05 Nov A Simple Move You Can Make Right Now to Reduce Shipping Costs
Shipping is a big expense for many companies and most are making a mistake that’s adding 5% or more to their logistics costs.
This happens when they assume their carrier invoices are correct or don’t understand how to check billing accuracy themselves. It’s an expensive oversight, so how can this happen?
For most companies, it’s because carrier rates and contracts (especially LTL) are very complex. It’s common for shippers to negotiate their rates based entirely on a percent discount with no understanding of the underlying base rates. A higher discount appears good on the surface but without knowing actual base rates, calculating a shipment’s cost and being able to make sure billing is correct is impossible. As a result, companies continue to pay incorrect freight invoices with no way to know if they are accurate or not.
A better question may be, ‘Why do shippers let it happen?’.
The answer lies in the fact it’s hard to audit invoices for other reasons than just the complexity of tariffs. A lot of line item costs appear on invoices beyond just the base rate and discount calculation. For example, fuel surcharges can change weekly. There are also countless other accessorials that may show up and are hard to verify or dispute – like unloading, address changes, late delivery, and many more.
LTL carriers are also notorious for sending lots of duplicate invoices to further confuse things. Clearly, invoice audit takes a lot of time even under the best of circumstances and when complete information is available – which is rarely the case.
Some shippers simply don’t know they have the option to audit freight invoices. Or, do not have the time or resources. Approving invoices is a responsibility that will typically fall with the Logistics Department, but when it comes to validating the amounts it can become a grey area with Accounting. Neither wants this responsibility for all these reasons and the sad result is simply that it doesn’t get done.
As a final insult, it’s just more work an error is found. Some companies consider that 5% overage a cost of doing business. LTL carriers have succeeded in creating a chaotic marketplace that enables them to get away with it.
Of course, complacency from shippers is a mistake.
Each should be able to expect their invoices to be accurate and not held hostage to the complexity of LTL carrier’s pricing models. It unfortunate the industry has evolved in this way, but it’s the reality of LTL shipping today.
Smart shippers have learned they can take control of their freight invoice audit and payment process by working with 3rd party companies, like www.viprocure.com, to gain the benefits of having their invoices audited without the added administrative effort to do the work.
Companies that specialize in this process have technology that makes auditing high volumes of LTL invoices for accuracy, accounting for the base rates, discounts, and all accessories. All this makes saving the 5% on your logistics spend while removing the work of auditing and paying a simple decision.