Four cents. Why, with that much money, you could snack on nearly three whole Pringles chips! Well, pennies, like Pringles, stack up fast. Especially in the freight business-saving cents a pound to ship 5 million pounds of potatoes can save a pretty penny: $200,000.
Rich MacGonigle shows those very figures during a demonstration of data2informBI, a product from Data2Logistics, where he is Director of Sales Operations. The freight audit and payment company uses offers the platform, whose “BI” stands for “business intelligence,” to its 300-some shipper clients.
As he clicks through a handful of some 600 data elements, MacGonigle outlines a scenario that may be familiar to supply chain managers:
“So, my boss comes to me and says, Hey, for my LTL, what’s our cost-per-pound look like, and how has that changed over the last year?”
The answer appears in his next click: the dashboard’s “CPC” button opens to a screen that shows the user-in this case, a demo client-is paying 30 cents per pound now. Last ear’s rate was 26 cents per pound.
“Because of the need to move product, [clients] can’t wait for truckload or intermodal capacity to free up.” — Allan J. Miner, CT Logistics
Four cents. Saving those few pennies on 200,000 pounds amounts to $8,000-no small potatoes an industry famous for tight margins.
Examples like this show why executives say shippers should use third-party audit-and-payment companies. After all, C-suiters suggest, why not outsource the tedium of gathering and processing millions of complex carrier invoices? Who else would have the expertise and technology to comb through millions of invoices comprising dozens of entries-from head-scratching accessorials to ever changing fuel charges?
Dan Leva, MacGonigle’s sales and marketing leader and Data2Logistics’ Chief Growth Officer, echoes others who say invoices are riddled with mistakes. “And I can assure you those errors are not inclined to favor the client, they’re in the carrier’s favor,” he says. And nine out of 10 bills contain errors, he adds.
Terabytes of data
Enter FAPs, which, more and more, do way more than pay invoices. They amass untold terabytes of data, which MacGonigle says now provides the backbone of the in-for-a-pound,in-for-a-penny sector.
For their shippers, FAPs condense all that data into interactive digital reports with real-time charts, graphs and tables. One look at one of these products illustrates why clients see short-term ROI for services that shippers probably shouldn’t be trying at home, anyway, according to all the C-suiters interviewed here.
“Shippers want a partner who can integrate all of their supply chain data sources with the carrier billing data.” — Michael Falls, enVista
Now let’s try a little back-of-the-napkin exercise The global supply chain totals $9.6 trillion, according to Freight Waves.
FAPs show they can save as much as 7% on invoices, which, incidentally, can cost $3 to $4 apiece to process, according to Tim Carey, EVP of Strategy at Target Freight Management. Thus this equation: $9.6 trillion times .07 (cents) equals $672 billion.
Tom Zygmunt, manager of marketing and business development at Cass Information Systems, says upwards of 65% of larger shippers use FAPs. That means the 35% of shippers that don’t are losing out on more than $235 billion.
That number is likely higher because the supply chain’s overall chaos is contributing to more-and costlier-errors, execs say.
“Shippers have suddenly and overnight been thrown into a world of insufficient capacity and rates that can’t be counted on, and they need to find alternate network capacity.” says Josh Bouk, Chief Revenue Officer at Trax Group.
Bouk shares an anecdote about one Trax client: Pfizer, which, of course, developed one of the COVID-19 vaccines. Pfizer says it has distributed more than 260 million vials so far this year at reefer temps as cold as minus-130 degrees.
In other words, the pharma giant quickly had to become a last-mile shipper-and deal with tons more invoices.
Bouk tells of a Pfizer vendor’s, let’s say, unorthodox method of submitting invoices.
“True story: When you say you want an electronic invoice from certain Chinese carrier, what the sales rep does is print out the bill, takes a picture of it and emails you the picture: “There is your electronic invoice,” he says, sounding mildly amused.
Leveraging, streamlining data
FAPs are all about leveraging and streamlining data. That’s why Trax now calls itself “transportation spend management company,” as other FAPs are starting to do, too.
These companies get all that data from all those invoices-Trax, for instance. handles well over 100 million transactions (shipments) a month and manages $22 billion in invoices.
“Carrier data happens to be a great data mine,” says Cameron Elliott, Brand Manager for Green Mountain Technology.
