Mastering Freight Audit RFPs
Managing freight audit and payment (FAP) is one of the trickiest parts of the transportation and logistics industry. You have global supply chain networks, multiple carriers with varying procedures, different payment rates for different modes of transportation, and so on. On top of all that, the Council of Supply Chain Management Professionals’ 2020 report notes that the industry will need new levels of supply chain resilience as a result of the COVID-19 pandemic. Companies need to think about supply chains in a new way. At Trax, we believe how you go about outsourcing your FAP plays a major part in laying the foundation for your company’s success.
The amount of time, money, and human resources that are utilized to fix problems that arise in freight audit and payment are underrated, and at the same time, very unwarranted. A strong FAP process through a seasoned FAP provider boosts your bottom line.
Outsourcing FAP should free up your in-house resources, resolve payment issues quickly, decrease—or even eliminate—your claims, and much more. But, is your current RFP template helping you master freight audit and payment? Tailoring the RFP for freight audit is crucial—it allows you to find a provider that can meet your current needs and optimize your FAP process. This is a vital step as a strong FAP practice is a stepping-stone to mastering Transportation Spend Management, which is the key for optimizing your entire logistics network and fully unlocking your supply chain’s potential.
Whether you need to outsource your FAP for the first time or simply change vendors, we at Trax are here to help you figure out how to leverage your RFP to find the best of the best. We’ll show you the importance of tailoring an RFP for freight auditing, best practices for creating one, and critical questions to ask of your freight audit provider.
Importance of Tailoring an RFP to Freight Auditing
Not all FAP providers are created equal, as capabilities and expertise vary. Tailoring your RFP to freight audit helps identify providers who will meet your needs and help boost your company to become a top competitor. For example, some providers dabble in global transportation while others have global resources, processes, and tools, making them experts in it. Take a LinkedIn search—it shows many providers claim to have global resources when, in fact, they don't.
Customization is another example. Competitive providers use specialized software for customizable solutions to meet individual organization’s needs, such as data visualizations for business intelligence or data quality tools for accuracy. The right provider should be able to show a clear process for managing and improving data quality that translates to better reporting, business intelligence, and performance management. Your freight RFP should reflect these total cost of Return on Investment (ROI) factors, not just transactional bidding amounts.
Many consider FAP RFPs to be a complicated matter. In truth, this misconception is because most RFP templates are designed for either services or tech purchases. Freight audit and payment is a bit of both, so using a service- or tech-only approach limits your company’s needs and success potential. Freight RFPs should be fine-tuned to contain elements of both services and tech purchases. A high-quality freight audit RFP illustrates all your freight audit and payment needs, and concerns like financial transparency, technological efficiency, and ease of use. Only when your RFP is tailored to freight audit success objectives will it yield maximum ROI.
The end goal for a freight audit and payment RFP is to help you identify the best provider for your particular needs and the one most equipped to give you long-term success beyond freight auditing. Keep in mind that an efficient FAP process not only saves you time, but can save you money. The dynamic nature of Transportation Send Management requires agility and resiliency. This enables you to perform root cause analysis and takes corrective action where needed to avoid ongoing issues. It’s critical to understand the relationship between cost and adaptability with resources and process changes over time.
Tailoring a traditional RFP for freight auditing can be simple when oriented to what your freight audit objectives are. Let’s walk through some best practices.
Creating a Freight Audit RFP: Best Practices
The most important considerations for building a freight audit RFP are project scope, company requirements, and RFP vendor selection. These three areas help ensure your winning vendor will fulfill your freight audit and payment requirements.
Define project scope
There are several aspects of freight audit and payment that determine the scope of a freight audit RFP. Outline your immediate requirements for paying suppliers and partners in order to remain operational. You should also define all the other relevant logistics related to things like multiple transportation modes, geographic differences, transaction volumes, data and reporting requirements, and more. Selecting a strong FAP provider that has expertise in global capabilities or multi-modal transport will not only meet your needs today, but set you up for smooth growth and success in the future. Furthermore, you’ll be prepared when regional policies change or major disruptions occur, as seen with the COVID-19 pandemic.
The best place to start is by identifying the RFP’s objective, which could be as simple as outsourcing freight audit and payment or replacing a current provider to meet a certain goal like increasing broad transportation performance visibility, logistics performance, transportation data quality, or overall productivity. Other objectives might be more involved, such as creating stronger or mutually beneficial carrier relationships, or increasing efficiency in managing transportation finances.
