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Freight Payment: From Data to Intelligence

Monday, June 29, 2015

It’s not about the data you accumulate; it’s what you do with it.

John Powers, The Journal of Commerce

Transportation costs account for as much as 10 percent of the U.S. gross domestic product, and the number is similar for more developed economies worldwide. Unsurprisingly, shippers and their logistics providers are more than ever looking toward their supply chains to unearth cost efficiencies and control their ultimate cost of delivered goods.

Critical to their efforts is the ability to identify, garner, manipulate and interpret the seemingly countless data elements associated with a single freight movement. These range from macro analyses of costs by country of origin to the granularity of delivered cost by individual SKU number. Savvy logistics professionals are turning to “business intelligence” partners to help them fine-tune their transportation chains.

“40 to 50 percent of shippers in North America outsource to an FAP provider. While this percentage is lower outside of North America, the number of international companies outsourcing is on the rise,” said Kristy Sutton, vice president of freight payment operations, CTSI-Global, referring to freight audit and payment services. Larger companies in the United States are even more invested. “An estimated 60 percent of major corporations in North America currently outsource their freight payment function as a result of high labor, processing and technology costs. While the concept is still somewhat new in Europe, we are seeing increased interest in this type of service,” reported Tom Zygmunt, Cass Information Systems’ manager of marketing and business development.

International use is picking up, as well, according to Rick Erickson, global director of freight payment solutions, U.S. Bank. “Outside of the U.S., the percentage is small, probably less than 10 percent. International utilization has been growing at a steady pace. These solutions have been around for quite some time, particularly the freight payment piece, and they are gaining ground in other parts of the world.”

For such business intelligence organizations, or BIOs, the international piece is not just about foreign firms using their services. U.S. shippers are demanding a closer look at the remote end of their pipeline. “We are seeing increased interest from shippers to provide a global view of their transportation networks and spend. They are seeking global supply chain visibility,” Zygmunt said, noting that Cass Information Systems’s European office better enables their global service.

With facilities on three continents, the international footprint of nVision Global is supported by a staff who are fluent in 25 languages, and process and pay invoices from more than 198 different countries in numerous currencies. Worldwide staff of 236 associates use leading-edge information management analytical tools to provide what the company refers to as an “allinclusive” global solution.

Business intelligence providers agree that their solutions must address a complicated litany of customer-specific demands. “CTSIGlobal analyzes the data supplied by the freight carrier and correlates it to the data that our customers have asked us to capture,” Sutton said. “Clients are very interested in data mining and having a single data warehouse source in order to manage their global supply chain. Capturing freight data timely and accurately within the data warehouse is important. We also observe trends in their data and shipping patterns, carrier make-up and business logic in order to offer suggestions on how to improve timely processing.”

CTSI also gives shipment validation based on the information a carrier submits on their invoice, compared to the client’s shipping data that originates from their warehouse management or enterprise resource planning system.

The sheer number of pieces of information that must be factored into planning, execution and post-shipment audit is staggering. “CT Logistics profiles each client’s unique business needs into their process/audit; therefore we look at over 500 data elements to capture and report on. This allows for visibility into the client’s supply chain from origin to destination and performs duplicate detection on conveyance and other equipment-specific type audits for as far back as the client requests. CT Logistics has been able to provide very quick and high ROIs due to our flexibility to provide greater details into and around the core freight audit, freight accounting, freight payment and management information process,” President Allan J. Miner said.

Once this mountain of data has been assembled into a virtual warehouse, it is used to drive the shipping transaction from planning to in-transit monitoring, then on to pre- and post-shipment audit and carrier reimbursement. The ability to interconnect all of the players involved in the transaction and keep them in the loop is as critical as the technology’s data manipulation capabilities. Examples of applications along the supply chain include:

— Audit of rates and accessorial charges.
— Shipment validation.
— Application of appropriate general ledger codes.
— Approval by the shipping origin.
— Elimination of duplicate payments.
— Matching of shipment to a shipper’s file using bill of lading or order number.

Erickson summarized the objective of the process: “Simply stated, we’re trying to better manage freight systems. Our technology is intended to help shippers understand trends and costs to gain insight into their supply chains. By receiving SKU-level data and order information, we’re able to help them determine the cost of freight down to a very discrete level … for example, shirt, brand, color.”

So, the previous shipment is wrapped up; goods arrived at the consignee in a timely manner; freight rates and accessorials have been reviewed, approved and paid; and general ledgers have been appropriately populated. The next challenge is micro-analyzing the shipment’s past to optimize shipments in the future.

“The information we glean from the freight audits can assist us in providing valuable insight into our client’s data through value-added services, such as shipping-lane analysis, carrier-rate negotiations and carrier compliance, especially on the inbound side, which may not be visible to some shippers until after the shipment is processed and paid,” Sutton said. “Shippers are also interested in benchmarking their data against other similar companies to see how their freight rates compare within the marketplace. Through receipt of a shipment bill of lading or purchase order file from the client’s [warehouse management or enterprise resource] system, CTSI-Global can pre-rate the file and provide monthly accrual information, which can assist with our client’s shipment planning and financial forecasting.”

