Imagine you’re at a swanky logistics conference. You’re seated for the keynote address with an impressive bag of conf-merch safely in your lap (that IL2000 frisbee looks dope). The above question is slide number one of a big consulting house’s hour-long presentation on freight auditing.
The presenter stares out at the crowd of conference participants, a knowing smirk on his face.
Obviously, this is a trick question, right? After an awkward silence, we all know the presenter will click to slide two, and the triumphant words…
“BOTH ARE EQUALLY IMPORTANT”
… will sear the retinas of a thousand conference participants in lurid magenta 42-point comic sans. And sure. Slide two is as factually correct as it is typographically inelegant: To optimize a supply chain you do indeed need both accurate data points and smart experts to interpret them.
Slick presenter guy makes a solid point. Can we go sample the free buffet lunch now?
Sure …
… but while we’re waiting in line for the shrimp cocktail, here’s a trickier (and we think far more interesting) question to chew over:
How do you get from accurate data to critical insight?
Is this you?
It’s Tuesday morning. 8:45 am. That shipping invoice you were waiting for just came through. Firing the PDF up on your screen, your eye scans down to that all-important dollar number at the bottom of the sheet.
“That’s about what we expected, and it feels right to me,” one little voice in your brain confirms. “Yup,” another voice chimes in. “I remember these guys and the invoice amount is always around that number.” You have another hectic day ahead and this is just busy work, so you give it the green light. You pass the invoice along the line and get on with the next item in your to-do list.
Because it’s easy to do that! No alarm bell goes off if you pay a little (or a lot) more than you should on a shipping invoice. In fact, a rough eyeball analysis is how the vast majority of supply chain managers (and even some 3PLs) handle invoicing.
After all, it’s natural to make knee-jerk decisions.
Even if the data is right there and within easy reach, a decision-making survey tells us, that roughly 60% of managers will make important decisions without even looking at the hard data. Instead, your typical corporate decision-maker will rely on gut reaction (which is riddled with confirmation and selection bias) and memory (which, the research shows conclusively, is about as reliable and impartial as a drunk guy at an airport bar who eats way too many peanuts).
You can learn more about the clarity dilemma in our BI white paper, but the key point for this blog is simple, albeit troubling if you’re trying to run a tight ship.
You won’t get from good data to smart decision-making unless you have a firm strategy for doing so.
This brings us to freight auditing.
The case for rigorous freight audits
Spoilers. We’re about to get all captain obvious here for a hot minute.
Freight audits are how your company escapes the gut reaction trap
First and foremost, you need a robust, comprehensive, and unimpeachably accurate freight auditing process to guide your decisions because routine freight audits insert that much-needed “Something Went Wrong!” alarm bell into your freight billing workflow.
- Paid too much on a shipment? A freight audit will uncover that.
- Consistently being overcharged by a carrier? Audits show you the who, why, and when.
- Getting dinged on unanticipated delivery-based assessorials? A strong audit process will reveal why and trigger an automation process to resolve the problem permanently.
You get the idea. Left to our own devices, we human beings are way too fallible and subjective to make a good call on what’s a nutritious mid-afternoon snack. What hope do we have with the complexity of a shipping invoice?
Moolah. Dosh. Dough. Dollars. Money.
The second case for getting strong freight audits into your company’s supply chain toolkit is even simpler. Money. Paying more than you should on shipping adds up quickly. Just trawl through our case study library to see just how much we save for clients through freight audits alone.
- We saved this company 25 grand in 6 months through good freight audit practices.
- We cut this company’s shipping costs by nearly 25%, again solely through better auditing.
It’s just like grandma always said: Take care of the pennies and the dollars will look after themselves.
What does real freight auditing look like?
Hopefully, you are now at least quasi-convinced that you need real-deal freight auditing in your life. Let’s take a look then at what a good freight audit looks like. IL2000’s freight audit process has three crucial moving parts:
- Accurate data collection
- Powerful reporting and automation tools
- Expert advice and vigorous expert advocacy
Let’s take a closer look at each.