Make sure you include all relevant parties in defining the scope, as FAP will affect more than just your logistics team, so include your finance and/or accounting department, supply chain leadership, and relevant stakeholders or executives. This harmonization will ensure you define a scope that aligns with your company’s overall vision, and will make it easier for you to determine the best FAP provider for your needs.
Identify your requirements
Once you’ve detailed the freight audit RFP’s scope and objective, you should pinpoint all the freight audit and payment requirements the vendor should fulfill. Some of these will be directly informed by the RFP’s scope: the ability to support global transportation operations, specific (or all) modes of transportation, and various invoice types (electronic, paper, EDI, other), and more.
Other requirements pertain to specifics, such as pricing format and various functional or non-functional requirements. For example, if you have certain process improvements you want to see, you should include those as requirements in your RFP discussions. Because there are no pricing format standards for FAP vendors, a pricing format is helpful for comparing total cost of ownership across your different options. This way you can assess different pricing methods that might be based on conventional transaction fees, volume and modes of transportation, or a percentage of savings.
Other functional and non-functional requirements are based on standard operating procedures for your company, which vendors need to know so you can calculate your ROI.
Be sure to include all your current requirements, but keep an eye out for any potential future ones. When looking for a FAP partner, consider a provider that has the capability to serve you efficiently now and grow with you in the future. Companies that offer other services, such as supply chain transportation, rate management, carrier management, or more, can be a great asset and investment in your company’s future. Such providers have a holistic view of the industry and already have the expertise and setup in place to help you grow your company.
Select vendors to bid on your RFP
Defining the project scope and requirements helps you to determine which vendors you want to bid on your freight audit RFP. A best practice is to focus on specialized providers that concentrate in areas like geographic availability or specialization in your industry (such as life sciences, retail, manufacturing CPG, etc., as verticals often have unique FAP needs). A tailored freight audit and payment RFP is invaluable for assessing vendor responses.
Another best practice is to leverage quantitative criteria through score cards or other tools to evaluate providers’ capabilities. The trick is to weigh the subcategories of your freight audit RFP scorecard according to what matters most to your company. For example, if your company routinely sees different invoice types, this subcategory should weigh more heavily in your scoring. With this approach, you should examine indicators, such as security, financial stability, customer references, commitment to technology, and continuous improvement programs.
Tailoring the RFP for freight audit also helps your company to optimize and mature through the Trax Transportation Spend Management Maturity Model. This model is a framework that provides a roadmap for large, global enterprises to shift from a lack of visibility and control to a fully optimized and accurate data-based transportation supply chain—for all modes and geographies. Our model improves accountability, transparency, efficiencies, and much more in your Transportation Spend Management.
Questions to Ask When Selecting a Freight Audit Provider
A large part of the value of a freight audit RFP is derived from the questions it requires vendors to answer about enterprise needs. These questions should address organizational, technological, operational, and strategic concerns. The RFP should also help you understand the extent that freight audit providers support key transportation functions, such as finance, procurement, and other supply chain functions.
Here are examples of some organizational questions to include in your freight audit RFP:
- Which geographic locations do you support?
- What language and currencies do you support?
- Can you service multi-carrier modes and lanes?
For an incredibly complex multinational supply chain, you need to consider your provider’s ability to service your entire supply chain globally, regardless of complexity by geographic region, language, custom, industry, culture, and currency. This is especially true given the impact of disruptions in supply chain management and the need to find quick alternatives. Providers, such as Trax, should be able to offer use cases of their experience working on a global scale.
Technology questions are becoming increasingly critical to success when outsourcing your freight audit. You should ask question like:
- What’s your experience integrating and working with a multi-faceted tech stack?
- What’s your data retention policy?
- What are your data quality and data management policies and processes?
- What was your systems’ total down time last fiscal year?
- Give an overview of your implementation process.
Providers’ answers should demonstrate dedication to improving their clients’ data and tech experience. A good provider should be able to integrate with your existing systems and with multiple systems. And it’s alright if you don’t have an ideal tech stack—providers like Trax help give you confidence in what data comes out of the tech you do have.
Learning the implementation process beforehand gives you insight into what that entails for going forward with the provider. Digitally savvy vendors should answer these questions with a tech approach that clearly explains how they can help create transparency while reducing manual efforts across modes and nodes.
Combining FAP expertise with technological mastery is the foundation for not only an efficient freight audit and payment process, but one that can provide you with the data and visibility needed for future optimization.
