While the State of Logistics 2014 report is slowly giving way to what will be the State of Logistics 2015 report, we couldn’t help start thinking about what will happen. However, we know postulating ideas for the future is impractical if we cannot learn from our past experiences. The economy had been hit hard, and 2014 saw a great climb from the recession. That’s why it’s vital for shippers to keep freight accounting best practices top of mind during this period of a slow-growing economy.
According to the State of Logistics 2014 report, reports Dan Gilmore, Editor-In-Chief of Supply Chain Digest, trucking-related costs made up 77.3 percent of all transport costs. If we consider that the report in 2015 held such high statistics due to the implications of low diesel prices for the last four months of the year, the trucking-related costs and nominal figures could easily appear more damaging when the 2015 report comes out this summer. Obviously, truck-related costs continue to dominate the industry’s expenses, and shippers will need to find a way to drive these costs down. Fortunately, Cerasis has already figured out the answer, but you need to know a few things first.
Freight payment processing is basically how a shipper can pay respective carriers for their services. It does not have any form of verification in most cases. Meanwhile, freight auditing takes on the role of payment verification. However, freight auditing is only completed when payment has already been made. Mostly, the shipper has already lost money, and recouping extra-payments typically results in less than 50 percent restitution. What good is learning to break a fall when you’ve already broken your ankle? This is the math behind organizations that use only one of these services.
Do you remember our conversation on freight consolidation? To understand freight invoice consolidation, apply the principles of freight consolidation to the management of freight invoices and payments.
The result of that management is fewer transactions, a dramatically reduced chance for errors and duplicate transactions, and more efficient processes. Every transaction has some extraneous cost involved, albeit on the part of the banks, the payment processing center, or another financial institution. Everyone wants to get paid, but why hit up an ATM twice if you have to pay additional fees for each transaction? Unfortunately, many service providers do not focus on freight consolidation because it tends to result in fewer profits for the company. This is not good business, nor is it fair, and it could easily account for a significant portion of the trucking-related costs in the industry.
The obvious solution is to perform all payment processing, freight invoice consolidation, and payment auditing processes in-house. That would be great in theory, but shippers are not invested in paperwork and audits; they are shippers. They cannot afford to invest their resources into advanced information technology (IT) systems, and the strain on the industry is continuing to grow. New DIM pricing models, as explained by Peter Moore of Logistics Management, are continuing to increase the complexity of freight payments, audits, and processing. Shippers will be forced to consider all of these factors, and the investment to maintain in-house resources will just become impractical and more outdated. The trend is toward progression and efficiency, not a ticking time-bomb of an internal IT department that’s based on outdated freight classification models.
Some service providers may offer a combination of these services, but these combinations routinely lack one of the critical components.
For example, Cass Info Systems focuses on freight accounting, auditing, and payment, which may account for the company’s staggering rates of success. However, the remaining component, freight invoice consolidation, seems to be missing. Yet, according to Cass Info Systems, the system is still disjointed. If you do not feel disappointed or cheated yet, you will in a moment.
Cerasis is not a shipper in the sense that we focus solely on moving product. Our focus is the entire journey of an item and resulting processes that occur from the initiation to the payment of the shipment and beyond. Regardless of the stage in the supply chain, the primary goal is lower costs and better service. As a result, Cerasis has created the proverbial “Holy Trinity of freight Accounting.”
Cerasis focuses on making sure the shipment is correct at the start, consolidates the shipment with similar items, automatically logs information via the Cerasis Rater, ensures the shipment is delivered on time or accounted for appropriately (such as washed out roads due to flooding that did not pose a threat earlier in the day), processes invoices independently and in batches (which eliminates the need to reprocess invoices through ACH transactions), and audits the processes along the way. This sounds complex, and it is. However, the entire freight accounting process is broken down into the following steps:
Do these steps look familiar? They should! The key to success is figuring out how to cut costs without cutting quality, and combining these three services into one comprehensive program creates a self-sustaining, self-validating and self-auditing system.
As a final thought, plenty of companies are built on the principle of doing one thing and doing it well. The logistics industry can survive on this notion, but it cannot thrive. Although these companies are successful, they lack the power of businesses that put everything together. Considering Cerasis links our Holy Trinity of freight Accounting to an enhanced TMS and other related services, ranging from small package to maintaining compliance, our system is designed to thrive. It doesn’t stop at just sound best practices to stay competitive; it takes much more. It takes a network, a team, a plan, and a system of checks and balances. It takes it all, but you have to be the one to take advantage of such an integrated system.
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