FAPs’ data then becomes clients’ BL actionable intelligence, prescriptive analytics and, ultimately, as some of the executives here predict, predictive analytics from Al.
“Where people were just focused on getting bills paid, we’re now seeing the value of being able to extract all that data, combine it and look at the story that it tells us.” Bouk says.
Again, MacGonigle shows precisely what that story can look like: “a year’s worth of data in seconds”-everything from ship spend to cost-per-shipment to modal trends.
“The sky is the limit in what you can do in terms of building dashboards and building very detailed reports with different kinds of analytics,” he says.
“Shippers are more open to or are actively exploring how data can provide a full, holistic picture of their shipping network.” — Cam Elliott, Green Mountain Technology
Shifting business practices
Just as FAPs’ paper-pushing services have shifted, so, too, have their relationships with clients.
Michael Falls, Director, Global Strategic Solutions at en Vista, says their customers seek strategic partnerships: “Long gone are the days where shippers want merely a freight-bill processor and auditor-they want a partner who can integrate all of their supply chain data sources with the carrier billing data.”
He lists clients one growing demands, too, such as GL coding: negotiating carrier rate agreements; and enterprise resource planning.
“The question has shifted from, ‘How much will you save me?’ to ‘What technology, processes and domain expertise do you have that will help me achieve business objectives?” he says.
Allan J. Miner, President of CT Logistics, further notes that FAPs offer their clients intangible benefits, too, such as visibility and transparency and the firms’ ongoing technology initiatives to analyze and predict trends and correlations.
Meantime, while COVID-19 has certainly altered current business practices, it also has forced shippers and carriers to focus even more closely on their core competencies.
“It’s so hard for them right now, even if it’s because volumes have gone through the roof or it’s because they can’t get material moved” says Craig Cameron, Vice President, Sales & Marketing at A3 Freight Payment.
That’s also why freight audit and payment executives say their companies’ services have become much more critical, even urgent.
Several execs point to data analyses that can show any number of cost-saving options available to shipping companies’ decision-makers. In some cases, the BI may suggest shippers change a longstanding network or even their preferred carriers.
As Miner explains, clients are now facing double-digit increases in parcel shipments and LTL volumes-a good problem to have for the bottom line. But he says: “Because of the need to move product, they can’t wait for truckload or intermodal capacity to free up, but to provide the pickups and deliveries needed to meet customer delivery commitments,” he says.
“Shippers have suddenly been thrown into a world of insufficient capacity and rates and need to find alternate network capacity.” — Josh Bouk, Trax Group
Here’s another anecdote. Cameron tells of an A3 audit that found the client was using an internal routing guide the shipper had created before the pandemic. The client’s 13 divisions were supposed to be following those guidelines, yet A3 found close to 40% non-compliance.
“We identified for them where they weren’t following the routing guide, but then, even deeper, we went into looking at who they were using and who they should be using,” he says, referring to the shipper’s preferred carriers.
The audit showed $1.2 million in overruns related to that non-compliance, he says. The solution: Update the routing guide, change the carriers-and, as other FAP executives have advised in similar situations-perhaps even build a new DC to help the network become more efficient … and save money.
Little wonder, then, that shippers have found what Cameron Elliott, Brand Manager at Green Mountain Technology, calls “newfound enthusiasm for carrier data. Specifically, shippers are more open to or are already actively exploring how data can provide a more full, holistic picture of their shipping network.”
“I can assure you those errors are not inclined to favor [the shippers], they’re in the carrier’s favor.” — Dan Leva, Data2Logistics
At the end of the day, Elliott and the others will tell you data is great, the gold that FAPs offer their customers, but relationships remain paramount-even including freight audit and payment firms’ ability to work with carriers as fluidly as they do with their shippers.
That’s largely why Carey, at Target, says the sector has staying power: “By ensuring that these critical relationships continue to grow, FAP companies can do their part to help shippers and carriers alike overcome the
supply chain slowdowns that aren’t disappearing anytime soon.”
“It’s so hard for them right now because they can’t get material moved.” — Craig Cameron, A3 Freight Payment
Add to that, as Zygmunt points out, FAPs could operate without interruption when the pandemic erupted: “For all the years and I’ve been working at Cass, I found it amazing how quickly I was already set up to work from home.”
As Cameron says of his peers who work in arguably the supply chain’s least glamorous job, “Were not just the staple kids in the basement.”
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