Freight invoice audit questions
Must-have freight invoice audit questions include:
- Describe your freight auditing of invoices process.
- What is the total number of freight payment invoice transactions you processed in the previous year?
- What is the total dollar value of the invoices paid in the last two years?
- What payment process times can you support?
- How do your carrier management capabilities and services work?
- How do you work with me and my carriers to improve data quality?
To maintain a robust supply chain, you need to ensure that your provider can handle the high volume of invoices and costs that constantly pass through your company. The provider’s procedural setup, expertise, and ability to smartly leverage technology and to understand global freight audit and payment policies are crucial areas to consider. The last thing you want is a provider that will slow you down or cost you money.
The volume and value of invoices the provider has handled are also crucial. You need a provider that can take on an increasing number—and value—of invoices without making mistakes. That track record is indicative of whether the freight audit and payment provider has the capacity and the prominence to be able to aptly handle your FAP needs.
A provider with holistic capabilities, the flexibility to handle varying types of invoices, the ability to handle different payment processing times, and the expertise to centralize all your needs in one place is a great start. Look for a provider that also has great carrier management capabilities, as well as a detailed knowledge-base of carrier requirements, costs, processes, and otherwise. This can open a world of opportunities for you.
Additionally, the right provider should be able to increase your confidence in your data, decrease—or even eliminate—your claims, deliver real-time visibility, and more, so you have data-driven performance management. This is a sore spot for many companies, as only 49% of supply chain managers can capture real-time data insights and act on them.
Coding, accruals, exception management, and other questions
There are several questions to ask about coding, accruals, exception management, and other such areas.
- What’s your process to allocate charges and assign General Ledger (G/L) accounting codes to our shipments?
- Can you allocate charges to multiple codes for consolidated shipments? What is required to do so?
- Describe your accrual process.
- Do you have a carrier collaborative online exception management tool?
- What happens when an invoice fails an audit?
You have a plethora of varying data rolling in all the time, and you need to leverage it in your business intelligence in order to be competitive and a leader in the market. A good provider helps make reporting possible: match metrics, price estimation, shipped but not invoiced, estimated vs actual reporting, and more.
Another vital part of the freight audit and payment process your provider should help you with is the tedious General Ledger (GL) accounting coding, as goods may be shipped with a certain GL code, but invoiced with a different one. This has the potential to create discrepancies or problems if your FAP provider isn’t experienced on the global stage and doesn’t have the capability to localize data and allocate charges from different codes for consolidated shipments. A freight audit and payment provider that can do this delivers a seamless FAP process, even for the most complicated shipments.
Being able to cope with changing circumstances is a cornerstone of a great freight audit and payment provider. This is also the case when performing accruals. Famously one of the more difficult supply chain practices, accrual management requires a strong understanding of the market, and an endless well of data and information. At Trax, we leverage that data so we can accurately accrue, based on objective and informed reasoning rather than assumption.
Knowing what happens when an invoice fails an audit is vital when choosing your freight audit and payment provider, as you want their process to ease your life, not make it harder. For example, at Trax we continually work with your carriers on root cause and corrective action processes to address exceptions and other problems so they don't happen again. Easy, simple, and elegant.
Use a Freight Audit RFP to Find the Right Provider
Tailoring an RFP to freight auditing takes a little effort, but you’ll be rewarded tenfold when it helps you select the right provider for your needs. While RFPs are usually considered solely on price, RFPs for freight audit and payment should be viewed from an entirely different perspective.
Freight audit and payment, as part of Transportation Spend Management, is not a one-time service, but an ongoing process. If done correctly, it rewards you with magnificent savings and relieves you of having to invest time, money, and resources into one of the most tiresome practices in supply chain management. Transportation management is dynamic and freight audit and payment should be a strength and a resource you leverage to drive value across your organization.
Choosing a strong freight audit and payment provider that can meet your needs, understand your corporate vision, match your global supply chain ambitions, and reach the perfect harmony of technological and operational know-how is the first step in optimizing your supply chain management.
We at Trax embrace the art of transforming freight audit into Transportation Spend Management through seasoned expertise, and top-tier solutions that enable our clients to not only compete in today’s market, but lead it. Contact Trax today.
Trax is the global leader in Transportation Spend Management solutions. We partner with the most global and complex brands to drive meaningful optimizations and savings through industry-leading technology solutions and world-class advisory services. With the largest global footprint spanning North America, Latin America, Asia, and Europe, we enable our clients to have greater control over their transportation performance and spend. Our focus is on your success.