Freight strategies: an audit determines which strategies fit your freight and how to implement them
Pool distribution, mode shifting, consolidation, route optimization, dedicated fleet. There are many strategies you can employ to drive time and cost out of your supply chain. Audits are designed to determine what strategies might be right for your freight and how to implement them.
For instance, many companies have benefited from shifting a portion of their freight from truck to rail. But determining the logic of such a move requires careful analysis to determine service level implications.
Many companies miss such opportunities because they don't have the systems to compare carrier rates and service levels. Or, they have an outdated perception of intermodal freight. An audit brings both the systems and the transportation expertise to bear in order to uncover efficiency-driving strategies.
Strategy questions an audit can address
- Does your service match your customers' expectations?
- What are the cost implications of better service?
- Should you switch modes or carriers?
- Is intermodal a good strategy for your company?
- Is your routing guide being followed?
- Do you really need to own trucks?
Carrier selection and rates: an audit shows which carriers are best for which lanes
Without a solid understanding of the market, it's hard to know which carriers are best for certain lanes. An audit can do that. Here are a few examples:
- A medical device company partnered with a truckload carrier that had very competitive rates across many lanes, but had high rates on certain lanes where its volumes were low. An audit identified these high-cost lanes and recommended other carriers who truly wanted that business.
- A pharmaceutical company that required cold chain deliveries paid a premium to work with a well-known, national carrier. But a transportation audit discovered that using high-quality regional and niche carriers for certain lanes saved hundreds of thousands of dollars.
Your rates compared objectively against others
Most companies feel they stay on top of freight rates and push carriers for the best deals. An audit turns that subjective assessment into an objective comparison of your rates against others. The results can be eye-opening. The audit team will dig deep to determine how your freight looks to specific carriers based on density, distance, value and location.
There is no way to uncover these opportunities other than getting into the weeds and doing the analysis.
An audit turns that subjective assessment into an objective comparison of your rates against others.
Carrier questions an audit can address
- What is your carrier mix and does it fit your economic and service goals?
- Do you review your routing guide on an annual or semi-annual basis?
- When is the last time you changed carriers?
- Can you improve cost and performance through cross-mode and cross-service opportunities?
- Are your customers happy with your current carriers?
Systems and processes: a TMS may not make sense if your primary modes are small package and LTL
Supply chain and transportation executives simply must know what technology and supply chain software can do for their companies. But who has the time to stay abreast of the latest technology advances? The right freight transportation consultant has this knowledge and can help you determine how technology can be leveraged to manage freight more efficiently.
Audits are not always about recommending systems that require substantial investment. They can be a check against planned investments. For instance, your decision to invest in a multi-million dollar transportation management system may not make sense if your primary modes are small package and LTL, in which case a less expensive, more targeted solution would suffice.
A system with manual workarounds can undermine your efficiency
An audit will also look carefully at your processes: what systems they leverage, how long they take and how many people are required for the task. Your system may allow you to manage a particular function, such as tendering a bill of lading, but if it takes many people stuck in the "old" way and the process is fraught with errors because clerks are manually entering data, the system is actually undermining your efficiency.
Systems questions an audit can address
- How much time do staff members spend on specific tasks and could these processes be automated?
- What could a TMS do for your operation? Does it make economic sense?
- What kind of automation makes sense for your operation?
- Is your back office operation efficient?
- What gaps exist between the functionality your business requires and the ability of your systems to provide this functionality?
Freight invoice auditing: one-third of companies that use carriers don't audit at all
Despite the potential to save money by auditing freight invoices, such auditing is not done at all at one-third of the companies that use transportation carriers. For the companies that use outside auditing firms, they often pay more than they get back in carrier credits.
Finding the right freight bill audit partner is key.
Most firms handle LTL and truckload, few excel at other modes
Almost all firms will say they can audit all types of invoices, and most do a credible job with LTL and TL shipments. But for other modes of transportation (ocean freight, rail, intermodal, dedicated fleets, parcel), only a few firms excel because of the detailed knowledge and technical tools required to do an effective job.
The experts conducting your transportation audit should be able to direct you to freight audit and payment firms that will pay for themselves.
You don't necessarily want the cheapest service in terms of cost per audited invoice. You want providers whose audit costs are consistently less than identified overpayments.
You want providers whose audit costs are consistently less than identified overpayments.
Freight invoice auditing questions a transportation audit will address
- How much money can be recouped by improving your freight bill audit process?
- How can you leverage available technology in ways that drive value?
- How can detailed reporting help you identify areas where freight expenses can be reduced?
- What is your auditing return on investment?
Reporting: many transportation operations have objectives but no KPIs to track them
Just about every corporate transportation operation can identify its key objectives. But a surprising number do not have KPIs related to these objectives and specific reports designed to provide constant feedback on progress.
A transportation audit partner can help create the right set of KPIs and work with your team to design reports that provide the data you need to monitor performance, make strategic decisions and report on progress to senior management.
Robust reporting is not only critical to managing the operation, it can come in handy when you get that surprise question from your boss, such as "What's the cost of fuel versus our total freight spend?" or "Why are we over budget?" The answers can, and should, be just a few mouse clicks away.
Reporting questions a transportation audit can address
- Can you drill down to each cost in your transportation expense?
- How well do your KPIs track with the broad goals of the company?
- Are you getting delivery feeds on service (PODs)?
- Do you have KPIs and reports for each key transportation objective?
- How can reports help you manage your budget?
A typical transportation audit takes 8 to 12 weeks and ends with actionable recommendations
A transportation audit can lead to substantial savings and insight. But it is not a quick fix. The process is comprehensive and a typical audit will take between 8 to 12 weeks, depending on the complexity of your freight program.
It will be a hands-on process for you and your team since the audit consultant will need access to detailed information from your systems. But in the end it will be worth it. Expect recommendations that yield service improvements of 5% to 10% and cost savings from 5% to 25%.
Expect recommendations that yield service improvements of 5% to 10% and cost savings from 5% to 25%.
The final deliverable gives you the hard data to defend changes inside your company
The final deliverable is a detailed audit report with actionable recommendations aimed at improving your shipping performance and efficiency. The report should provide the detail behind the recommendations, so you have the hard data you need to defend suggested changes within your company.
What to look for in a transportation audit partner
The right partner won't just report on what they see, they will challenge every aspect of your program, including why and how you execute certain functions.
Other things you should look for in a transportation audit partner include a broad knowledge of transportation across all modes and job functions and access to objective industry benchmarks for rates, shipping performance, and staffing.
If you need to understand how well your organization is positioned to support your company's supply chain, today and tomorrow, a transportation audit is a very efficient way to get the answers you need.
