Freight Payment Update: All systems go

Acombination of the data explosion within the freight industry, tightening of supply chains due to the pandemic, and the resulting economic shock waves have caused an evolution in the freight bill payment industry—a sector that’s now being referred to “the Swiss army knife” of freight transportation.

The era of simply providing electronic data interchange (EDI) to pay freight bills is clearly over. Today’s freight bill payment companies are a diverse group, offering growing services in transportation management systems (TMS) as well as additional benchmarking honed from millions of data collection points.

Industry stakeholders contend that the whipsawing effects of the pandemic and the resulting supply chain issues have only emphasized that freight bill payment providers must be as nimble and adaptive as the freight industry they track.

“The shippers we have and those coming through as prospects are tired of playing a game of supply chain whack-a-mole,” says Ross Harris, CEO of A3 Freight Payment.

Harris and other leading freight bill payment executives told us that, in past years, freight bill payment didn’t make the high priority list among the C-suite folks. However, those days are over, as even the largest, shrewdest manufacturers and shippers are coping with double-digit increases in their freight bills.

“They know the day is coming that the chief financial officer is going to come down the hallway, open the door and ask why we’re paying so much,” says Harris. “It’s a seller’s market. Those old excuses were great for a quarter or two. But we’re in a new normal and our job is helping them manage their transportation spend.”

Harold Friedman, the recently retired president of Data2Logistics, says that to survive, freight bill payment companies need to know how to best use information. In turn, shippers need to understand that data can make them more in tune with what their carriers need. “The pendulum has swung in favor of the carriers,” he says. “It’s been that way for a year and a half, and it will be that way for the foreseeable future.”

So how can shippers make themselves more attractive to carriers? To find out, Logistics Management takes its annual look at the nation’s freight bill payments sector. We’ll cover how the best providers are helping shippers access and use the mountains of data their carriers collect on a weekly basis; we touch on the trend of micro-logistics; we’ll offer five proven ways shippers can cut their costs; and we’ll examine how the pandemic has affected the industry.

How to use all that data

As things are calming down from the shutdowns and the resulting freight boom, Harris and other top freight bill payment executives believe that one lesson shippers have learned is that their old methods of collecting and analyzing data just don’t work anymore.

“As shippers try to navigate the current waters and get an up-close view of their data, they’re finding it wanting,” says Harris. “When they need information the most, the data isn’t there. That’s prompting shippers to ask: Why can’t I get the data I want? As it turns out, they may not have access to it.”

According to Mike Regan, president and founder of TranZact, three things are driving freight bill payment activity, and all are data related:

Availability. There’s more data than ever, and it’s coming through transactions associated with movement of freight.

Accessibility. How are shippers going to get that data? You may have availability, but accessing that data is even more critically important.

Quantity. It’s not just the movement of data information, it’s the quantity available and what shippers can do with it.

“Trucking companies have more data than shippers,” says Regan. “They know when their truck enters your facility, and they ask their drivers to rate their experience with that data. With few exceptions, none of that data is being accessed by shippers.”

And remember, that data is being used by carriers to establish a shipper’s rates. If a shipper makes a truck driver wait at the dock for three hours, that rate may be affected by those delays.

“That data is available, and accessing it is very important,” Regan explains. “Our information technology group is looking at this. It comes down to how do you become a shipper of choice with a certain carrier without this data. The answer is you can’t.”

Most shippers have customers and suppliers that have a pattern of freight deliveries. Shippers desiring to be shippers of choice to carriers need to be able to identify those patterns, automate those repetitive tasks to free up human capital and then make sound decisions based on reality of those patterns.

“Smart companies that want to beat their competition are going to say they need that data,” says Regan. “When companies come to us, one of the real advantages we have is figuring out how to get the data and then help them understand how data can be used to improve their business.”

Jeff Pape, general manager of transportation at U.S. Bank, which has been in the sector for more than 20 years and analyzed 31.4 billion transactions last year, says that shippers now need useful analytics more than anything else. “What shippers want and need is how to make that data more actionable,” he says

Five ways to cut parcel costs

Shippers are facing major challenges as small parcel costs increase, budgets shrink and more online customers expect “free shipping” with their orders.

At the same time, carriers are adding and increasing surcharges on top of rising annual rates, resulting in higher costs and greater pressure on shipper budgets. So, what can companies do to get a handle on their last-mile costs?

Jeff Pape, general manager of transportation for U.S. Bank, Minneapolis, has developed five steps to help shippers control costs. They are as follows.

1. Get visibility into the entire supply chain;
2. focus on financial validation;
3. identify opportunities with proactive account management;
4. audit all shipments; and
5. move toward automation.

