adjustments and instant issue resolution. In fact, a Fortune 500 retailer recently adopted analytics-powered lane optimization to save $4.2M annually.
To adopt this practice, you can:
Carrier scorecards are great freight post-audit practice for transparent performance tracking. Organizations using comprehensive scorecards improve carrier performance by 23% and reduce costs by 8-12%.
The essential metrics that make carrier scorecards so impactful include:
Imagine an FMCG company created scorecards to track carrier delays and billing errors. It would instantly help renegotiate contracts with underperforming partners. The Aberdeen Group even found that top performers using scorecards achieve 15% better carrier rates.
You can implement the following steps for effective carrier scorecarding:
Reviewing costs on each lane delivers granular and segmented insights into hidden inefficiencies and freight strategies. Companies leveraging detailed lane analysis identify 5-7% cost reduction opportunities through optimization.
Let's look at the key analysis points that drive impactful results:
Let's say a beverage distributor analyzed lane costs. Doing so revealed which route impacts shipment quality, high costs, and other inefficiencies. Switching to a lane and carrier that has minimal impact helps drive service records. Surveys show that companies performing such in-depth lane analysis save an average of $0.12 per mile through optimization.
This is the go-to implementation framework for lane-level cost analysis:
This involves strategically mapping your network to streamline logistics and reduce cost inefficiencies. This practice can reduce network costs by 9-14%, driving significant savings.
Let's break down effective network optimization into the following key components:
If a manufacturer were to use an Al solution to redesign its distribution network, the AI model would map a more efficient cargo flow. Its revised insights will help the business effectively consolidate shipments, reduce empty miles, and improve transportation efficiency. Recently, a global manufacturer showcased its potential by saving $8.2M annually through network optimization.
If you want to put this freight post-audit practice into action, incorporate the following steps:
Create a detailed implementation plan to execute the strategy.
An accessorial analysis program identifies and reduces unnecessary fees, cutting accessorial charges by 15-20%. By scrutinizing every extra charge, companies can prevent overpayments and streamline processes.
A few vital elements that are a must in this practice are:
Assume an FMCG business regularly reviewed its regional accessorial charges in carrier invoices. By doing so, it would be able to dispute recurring fees that don't comply with their contracts. Plus, the business will be in a better position to negotiate contract rates regarding custom clearance.
It's important to keep in mind that top performers who take advantage of its potential keep accessorial charges as low as 4-6% of total freight spend.
If you're adopting accessorial analysis in your freight post-audit strategy, here's how to get started:
Rate-based analysis is an essential part of negotiating better carrier rates. It even results in a 7-10% rate improvement. By evaluating market trends and leveraging volume, organizations secure more competitive pricing.
To conduct an effective analysis, incorporate these metrics and components:
Let's take the example of an electronics exporter comparing market rates before their rate negotiation meeting. Insights on the latest average and shipment forecasts empower them to secure better deals and even set a benchmark for all future rates. According to FTR Transportation Intelligence, companies that use detailed rate analysis secure 12% better contract rates.
If you would like to integrate this into your freight post-audit process, here's a framework to follow:
Given the dynamic fuel rates, approving fuel rates often need a close review. Having a process to manage fuel surcharges can reduce costs by 8-12%. Companies can cut unnecessary expenses by fine-tuning surcharge calculations and improving operational efficiencies.
For effective fuel management, your program must include the following components:
A relatable instance here would be when a regional grocery chain realizes they've been paying high fuel surcharges on rural delivery routes. With a fuel management program, they can combine shipments and renegotiate carrier contracts, bringing surcharges within an expected range and improving transportation cost planning. Recently, a major retailer saved $2.1M annually through fuel program optimization.
When adopting such a program, it's important to:
Service-level optimization helps reduce reliance on premium freight. In fact, a dedicated program, like an autonomous freight procurement solution offered by Pando, could help reduce usage by up to 35%.
For an analysis framework, here are the most important things to understand:
Imagine this, a healthcare supplier's audit revealed that 70% of premium shipments arrived on time with standard services. With service level optimization, they cut out an unnecessary premium service level and renegotiated standard shipment rates. With a fractional increase in per-shipment cost, they reduced delivery times and eliminated excess inventory carrying costs. Analyzing service needs and alternatives also balances cost efficiency and quality.
This can be achieved by:
Budgets are an excellent way to optimize logistics costs. Adopting cost allocation analytics enhances financial precision, improving allocation accuracy by 40%.
Since this involves both accounting and logistics, these are its essential components:
However, automated algorithms may get tricky to correlate. Let's say a construction company implemented automated cost coding to streamline expense tracking across multiple projects. By integrating this into financial workflows, every expense was categorized accurately and in real time. It also eliminated manual errors, sped up month-end reconciliations, and provided better budget control.
In fact, an Aberdeen Group report noted a 45% improvement in budgeting accuracy with proper allocation. The bottom line is that optimizing cost tracking and allocation helps companies achieve better budget control and financial insights.
You can adopt the following framework to streamline implementation:
Predictive cost modeling in solutions like Pando's automated freight audit and payment uses historical data and market trends to forecast future costs. In addition to better decision-making, it also improves budget accuracy by 25-30%. Plus, freight audit and reconciliation become more efficient and less extensive.
The key elements of a predictive cost model include:
Let's consider if a food distributor leveraged predictive modeling to forecast seasonal demand spikes. The data will enable them to pre-book capacity at lower rates and reduce last-minute shipping expenses during peak periods. In fact, one manufacturing company boosted its budget accuracy to 92% through predictive modeling.
Let's break down adopting predictive models into these four steps:
Pando's freight auditing solutions have streamlined operations for many organizations. After adopting Pando, Nivea, the German personal care giant, shared, "We now accurately estimate freight costs, better control freight invoices, and effectively manage disputes and extra charges."
Freight post audit is undeniably a tool for driving strategic improvement. Beyond error prevention and route optimization, a well-structured freight audit system is a powerful forward-thinking strategy for long-term success.
With the 10 best practices we've covered, you're closer to unlocking cost savings and operational excellence. Now, all that's left is choosing the right partner to implement these strategies seamlessly.
With its comprehensive freight auditing and payment solution, Pando is a great choice. Its supply chain expertise comes with seamless EDI integration, multi-modal TMS, and AI-powered freight procurement. It is truly a one-stop solution for shipment tracking and freight auditing.
If you want to enhance the impact of your logistics cost strategies, it’s time to try Pando.
Book a demo today!