Audit logistics processes to access cost savings across your transportation network.

Audit Logistics for 10-20% Transportation Savings

A transportation and logistics audit reviews carrier performance, shipping needs and transportation procedures employed within a company’s supply chain. With this information, shippers can plan better. They can also make better decisions about their current and future needs.

Many large-scale companies rely on 3rd party freight audits. A partner with hybrid-digital audit solutions can help small and mid-sized shippers expose areas of waste and implement new processes that deliver immediate savings.

Let’s explore three levels of audit, what they entail, and how they can deliver results across your transportation management. Combined, these best practices for a transport and logistics audit can drive cost control and help you achieve savings of 10-20 percent.

Three Levels of Transportation Audit

A third-party logistics (3PL) firm can use several methods, procedures and focus areas to help you improve transportation efficiency. Audits are a foundational tool.

When a 3PL performs a transportation audit, the solutions provider is using information gathered across your network to:

  • Examine your end-to-end supply chain
  • Determine weak points
  • Apply analysis
  • Implement remedies

By conducting a freight study, a 3PL can determine which level of audit partnership will be the most effective, complement your in-house team and provide the best return on your investment.

Since the audit is a continuing process, three levels of transportation evaluations can provide you with ongoing benefit.

1. Enterprise Logistics Assessment

This examines every aspect of your relationships over 8-12 weeks. It reviews your carriers and other supply chain partners, as well as the entire procurement process.

The analysis includes a review of negotiations with carriers, extra fees, warehousing processes, technology, staffing, brokers/forwarders and all modes of transportation. Much of the contact is with the CEO or CFO.

At the end, your practices are measured against industry benchmarks to produce a detailed logistics audit report. It includes actionable recommendations for improving shipping performance and efficiency. Real world, “best case” data compared with your current practices can validate where you need to make adjustments.

This clear case – outlined by recommendations and backed by hard data – can be part of your improvement roadmap. Based on our ongoing service to retailers, manufacturers and distributors, we know the benefits of a supply chain audit can be significant.

Efforts to audit logistics processes can deliver overall 10-20% savings.

2. Freight Procurement Audit

This takes about two weeks. Here, your 3PL partner studies your transportation network to confirm alignment between your freight movement needs and your carriers’ capabilities.

A logistics carrier management action plan defines least-cost recommendations, budget needs and any operational considerations. It can empower your internal team to secure required freight capacity in the most cost-effective way. Often the traffic manager is the point of contact at this level.

Many of the same items we introduced in the enterprise assessment are included in the freight procurement audit.

The results? Our freight procurement support achieves 10% savings for many of our customers.

3. Freight Bill Audit and Payment

A technology-enabled logistics partner can manage your contracted transportation rates, reduce overcharges and resolve billing errors. At the same time, your partner should be compiling, managing and analyzing supply chain data for your benefit.

After identifying and contracting rates with transportation service providers, a logistics management partner with freight audit and payment capabilities manages financial settlement on your behalf. This starts with an audit designed to collect data and identify problems.

Your 3rd party freight audit partner examines every inbound invoice, confirms contracted rates and transportation service. All this is compared to your original Bills of Lading.

For our clients, Transportation Insight uses technology to monitor more than 150 data items in a diverse system that identifies shipment discrepancies. While many 3rd party freight audits allow a tolerance of $10-$20, Transportation Insight pursues any error greater than 5 cents.

In completing this level of audit, we’ve found that:

  • 30% reflect a carrier billing error
  • 4% contain charge errors
  • 2% record revenue discrepancies

Your audit partner can identify and correct these billing errors, obtain corrected invoices and collect refunds – so you don’t have to.

Audit Logistics to Review Needs, Prepare for the Future

Keep in mind, the entire purpose of a transportation audit is to target waste, uncover errors and optimize your freight movements. With every review of your transportation management, look at current and future needs while preparing for the unexpected.

Review Current Needs

Create a baseline of discovery and take a deep dive on your current needs. This guides your 3PL to customize your audit and accurately determine areas for improvement and partnership.

Analyze Future Needs

Planning for the future is especially important in supply chain management. If your sales grow but you don’t have bandwidth to fulfill increased demand, your company won’t win new customers. A transportation audit considers potential service gaps that could hurt customer experience.

Prepare for the Unexpected

Once your partner understands your shipping and receiving needs, best-in-class logistics support provides what-if scenarios. These help point out your vulnerabilities and identify cost-effective responses.

Remember, your transportation audit is a starting point. It is important to select the right partner. Your choice can be a differentiator in today’s challenging environment.