According to Pape, small parcel shipping makes it difficult to get a timely, accurate picture of true cost and service fulfillment. There can be high volumes, multiple surcharges, contracted delivery guarantees and limited access to information.

It can all add up to a complicated invoicing process that’s rife with opportunity for inaccurate and unnecessary cost. Pape says that a good freight bill auditing company can provide automated solutions that tracks and reports delivery performance, conducts pre- and post-payment audits, processes and pays invoices and provides detailed reports highlighting savings opportunities.

“Customers are looking for more transparency and predictabilities,” adds Pape. “They’re looking to maximize and control parts of the supply chain that they can and make them as efficient as possible.”

—John D. Schulz, contributing editor

Allan Miner, president of Cleveland- based CT Logistics, which has been in the business since 1923, says his company performs much work in customizing business intelligence and analysis for shippers. “We analyze it and provide additional benchmarking as well as support or assistance with bids for all modes,” he says.

According to Miner, there has been “a definite increase” in airfreight diversions from ocean, rail and truck because of raw material shortages causing clients’ manufacturing and assembly lines to shut down.

“This also necessitated longer-term use of over-stocking instead of just-in-time inventory, with the resulting increase in warehousing and distribution costs,” Miner says. “There’s a move toward near-shoring and re-shoring to minimize the delays in the ongoing supply chain disruptions as well as reduce costs associated with mode deviations and premium freight costs. Our sector is there to facilitate this.”

The micro-logistics trend

Craig Cameron, vice president of sales and marketing of A3, says that with everyone’s increased emphasis on costs, all logistics professionals are trying to justify their expense to their CEOs. One way to do that is to think small.

“Think micro-logistics,” says Cameron. “We’ve all been down the path of optimization, but instead of massive changes, like where to build a new distribution center, how about looking at different processes at a granular level to reduce costs?”

In short, micro-logistics is a more detailed analysis of the optimization for distribution for a shipper. It might entail putting warehouse stores closer to customers, or perhaps a shipper can set up a relationship with a local courier to make final-mile costs cheaper. “It’s a deeper dive,” says Cameron. “Now you’re talking about parsing a DC into micro DCs—that’s another component we’re seeing.”

This can be done with companies going deeper into their own data and integrating it into their freight bill payment processes—something that’s best done with even more detailed data. “Integration of data has been there in the past, but most executives looked at it briefly from a high level,” says Cameron. “But there’s another tier underneath that. Now everybody is looking after every penny and they want to get down to that next level.”

Many freight bill companies can provide that level of data management. Certainly, that big data is getting bigger. For example, a larger shipper with 20 million shipments can quickly get 100 million records of detail on an annual basis. “When you get to the micro level, that data is significant,” adds Cameron.

Get away from paper

Is your operation still using paper documents for bills of lading and proof of delivery? If you are, you’re not alone—so don’t feel too bad.

Doug Schrier, senior vice president for strategy for Transflo, which manages more than $100 billion in freight invoices annually, says that paperwork is still alive in freight transportation.

Transflo and others have developed processes around digitizing freight documents like bills of lading and proofs of delivery. Its focus is now on better integration of parties across the freight supply chain—shippers, brokers, motor carriers and receivers. “It’s true that many shippers are behind the document curve,” says Schrier.

According to Schrier, he sees the need for the following two things:

Moving from paperwork to electronic documents. “If we can just grab the data at the beginning, rather than a document exchange, it will make the ability to automate back office a whole lot easier. It eliminates the guesswork.”

Paperless transactions. “Let’s store those documents in a cleaner way. There is more back-office automation that we can do.”

In the future, Schrier sees a freight bill auditor’s main focus as the ability to give shippers scalability. “All aspects of the supply chain are seeing consolidation and growth,” Schrier says. “For carriers and brokers, that starts with ingestion of documents.”

Pandemic effects

The changes in the freight bill sector weren’t caused by the pandemic-related economic shocks—but they were hastened by them. “In my estimation, what the pandemic did was act as an accelerant,” says TranZact’s Regan.

Miner of CT Logistics says that he’s seeing many long-time, seasoned traffic and transportation management professionals retiring due partly to the pandemic. That has coincided with a need for freight auditors to provide more consulting, business analysis, benchmarking and assistance with carrier bids for all modes.

Miner adds that he expects that will continue as more shippers turn to automated capabilities to support and provide “boots on the ground” to assisting planning and execution of transportation routings.

“A certain segment of clients is pushing their freight terms out to 60, 90 or 120 days,” says Minor. “This is causing the need for us to deploy more supply chain financing opportunities to assist those carriers who want faster payment than the new credit terms being rolled out by our clients.”