Transactional freight payment data is the mother lode of logistics information, the bedrock on which strategic benchmarking and transportation modeling rests.
Freight payment companies are eager to leverage this valuable resource for the benefit of their customers. They are using advanced analytics and data mining technologies to provide a clear window into transportation and logistics practices, and incorporating multiple modes into their solutions as they expand globally.
Electronic booking of cargo streamlines and standardizes a number of transactional processes in ocean container shipping, and freight payment is one of them, said Rod Agona, director of professional services at INTTRA, a provider of e-commerce solutions for the ocean freight industry.
INTTRA eInvoice automatically creates carrier invoices matched to freight statements. Combining Electronic Invoice Presentation and Payment technology with a network of transportation partners that includes more than 30 of the world’s largest ocean carriers and non-vessel-operating common carriers, eInvoice is designed to streamline dispute management and other processes.
“Most of the bigger carriers view accounts payable as a generic thing,” Agona said. “They just want to pay and not worry about it.”
There are reasons an eye-popping 25 percent of all ocean invoices are disputed, the majority of them the result of carrier error. Invoices tend to be generic, while ocean freight data has become more complex. Shippers and carriers often rely on manual booking and billing instructions instead of using electronic platforms, which allow for better validation. Service contracts can be poorly written; multiple rates are pulled depending on how each party interprets the language. Shippers often don’t see carriers’ rates until invoices have been cut. Charge codes and product classifications present numerous opportunities for error.
“That’s why there is a freight payment industry, because there is a lot to find,” Agona said. “If shipping instructions are done poorly, the carrier has to guess.”
INTTRA facilitates dispute resolution by providing standardized information to both parties and ensures the information gets to the right people. Shippers often don’t know whom to contact given the different, countries, regions and branches and the different ways carriers are structured. The dispute resolution mechanisms are cloud-based so carriers can register their invoicing protocols. “It relieves shippers of the burden of wondering whom to route things to,” Agona said.
Data provided by INTTRA also allows carriers and shippers to monitor trends by customer, carrier, country, branch and other criteria so they can discover root causes of errors.
Companies are asking freight payers for more transparency, cleaner data and better benchmarking capabilities, said Mike Regan, president and CEO of Elmhurst, Ill.-based TranzAct Technologies. Since its founding in 1984, TranzAct has processed more that 600 million freight bills and disbursed more than $60 billion in freight payments to more than 26,000 carriers.
Consulting companies have historically undertaken the benchmarking and strategic modeling initiatives that freight payment companies now can provide to companies looking to improve their transportation and supply chain performance. There is strong demand for expanded analytical capabilities as diesel prices soar and shippers emphasize modal flexibility, carrier selection and network design.
“We now have the data to help companies understand where they are relative to the marketplace,” Regan said.
As social media and mobile technologies are integrated into freight payment and other logistics processes, cycle times for reporting will decrease quickly. Companies relying on 30- to 45-day reporting on the use of non-core carriers, for example, might be flagged daily when non-core carriers are used.
TranzAct last year began to offer Shipper Shield, a Web-based carrier program that monitors motor carriers and contracts and provides enhanced levels of data reporting and carrier oversight. It provides a full spectrum of critical carrier data, including insurance and safety ratings, alerts and audit trails. More than 30 customers have signed on to the program.
StarPay, TranzAct’s Web-based freight payment and audit application, provides up to 15 Web-based reports containing comprehensive, detailed data on payments, carriers, lanes of traffic and dollar/tonnage information. Reports can be customized, automatically triggered by designated events and delivered in multiple formats. TranzAct also offers several data mining tools for expanded analytical capabilities.
Future growth in the freight payment business largely will come from outside the U.S. as shippers seek to control costs by leveraging their global logistics buying power. Data2Logistics, a Fort Myers, Fla.-based freight audit and payment company, recently expanded its European sales force with the aim of establishing a control tower structure to leverage its global buying power from a single vantage point.
Data from around the globe, from currency exchange rates to exception alerts, can be viewed through a single lens, enabling faster response times for better cost control. “Carriers are expanding on a global basis, and we are trying to get out ahead of them,” said Harold Friedman, senior vice president of global corporate development.
Visibility is more important than ever as rising diesel prices, recent hours-of-service and Compliance, Safety, Accountability program legislation and driver shortages drive up transportation costs. Data2Logistics estimates it saves clients an average 5 to 15 percent of their annual shipping costs. The company processes hundreds of millions of freight bills annually, valued at more than $15 billion.