To learn more about accessing logistics cost savings with a transportation audit, download our white paper. It shares some of the successful formula we’ve developed to help our customers over the past 20 years.

By combining industry expertise, proprietary technology, audit accuracy and the ability select the best shipment lanes, we bring significant value to more than 750 businesses across a broad range of industries, including yours.

Indirect Spend: Harvest Savings, Improve Competitive Advantage

Why does Indirect Spend matter?

A. Cost: Up to 40% of a company’s expenses might be Indirect Spend.
B. Savings: Optimizing procurement can save up to 25% on Indirect Spend line items.
C. Profit: Improving procurement strategies can deliver double-digit return to your bottom line.

Management of Indirect Spend is a big, challenging job, but the transformative effect on the business justifies the effort. Lower costs are one benefit. Rigorous specification, supplier qualification and strategic procurement processes can improve the products and services used by the company in ways that significantly improve the business.

Getting a strategic procurement effort on track requires persistence and a success-focused action plan. These concepts and tips will help you get started managing compliance, controls, and costs.

What is Indirect Spend?

Indirect spend items are purchases of goods and services not directly incorporated into the final product or service offering of a company.

Indirect Spend categories include Accounting, advertising, marketing, consulting, travel, IT, telecommunications, HR-Facilities, Utilities, MRO (maintenance repair and operations), capital goods, office supplies, furniture, food services and commodity packaging supplies. Indirect Spend in many of these categories can be critical to the company’s success.

Purchases justify a procurement group that can lower costs in the short-term and understands how supplier relationships can generate value for the company.

Gain Control & Harvest Savings

To reap savings from Indirect Spend, companies must strategically manage the processes and people involved. This management requires many collaborative efforts within a company and between suppliers, internal buyers, and your procurement team. Indirect Spend includes everyday items but also complex services. As your Indirect Spend management improves, your evaluation of suppliers becomes longer-term and more strategic.

To do a good job managing indirect spend, a business must commit to:

  • Executive sponsorship
  • Processes that identify, categorize and aggregate items
  • Systems that streamline and improve procurement
  • Support to select qualified suppliers and negotiate sound contracts
  • Collaboration between procurement professionals and departmental buyers
  • Monitoring for pricing, risk assessment, and changing market conditions
  • Measurements and visibility

You can see from this list how efforts to contain and control Indirect Spend are comprehensive and companywide.

Implement New Processes to Track Spend Better

Historically, companies put more focus on direct spend, which are the costs that go into finished products. Indirect spend categories can be more fragmented, numerous and diverse. Purchasing authority for Indirect Spend items is traditionally assigned to remote locations, business units, departments or internal stakeholders in a group, such as maintenance, operations, legal, HR or marketing. For these managers, relationships, proximity or speed counts more than cost savings.

Additional Tactics to Improve Indirect Spend:

  • Invest in Automation & Technology.
  • Partner, Hire or Train Procurement Professionals.
  • Involve departments in creating processes.
  • Get an optimal supplier portfolio.
  • Move toward long-term savings and value creation.

Get outside consulting if you need help to select technology, develop strategy, implement new procurement processes, pick qualified suppliers, or negotiate better, longer-term contracts. Transportation Insight offers free information and discussion about how to analyze your spend, put together a plan, assess the current situation, establish cost-saving processes, conduct strategic sourcing and save money.

Identify Items and Create Categories

A complex task is identifying Indirect Spend in your company in terms of items and costs. Reviewing payables (Accounts Payable) can offer the clearest listing of suppliers, items and costs. This review requires looking into spending by locations and departments to find the total for each item and the current supplier.

These steps can start bringing indirect expenditures under control:

  • Identify items and suppliers via Accounts Payable (AP).
  • Assign items to categories.
  • Review specifications and newer technologies, materials, or offerings.
  • Aggregate Indirect Spend item quantities into fewer, larger orders with preferred suppliers.
  • Implement company-wide contracts that reap volume discounts, favorable terms, and responsive suppliers.

Once you identify all the items, you can achieve success by aggregating similar items into categories that create larger bid packages for higher discounts. Also, there are opportunities for more substantial discounts, higher-volume deals open opportunities for supplier-managed inventories and multi-location ordering, replenishment, or delivery.

When items are aggregated and categorized, you may find opportunities to keep smaller quantities in stock, reduce the total number of items purchased, or reduce the number of supply closets.

Tasks, Goals & Metrics For Long-Term, Incremental Improvement

In the beginning, better control of Indirect Spend is different from the end game. After processes and suppliers are in place, the company needs to measure success and compliance. These measurement tasks need the right KPIs for suppliers and internal processes. Tasks, such as periodic budget reviews and training, are necessary. The company must build on success to reach higher towards the greater rewards from Strategic Sourcing and partner-like supplier relationships that offer an exceptional level of higher value.