Accurate data collection
The moment IL2000 steps in to manage your invoicing we start codifying. We go through every procedural step of your freight accounting.
All your transactions are GL coded, equipping us to carve up your shipping costs by important categories: by inbound versus outbound, by location and billing center, profit centers, geographical location, and by-product to name just a few.
Accurate, consistent, and analyzable shipping information will begin to flow into your company. You’ll receive standardized invoices for everything shipped. Your invoices will be summarized and your data optimized to permit instant analysis of what you ship, where it goes and how it gets there.
We standardize your required reference fields so that we can quickly analyze what products get shipped where, with all cost increases accounted for and explained. In essence, you get your books handed to you, done, and ready to analyze. On top of all that, you can now use this newly codified system to pay for all your freight in one, standardized place.
With accurate data collection, you gain an analyzable dataset, greater consistency, a drastically reduced rate of billing error, and your accounting people save vast amounts of time.
Powerful reporting and automation tools
With your shipping data accurate and standardized, we can now see your supply chain with less distortion and from more angles. Let’s say a series of overages emerges in one location. Is this just a coincidence? Or is a pattern emerging? IL2000 will leverage customized reports to answer that question. We may discover that your freight is being reclassified or reweighed by one carrier. Or your shipments may be incurring a liftgate charge you hadn’t anticipated.
Whatever is introducing that price turbulence, it’s our reporting tools that allow IL2000 to elevate accurate data about a series of isolated events to an underlying and addressable pattern. If the overage charges were valid, we now have a strategy in hand to fix your freight operation at the source. If they weren’t valid, we now have the data we need to reverse the charges and prevent them from happening again.
From this foundation of strong reporting, we can also begin to tackle issues of automation. Let’s say that the pattern of unanticipated liftgate charges was valid. We can profile that assessment into your price calculation tool. The next time you ship through that carrier, it’ll automatically populate your liftgate fees.
Reports and automation are vital components of bridging the divide between good data and sound supply chain decision-making. Reporting gives you that accurate real-time window you need into what is going on across your supply chain. Automation saves time and reduces operational busywork.
Expert advice and vigorous advocacy
Reporting and automation transform your shipment data from a black box to a control panel. But it’s important to recognize that inside that shipment black box is a smaller black box that, quite frankly, you’re best leaving unopened. We’re talking about freight rate calculations.
Freight rate calculation is unbelievably complex. Any small change can impact cost. Terms, shipper history, weight, dimensions, class, fuel costs, additional assessorials, density. These factors and many more (which shift and shimmy depending on which carrier you use) all factor into your final freight rate calculation. It’s so complex that it is overwhelming. And if you’re a typical US company managing a typically complex supply chain, there’s no software silver bullet or reporting tool that will magically make this aspect of freight management “whelming” again. To unravel freight rate calculation you need access to experts — people who have been negotiating these data sets (and the carrier companies who apply them) for many years.
This is the bit you’re best leaving solely to IL2000.
It takes skilled people to tame supply chain complexity. Working with IL2000 you gain access to a dedicated team of supply chain analysts who will perform an expert analysis of each freight rate calculation. And if we see that a carrier has miscalculated at your expense, we’ll vigorously negotiate on your behalf to resolve it. Think of IL2000 as your company’s muscly older brother who knows kung fu.
The big benefit of our approach to freight auditing is shielding you from all the craziness. You don’t have to think about it. We will handle the disputes and quickly eliminate friction with the carriers upon whom your company relies.
How do you get from accurate data to critical insight?
How your 3PL answers this question will speak volumes about how effectively their freight audit process can improve how your shipments move.
IL2000 believes in a comprehensive and rigorous approach to supply chain audit where we equip your supply chain with accurate data and powerful reporting and automation tools, all backed up by expert guidance and vigorous advocacy on your behalf when you need it.
We treat your shipping invoices as though they were our own.
Ready to build a bridge between good supply chain data and smart supply chain decisions? Talk to IL2000 today to learn more about our freight audit service.