Delivering essential information to the client on a usable basis is paramount, Erickson said. “Once our business intelligence tool has captured granular-level invoice and bill of lading data, we feed our analyses back into the shippers’ planning systems so that they can continually fine-tune their networks.”

The information flow back to the customer doesn’t stop when the shipment is finalized. “In many cases, Cass Information Systems receives post-shipment information for integration into our audit and payment platform. Information is then made available via the Internet, and in many cases provided back to the customer systems. Cass’s Internet portal also provides business analytics and benchmarking data,” Zygmunt said.

Notwithstanding process advantages afforded by business intelligence platforms, measurable cost savings remain a primary driver in the decision to outsource to BIOs. On average, shippers see reductions of 2 to 5 percent on their overall freight spend, resulting from activities that might be classified as traditional freight payment and audit functions. Additionally, they drive incremental savings by utilizing their business intelligence organizations’ analytical tools:
— Streamlined shipment planning.
— A dramatically simplified transportation process.
— Improved leverage with contracted carriers.
— Enhanced supply chain visibility and reliability.
— Elimination of in-house clerical, administrative and paper processes.

“Industry averages for cost prevention from an outsourced audit generally range from 1 to 5 percent. Industry averages for cost prevention from the elimination of duplicate invoices by an outsourced audit generally range from 1 to 2 percent. In addition to the savings, business intelligence and analytics can further reduce future expenses from 10 to 20 percent,” Zygmunt said.

CT Logistics customers see 3 to 50 percent savings on total freight spend on a global basis, Miner noted.

The number at U.S. Bank is typically 2 to 4 percent of the total freight expenditure, Erickson said. “Our 100 percent pre-payment audit addresses the transaction on the front end to capture savings before shipment. This eliminates the costs and hassles associated with postshipment recovery of monies related to overcharges, misclassifications, duplicate billings, etc. This generates additional savings related to the cost of money. There are further economies resulting from our clients’ transition from hard copies to our paperless environment,” he said.

The CTSI-Global model generates a front-end bump for their customers. “Typically, we can save shippers who have an outsourced solution anywhere from 2 to 5 percent, on average, depending upon mode. We usually find that we can save shippers who have an inhouse payment solution 10 percent on average in the first year, because invoices are received and usually paid in full by their AP department and are not scrutinized by a preaudit of the invoice charges against rate contracts,” Sutton said.

There is consensus that the soft-costsavings potential reaches into doubledigit percentages. Zygmunt broke the benefits down into four categories:

— Reducing expenses through invoice processing efficiencies and reduction of overcharges to realize tangible savings.
— Automating processes such as electronic data interchange, exception management, online reporting and electronic payments to create internal efficiencies.
— Developing decision-support functionality through robust business intelligence to aid in strategic planning and execution.
— Enhancing operations through tactical performance improvements and use of metrics.

Additional efficiencies result from the ability to centralize business intelligence process worldwide, Sutton said. “Shippers in the marketplace are looking for a single supply chain solution. CTSI-Global’s primary advantage within the industry is offering a TMS [transportation management system] in addition to our FAP tools. Partnering with a logistics provider that can offer a TMS and FAP package as well as a robust BI [business intelligence] reporting tool package and the ability to send data to a customer’s ERP system is key.” Global office locations are a key component to this success, Sutton said, noting the value of meeting sales, customer and operational needs quickly, in multiple time zones.

Shortly after they partner with a business intelligence organization, shippers become aware of the incredible amount of data at their disposal. Inevitably, this leads to a demand for improved ways to assemble, access, analyze and utilize this avalanche of information. While BIOs supply a hefty roster of standardized reports and pipeline visibility tools, the fact remains that individual shipper idiosyncrasies lead inexorably to continuous process improvement and customization of output.

The enhancements shippers seek include better tools for visualization. “Shippers want to see their data displayed in our business intelligence tool, Cognos, with dashboard graphics, so they can react faster to changing logistics needs. They find it essential to get the business intelligence they need to drive daily actions and long-term business strategy. CT Logistics has created dashboards and reports, which facilitate freight spend decisions; turn ‘Big Data’ into deep insights; and perform data mining and analytics. CT’s business intelligence reporting delivers valuable insights that are meaningful, actionable and relevant to shipper’s global transportation spend,” Miner said.

Increasingly, the desire is for a “glass” pipeline, and one that is crystal clear. “It’s all about visibility,” Sutton said. “In today’s information age, shippers are all about having the data at their fingertips.” CTSI-Global’s processing system allows customers to view an invoice, electronic or manual, within 24 hours. Within its freight audit and payment, or FAP, environment, real-time information is available through a robust reporting and dashboard tool.

“On the front end we offer a TMS package that provides offerings such as least-cost carrier selection; load optimization shipment execution; BOL creation and generation; and event management, to name a few. These tools can be used a la carte or in conjunction with our FAP solutions to provide shippers a complete view of their supply chain data,” she said.