  • Measure Cost Savings & Supplier Performance: Technology can provide real-time 
    visibility into purchase transactions to the line-item level, which helps to stay on track with ongoing spend management.
  • Set KPIs for Suppliers: KPIs can be used across suppliers, measuring contract compliance, customer satisfaction, cost competitiveness, service, support, and continuous improvement.
  • Review Budgets Regularly: Periodically review for savings opportunities under the revised procurement process. Ongoing cost review is part of a continual improvement effort. Also, look for ways to improve your new procurement process.
  • Create Lasting Value & Competitive Advantage: Ultimately, your procurement strategy should shift from the initial cost reduction phase to a value creation phase for the company.
  • Strategic Total Sourcing: Strategic Sourcing identifies the lowest total cost, not just the lowest purchase price. It embraces the procurement lifecycle, from specification to payment. Strategic sourcing is a procurement process that offers continual improvement of the purchasing activities of a company. Strategic sourcing often creates a close, partner-like relationship with a supplier to meet that customer’s needs better.
  • Educate Staff on Indirect Spend: Your procurement group (purchasing group) and budget owners from each department should become acquainted with the goals of your Indirect Spend cost-saving initiative.

Looking through these tasks, we recognize the importance of Indirect Spend management to the long-term profitability and competitiveness of the company. The efforts and organization-wide collaboration needed to attain results are apparent. Excellence in supplier management through Strategic Sourcing changes the basis of competition for a company and requires a continuing commitment to improvement in supplier evaluation, supplier relations and contracting.

Optimizing Indirect Spend Transforms Companies

By combining tactical procurement processes and strategic sourcing, companies realize savings in Indirect Spend that goes to the bottom line. As companies improve buying processes and view supplier relationships over the longer-term, the value of these relationships goes up along with the benefit to the company.

Businesses know that changes in technology, regulation, and markets alter the playing field for the company and that its ability to adapt to lower-cost and better-performing solutions is critical to success. For more information on reducing expenses by improving the management of Indirect Spend, watch our webinar, “Uncover Indirect Spend and Reclaim Lost Profit.”

Parcel Audit Services Power Network Optimization

Without deploying parcel audit services that empower performance optimization, small package shippers face a storm of potential risks. These can span the spectrum, from non-compliance and failed service to multiple payments of the same invoice and fraudulent usage of your account number. In each case, a lack of awareness into shipping activities creates risk that not only jeopardizes profitability. It also threatens to negatively impact customer experience.

It takes a team of parcel logistics experts – and 360-degree visibility across your transportation operations – to calm the storm and mitigate these risks.

Best practices for optimizing your parcel operations requires a “diagnose first, prescribe later” approach to designing best-in-class parcel programs that maximize service levels with minimum disruption.

Diagnosing Problem Points with Parcel Audit Services

E-commerce continues to radically change the way Business-to-Consumer (B2C) and Business-to-Business (B2B) organizations serve their customers. UPS Estimates global e-commerce sales will reach $3.3 trillion in 2019 and more than double to $6.7 trillion in 2025. Further, it cites analyst predictions that global e-commerce sales, projected to account for 13 percent of retail purchases in 2019 will grow to 20 percent in 2025. In terms of parcel volume in the United States, FedEx expects the U.S. parcel market to double in size to more than 100 million packages per day by 2026, with e-commerce a significant driver of accelerating volumes.

With increased parcel volumes comes increased complexity. Not only will this spur increased challenges associated with invoice, payment, and claims management. This evolving marketplace requires that parcel service providers closely monitor service practices to maintain their own profitability. Be mindful of carriers’ efforts to shift pricing practices and strategies around surcharges and accessorials to financially support associated service needs.

Now more than ever, small package shipping optimization powered by audit technology and parcel expertise is integral to helping shippers validate their practices and uncover opportunities to optimize performance.

Three steps are involved in the optimization process

  1. Solutions Assessment: Review your current state and clearly identify your financial goals, your customer service needs and your logistics requirements.
  2. Program Analysis and Design: Leverage industry knowledge and proprietary technology to carefully analyze all aspects of your parcel program.
  3. Implementation: Once design is complete, manage RFPs and optimize your platform to best meet customers’ needs.

Best practices for auditing your parcel operations requires visibility into your supply chain, diligent data collection and smart analysis. Market-leading service providers collect more than 200 data points from parcel and freight bills to uncover duplicate invoices, bill of lading errors, missing items, damaged cargo and more. Less rigorous companies check far fewer data points, missing discrepancies that, when resolved, lead to cost savings.

