In our last article, we explained what a parcel audit examines and how it can help you to retrieve some of the shipping costs such as for invalid charges by your carriers or when they fail to meet their delivery timeframe obligations. So, what happens once a transportation freight audit firm completes the audit portion of its work and presents the data findings to you? How can you use this information to make a positive impact?
After retrieving the raw data from the carriers, the audit firm converts, normalizes, and structures it into a usable format. It will then look to find cost saving opportunities for you by finding trends . An audit firm will also investigate potential internal supply chain changes that can make a positive impact, identify discrepancies that are not aligned with current carrier agreements and prescribe action that will ultimately lead to cost-reducing actions that impact short or long-term savings.
Claiming back costs and considering carrier quality
Audited data will uncover invalid charges and help validate potential incorrect charges to be examined for shipping adjustments to create savings. An example of an invalid charge includes address corrections, where a package may be correctly shipped to an address, but the carrier makes an unnecessary change that would cause you to be charged an address correction surcharge. Packages that do not reach their destination at all allow you to apply for a lost package credit. The presence of rating errors and discrepancies can assist you in placing controls or checks to ensure these occurrences are minimized in the future. Using information like this can help you determine the reliability of your carriers. If a certain carrier is notorious for invalid billing charges or losing packages, transferring to a new carrier network may be a wise decision to consider. The audited data can be used to assist in preparing new agreements and contracts with carriers by outlining commonly billed charges or services in the next round of negotiations. It also helps you with grading the reliability and KPIs of the carrier’s different transportation modes.
There are common discrepancies that can be found in the audited data to make informed decisions. One commonly audited item is whether a specific carrier service is not applying discounts to the shipper. One prime example of a service commonly missed in parcel agreements is FedEx Ground and Home Delivery Zone Jump Shipping. Zone Jump (or as some may call “Skipping”) is the practice of consolidating packages into a single shipment and shipping to a destination collectively. This service is a growing trend within FedEx, as it assists in reducing costs for both the shipper and carrier. However, most shippers are unaware of this service, which leads to many shipments not receiving their agreed-upon discounts outlined in their parcel agreements. Being aware of the various service levels and how you utilize them is critical in a contract negotiation.
Shipping cost savings thanks to wise inventory location choices
Audited data can also provide insights into how often shipments are shipped from one specific location to another. You may also be unaware that you can reduce costs by minimizing the distance packages are shipped to or from by transferring inventory to different distribution centers. Larger parcel carriers such as FedEx or UPS are beginning to charge zone-based accessorials by the distance a given package is being shipped. The fee difference between the shortest to the longest distance a package is shipped can range from $3 to $6 per package and hence can make a big impact with large volumes. These billing practices are especially common in large package and additional handling.
Making sure shipping discounts are applied correctly
When an organization has multiple entities with varying discounts within carrier agreements, carriers often can inadvertently link discounts to the incorrect entity or not apply them at all. A freight audit can identify shipper accounts that are not linked correctly to discounts by the carrier. You can utilize the actionable information from the audit to communicate with your carrier partners and ensure you are given a fair discount for packages shipped under a commonly used service or verify an account belongs to a specific entity.
Utilizing this information can prevent similar mistakes from occurring again in the future by putting in place internal controls recommended by your freight bill audit provider.
Saving costs in the long term
Overall, there are many benefits audited data can provide for you - from utilizing this data to forecast year-over-year savings, identify discrepancies, and help with negotiations. It’s essentially up to auditors and you to communicate and create an organized action plan for changes to be implemented in an effort to generate savings and minimize reoccurring discrepancies. Collectively, utilizing audited data can assist you in making educated business decisions. Learn more about transportation spend optimization here.