Customers are also pressing for enhancements to their individual business intelligence processes. “At the outset, the client employs standardized reports,” Erickson said. “As they become aware of the horsepower of our technology, they progress to customized reports and enhanced access to the shipment information. Ultimately, they turn to our consulting services to help them derive more insight from their data analyses.”

Driven by shipper and carrier demand for even more ways to capture, slice and dice data, where are business intelligence organizations spending their development dollars? “Our attention is on our back-end architecture — the tools customers use to access and interface with our solution. We’re trying to make it more intuitive so our clients can do and find things with fewer clicks. Overall, we’re determined to continuously improve the user experience,” Erickson said.

Handling upgrades in-house allows a provider to promptly respond to emerging client demands, Miner said. “We’re focused on new hardware and software technology: new development tools and additional information technology staff for new product development. CT’s software, FreitRaterTM, is the platform from which all of CT’s products and services are derived. This software is produced, maintained and upgraded internally, and the application is housed on one of CT’s IBM ERP-class servers, which are housed and maintained in our server farm at corporate headquarters,” he said.

Global sourcing requires superior agility in handling international requirements, which may differ from country to country, and Cass Information Systems has made it a priority to invest in upgrading their systems as well as the core processing system itself.

Ease-of-use for CTSI-Global staff parallels the importance of delivering usable products to its clients, Sutton said. The rationale is that making the process as efficient for service providers as it is for end users will translate into systemwide fluidity. “CTSI-Global focuses on the ability to create new and exciting products and services with an emphasis on experiences for our users (both internal and external). Our product development team initiates and embraces distributive technology trends so we can enter new product markets, and to drive early adoption of our products and services. We invest in a range of emerging technologies that we believe offer significant opportunities to deliver value to our customers and growth for the company. We maintain our long-term commitment to research and development across a wide spectrum of technologies, tools, and platforms from, business and e-commerce, information access and organization, to communication and collaboration,” she said.

So where are the opportunities for business intelligence organizations to add even more value in the future? Certainly, they will focus on more and better ways to acquire and assemble data and refine their technology and automation to facilitate ease of access.

Opportunities for service upgrades abound, Erickson said. “Clients are looking for a comprehensive managed solution. Going forward, this will include more and better integration with internal supply chain and financial systems. They also expect us to help them evaluate historical data to gain better insights into their transportation-planning process. As a result, we expect our consulting business to grow considerably as we help clients put their data resources to work,” he said.

Once again, continued demand for global visibility will be a major driver in shaping the business intelligence organization of the future. Logistics professionals will help design origin-to-destination “glass” pipelines, as well as streamlined connectivity to business partners overseas. “The one constant that has remained in the forefront of the freight audit and payment industry is the continued appetite for more information. This can be expected to continue as companies want more data, and more ways to use the data such as with dashboards and business analytics tools. In addition to these basic attributes, you can expect to see a more global perspective and requirements to manage their transportation expenses to provide competitive advantages,” Zygmunt said.

 


 

YOUR LINK TO SUPPLY CHAIN SOLUTIONS

Since 1955, CTSI-Global has helped clients manage all key aspects of their supply chain — physical, financial, and informational within one global database by providing a transportation management system, or TMS, freight bill audit and payment, business intelligence and global consulting. Our services and solutions are customized to each client’s specific needs and business requirements to give them more control, improved efficiencies and a cost effective process that result in greater savings.

By offering both a TMS suite of applications and full service freight audit and payment, CTSI-Global automates manual processes, improves performance levels, and decreases transportation costs. Also, using one provider for all your needs ensures seamless integration, eliminates redundant processes and costs much less.

CTSI-GLOBAL HIGHLIGHTS

— Multiple locations strategically placed around the world.
— Expertise: the same operating management for over 30 years.
— More than 10,000 carriers supported in all modes.
— More than 260 million annual transactions.
— Hundreds of quality clients across all industries.
— Over 128 terabytes of online data storage.
— $6 billion in annual freight dollars processed.
— Supports more than 35 currencies.

Services & applications

Transportation Management System: The ability to manage orders, optimize loads, select the best carriers, tender shipments, manifest parcel, track their progress and manage claims can reduce transportation costs by 10-30 percent.

Freight Audit & Payment: By allowing experts to manage your contracts, audit your bills, allocate the charges, make the payments and report the results, you are assured of paying the correct amount.

Business Intelligence: Having the online tools to dynamically report, graph, map, trend and model your entire operation provides the performance reporting, key performance indicator dashboards and insight for continuous process improvement and maximum savings.

Global Consulting: With the information derived from these technologies, CTSI-Global is able to extend client savings by consulting in all key areas of interest including benchmarking, KPI management, global network design, bid preparation and negotiations.

Businesses cannot manage and control their transportation spend without having timely, accurate, and complete visibility to their shipping costs and activities. Investing in CTSI-Global can help reduce these costs, ensuring a competitive position in the global marketplace.