The Missing Puzzle Piece in Procurement: Freight Audit
Leaders in procurement wear many hats, and a shift is occurring in the department from performing strictly administrative functions to catalyzing innovation company-wide. Procurement departments of the future will be typified by laser-focused strategy; not merely reacting to market conditions or carrier dynamics, but operating proactively.
This ideal state of elevated operations relies almost solely on the ability of procurement leaders to have full view of sourcing and purchasing processes, as well as carrier and payment information.
There is an immense financial risk associated with the financial fortitude of carriers and vendors, and procurement teams are often tasked with setting evaluation criteria and implementing up-to-date solutions. This is a great idea, but its execution is tricky, as procurement departments aren’t staffed with data scientists or analysts with an excess of time.
How can these teams know more and perform better?
Better insight for better decision-making cannot be the result of manual analysis processes. Rather, it must be fast, it must be exact, and it must be effective. In short, it must be fueled by technology. Incidentally, digitization projects are one of the primary investments procurement departments are making post-pandemic. Experts at the Chartered Institute of Procurement & Supply explain, "After building credibility during the pandemic, now is a good time to justify investment in systems and tools to improve efficiency."
At Trax, our Freight Audit and Payment solution uses cloud-enabled technology to increase visibility. The outcome? Your entire procurement team gets real time insights to focus efforts, manage carriers, mitigate risk, negotiate with precision, and supercharge efficiency.
If you lack any of those elements, more or better data from freight audits may be the missing puzzle piece in your information ecosystem. Read on to learn more.
How FAP Supports the Procurement Function
Freight audit and payment systems typically include the following services:
- Carrier invoice auditing (pre audit and/or post audit)
- Examine and adjust invoices
- Catch errors
- Catch duplicative information or charges
- Verification for accuracy
- Invoice collection from the carrier
- Payment to the carrier on behalf of the shipper
The benefits of freight audits are as follows:
- Eliminate duplicate payments
- Achieve greater accuracy
- Amass better data for timely reporting and analysis
- Precisely schedule, on-time carrier payments
- Improve the percent of rated records
- Improve accrual accuracy
All of these outcomes directly impact many of the tasks in procurement, with improved data accuracy and timely information supporting better logistics around the procurement process.
Freight Audit + Procurement
Often, procurement departments operate with incomplete or inaccurate knowledge. If you are in this department, you already know that carrier information and invoices are often inaccurate, and that’s just one missing link.
Procurement departments follow prescribed processes, making decisions based on the information they have. If that information is untrustworthy, it creates an enormous disadvantage for making confident, speedy decisions. This places the entire team in a place of imbalance, and complicates risk management.
Even with centralized administrative controls afforded by Service Oriented Architecture (SOA), procurement departments suffer from missing parts and pieces, which leaves some guesswork in every decision.
Freight audits remove the mystery around spend, providing end-to-end visibility as freight bills are examined and verified for accuracy. Over time, this decreases the frequency of errors or delays, making it easier to see a full picture. Note: FAP systems should not uncover endless problems; at Trax, for instance, we focus on getting to the root cause of issues, which will naturally diminish them to a point of non-existence.
An effective freight audit and payment process puts the right information in the hands of the procurement department, enabling them to improve in five key areas:
- Risk mitigation
- Vendor accountability and tracking
- Cost reductions
- Interdepartmental collaboration
- Managing carrier relationships
The procurement department is responsible for identifying, analyzing, ranking, mitigating, and monitoring risk. All of this is called into question without accurate and timely knowledge of freight invoicing and payments. Routine audits level-set understanding, ensuring better reactions and course-correction that have the net impact of mitigating risk.
Carrier Accountability and Tracking
Procurement departments often include frontline workers who manage carrier relationships. From original sourcing efforts and pricing services to evaluating the quality of work and maintaining communication, procurement workers need to be among the most “in the know” for carrier data and dynamics.
How are any of these tasks possible when the procurement department lacks visibility into things like on-time or accurate payments? Freight audits streamline information-sharing, making it easier to hold carriers accountable and know the status of outstanding invoices or other issues.
Cost reduction strategies are an ever-present goal for the procurement department, not to mention the company as a whole. There are a number of cost reduction strategies deployed by the procurement department that require data gleaned only from freight audits. This includes better defining and tracking operational costs, implementing the right benchmarking timelines and metrics, and using timely and complete data to identify opportunities to drive re-negotiation efforts.
One of the greatest benefits of modern technological tools is reduced siloes. Procurement does not exist in a vacuum, and businesses need to exercise greater interdepartmental collaboration to achieve the best results. Freight audits provide an expansive body of data that, when shared across departments and functions, accomplishes big wins for all. When procurement shares understanding with finance, operations, logistics, and more, consensus comes faster, and it is easy to accelerate progress toward shared goals.
Managing Carrier Relationships
Strategic carrier procurement is fueled by pricing strategies and relevant company priorities. Healthy carrier relationships benefit from regular communication, standardized processes, early intervention of potential or existing issues, and reliable payment strategies. All of these are made possible by the data from freight audits.
The right carrier mix gives shippers a balanced carrier portfolio, supports solid shipper-carrier partnerships, and diminishes disruption with improved relationships, strengthened over time.
At Trax, we’ve watched time and again how our partnership empowers procurement teams to elevate risk management, enhance carrier management and relationships within the maturity continuum, implement an easier sales process, and benefit from ROI guarantees.
Recap: Why Procurement Needs Freight Audit and Payment
In September 2021, analysts at McKinsey reviewed new tools that are helping companies “crisis-proof their supply chains,” namely through procurement analytics:
“Procurement functions are growing more complex, and the business environment is becoming more volatile. As a result, procurement analytics can deliver real value by taming complexity, increasing transparency, and giving managers the insights they need to make better decisions. Through these measures, the procurement function—and the entire enterprise—can become much more resilient.”
The data extracted from freight audits is an invaluable component of procurement analytics, and is an essential piece of the full picture to inform decision-making.
We like to say that the right freight audit and payment solution ensures line of sight. Know your spend, know your performance, keep tabs on all of your carriers, and gain clarity and consistency. Interested in learning more about how to achieve these outcomes? 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.