Friedman describes the freight payment value proposition as cost avoidance rather than savings; by getting it right the first time, extra costs aren’t incurred. Data2Logistics focuses on improving the first pass yield, working closely with carriers to root out repetitive billing errors.
Chainalytics, an Atlanta-based supply chain research, analytics and advisory firm, relies on transactional freight payment data to undertake benchmarking and modeling projects on behalf of global companies in a range of industries. The company doesn’t install transportation management systems or freight payment systems, but helps customers select and assess those systems, said Kevin Zweier, principal of Chainalytics’ transportation practice.
Chainalytics’ customers expect their freight payers to pay bills and minimize errors. What differentiates providers in their eyes is the ability to harness data to improve supply chain efficiency and reduce costs.
Some freight payment companies are better than others at capturing and culling data and at ferreting out inaccuracies. By the same token, some shippers are clueless about how to interpret and use freight data. Shippers also can be hampered when freight payment data resides in accounting and finance departments, disconnecting it from those who actually use it.
Chainalytics filters data through its freight market intelligence consortium, where advanced analytics and drill-down capabilities benchmark client transportation data versus market rate data. The analyses are used for modal optimization, flagging rate divergence, improving consolidation or pooling strategies, or deciding whether to use private or dedicated fleets.
“All optimization analysis comes from transactional shipment data, which comes from freight payment systems or TMS,” Zweier said.
Data also is tied back into routing guides and budget plans to identify problems, determine where leakages are and find solutions. Problems could be internal or involve either party not living up to the service agreement.
One trend emerging from Chainalytics’ benchmarking studies is that when selecting carriers, shippers who “chase dollars” by relying on the spot market and by utilizing multiple brokers pay huge premiums when freight prices spike, wiping out gains from below-market rates paid prior to the spike. Shippers with stable carrier relationships pay much steadier rates and save costs overall.
Zweier sees a trend among large global shippers to take freight payment back in-house. Many have invested in transportation management systems with freight payment functionality, but the jury is out as to how well the systems work in a global, multimodal context.
PayCargo, a provider of electronic invoicing and settlement solutions for the ocean shipping industry, in February announced it would expand its Electronic Invoice Presentation and Payment capabilities to the air, trucking and rail shipping industries. PayCargo is a part of First Data, a global e-commerce and payment processing company.
PayCargo’s B2B commercial payments solution offers multiple funding options, dispute resolution, systems integration capabilities, e-mail alerting and reporting. All of the capabilities currently provided to ocean shippers will be available as customized tools for air, truck and rail payment when the enhancements are rolled out this spring.
“PayCargo is investing considerable time and expense in upgrading its software, but it’s absolutely the right thing to do,” CEO Chris Courts said. “There were so many opportunities in the ocean industry that carried over into other modes.”
Given the volume and complexity of multimodal freight payment, settlement solutions such as PayCargo must have enormous IT processing capabilities. PayCargo has those capabilities through First Data, which also provides it with a funding source that Courts described as possibly the most critical piece and a key differentiator in the freight payment marketplace. PayCargo offers advanced funding of receivables to carriers and creative payment terms for shippers.
In general, the term “freight payer” is a misnomer because most big freight payment companies do everything — invoicing, analytics, data mining, business intelligence, dispute resolution — except cut the check. For that, they rely on multiple banks, which make the process more complex.
“We can pay carriers the day after proof of delivery, which dramatically improves their cash flow,” Courts said.
Despite huge advances in e-commerce technology, it’s still much harder for carriers and truck brokers to get paid from freight payment companies than from shippers. Slow payments have dogged the industry, and while the practice of “float” — when payers delay payment to earn interest on funds — has largely disappeared, factors that lead to delays include poorly structured service contracts or inefficient data transfer between the parties.
While freight payers have long had programs in place to pay carriers faster in exchange for discounts, some freight payment companies now are mandating such terms. The arrangements are a boon to smaller carriers that rely on quicker payments, but taking away flexibility doesn’t always work for major brokers such as Transplace, a non-asset-based 3PL and truck broker that manages freight transportation for customers. The discounted rates often add up to more than the cost of borrowing money.
Another problem is that fast-payment programs give shippers the illusion they’re saving money when in reality, carriers often build discounted percentage points into their rates. “I’m all for giving carriers options,” Transplace President and CEO Tom Sanderson said, “but mandating quick payment is a bad tradeoff for us.”
Contact David Biederman at email@example.com.