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.
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.