Audit Services Recover Lost Profit, Drive Improvement

Rigorous parcel audit compliance services will assess to the penny against client contracts to match program costs with services rendered. Auditing every invoice takes a tremendous amount of administrative effort; not auditing invoices mean you leave money on the table. Auditing with SOC I Type II compliance means complex invoices are inspected and unraveled for national and regional carriers.

Using collected data, you can model what-if scenarios to enhance programs for current strategies and future goals. These scenarios can address mode optimization, split shipment assessment, routing analysis, DC alignment and site selection analysis, mergers and acquisitions analysis, fulfillment models and regional carrier analysis. The result is a parcel program closely aligned with business goals based on fact-based analytics, robust audits and industry expertise.

Leveraging a partner with an Enterprise Logistics solution and an engineered parcel program supports growth of your business. Transportation Insight’s audit analysis offers deeper insight into parcel audit services to help you keep customers happy, streamline business operations and achieve competitive edge.

Reduce Parcel Shipping Costs: 3 Alternative Strategies

In practice, organizations have developed tried-and-true solutions to help control parcel shipping costs. For example, one common tactic is to eliminate late deliveries, which limits the need to rush-ship as many items and reduces the total cost of parcel shipping. This low-hanging fruit does not have to be where the savings stop. Here are three alternative parcel management strategies you can employ to reduce expenses and get more value from your carrier relationships.

1. Deal With Address Corrections

Any lost or delayed shipment represents sunk cost. You will either have to send another product to the customer or deal with customer support calls from a frustrated client seeking answers about why their parcel did not arrive on time. Sometimes losses and delays are unavoidable. They also happen for some surprisingly simple reasons. One of the more common issues that affects delivery is an improper address. You could run into a situation in which:

  • An address is listed in an unconventional format, causing an automated scanner to flag it as incorrect and send a correction request back to you. This leads to delays in getting the package out for delivery.
  • A listing does not comply with the carrier’s regulations for address listing and coding, causing the carrier to hold the package until you correct the situation.
  • A consistently incorrect address sends packages to the wrong units within a business park or multi-unit dwelling, creating confusion for customers, potential for theft and delays in delivery.
  • A failure to update addresses for customers who move or request an alternative shipment destination leads to packages being sent to the wrong location.

In any of these cases, you could be required to recover and/or resend packages. You may need to replace a shipment entirely. Setting address compliance standards and analyzing your database for data quality and policy compliance is vital to eliminating unnecessary costs.

2. Prevent Shipper Error

Vendor compliance is not always cut and dry. You may encounter situations of improper account number usage, leading to costs for something you did not ship. For example, a retailer may use a distributor for one of its jacket brands. When the distributor gets an order, it knows to use the account number for that retailer. However, if one of the distributor’s dock workers or order entry employees applies the account number to the wrong shipment, the retailer could be left paying to deliver somebody else’s product.

On an isolated basis, these errors may not be particularly expensive. Over time, the costs can add up quickly, leaving you paying a hefty bill to ship another company’s goods. If you attach a P.O. number or order number to each shipment, you can analyze each shipment in your account, verify that rules have been followed and prevent errors.

3. Protect Against Fraud

Imagine an employee knows your account number and is authorized to make shipments. How can you prevent that employee from using those details to send gifts to friends or using your company’s assets for personal purchases? If you cannot track every shipment easily, this small fraud can go undetected. When you track order numbers or P.O. numbers, you can eliminate this type of fraud entirely.

Internal compliance rules can also let you attach account numbers to locations. If an account number is designed for goods that will ship from a specific location, any item under that account number shipping from an alternative location would raise a red flag. There may not be a problem in some cases, such as a vendor shipping from a backup warehouse due to unexpected supply limitations. But it can also be a sign that vendors are creating additional expense because they are not complying with service level agreements.

Maximizing Value Potential

Taken in isolation, these errors or fraud instances may not cause significant damage. Over time, at volume, the costs add up quickly. If you do not have strong rules in place and software to monitor compliance in real time, the unexpected expenses can be significant. A typical 3PL may be able to help you tackle low-hanging fruit to reduce parcel shipping costs. An enterprise logistics partner like Transportation Insight can work closely with you to create the best rules for your business and implement technology to monitor compliance. Identifying errors and fraud efficiently creates significant value as you are able to reduce parcel shipping expense to protect profitability.

To learn more about the Transportation Insight’s expertise can help your business, contact us today.