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Issue 7 2019 - Freight Business Journal


///FREIGHT AUDIT & PAY When it doesn’t pay to DIY


As if running a business wasn’t complicated enough, keeping track of your freight payments can be complex, expensive and oſt en infuriating. And today’s freight audit and pay companies can off er a lot more than a bill-paying service.


EnVista off ers a total solution in a tight market


The demise of major US-based Freight Audit and Pay (FAP) company IPS Worldwide early in 2019 has unsettled the market, says Dominic McGough, managing partner at enVista for the EMEA and APAC regions. At the same time, the decision by US Bank – owner of a number of providers including Elavan and Syncada – to exit the European FAP market has created a further shortage of capacity, he says. EnVista off ers FAP processing global transport, including ocean


for express parcels, freight forwarders and on its


myShipINFO platform. It supports more than 168 currencies and is fully translated across 14 languages. It also off ers managed operations, strategy consulting, fl eet solutions and vendor management, focusing on midmarket and large global and with offi ces in the US, Europe, Asia/Pacifi c and Latin America) With many customers fi nding


their relationships with their FAP providers terminated at short notice, “an enormous number of companies suddenly found themselves


without a


service provider.” It’s taken the remaining players in the industry most of this year to take that volume on. Existing providers have increased their business by around 15-20%, says McGough. IPS Worldwide has since been


bought by European-based EM6, but it will be some time before it re-establishes its market presence, McGough suggests. Like other players, enVista has shared in the increased business and has as a result seen a major increase in activity. It has taken on extra staff and, equally importantly, upgraded its systems and added more automation. “We’ve brought forward an increase in our processing capacity and our fi ve- year plan has become a three- year plan,” McGough explains.


Worldwide, there has been


some retrenchment among some of the US players that had set out


world, he believes. “What many companies have found is that not only were European costs higher, but that European freight bills are much more complex than US ones and are correspondingly more complex to process.” FAP was originally a mainly


North American phenomenon but, faced with a sometimes saturated market at home, fi rms have increasingly started to look to Europe, Latin America and Asia, trying to off er a truly global service. However, many have found that it is impossible to simply cut and paste the service provided in North America – there are too many local nuances and customs and practices for that. At the same time, the size


of the data-processing task has increased enormously, especially with


A sorry tale of mismanaged freight funds


When Florida-based IPS Worldwide fi led for Chapter 11 bankruptcy protection in January this year, it was only the latest in a long line of freight audit and pay companies that have fallen by the wayside. Others fi rms that have collapsed in reent years include Trendset Information Systems and TransVantage Solutions. What was remarkable about


this case, though, was the size of the liabilities IPS had managed to run up, of at least $100 million – and this by a company that had assets of a mere $50,000 and with annual revenues of only about $9 million in 2018. Among the larger outstanding creditors were Stanley Black and


Decker, which was owed $41.6 million, according to IPS’s own fi gures – a fi gure that the tools company later wrote off in its 2018 accounts. Another company that had used IPS Worldwide to process and pay its freight bills was aluminium producer Alcoa, which was owed $28.7 million. Haulage and other transport


fi rms have also been leſt out of pocket because IPS Worldwide failed to pay their bills. US transport fi rm YRC was owed $4.7 million, for example. A crucial diff erence between the


US Freight Audit and Pay market and that in Europe is the fact that US fi rms frequently entrust FAP fi rms not only with checking their


freight bills but advance them the money so that they actually pay them on their behalf. But in Europe, the emphasis has always been much more on the auditing aspect with far fewer clients of FAP fi rms actually handing money over to them. In many FAP bankruptcies,


there has been at least an element of fi rms misappropriating and misusing the funds that customers entrusted to them. The industry is largely unregulated and FAP fi rms’ accounting procedures can be opaque. If an FAP fi rm falls on hard times, the temptation to use funds handed over by one client to pay a previous client’s freight bills can be overwhelming.


the recent to conquer the


development of e-commerce, which has led to a massive surge in the number of transactions. Meanwhile, enVista has been


increasing its own customer base and the number of transactions it processes. However, it sees itself than much more than a simpler processor of freight bills, says McGough. “What’s important to us is the ability to off er ‘actionable analytics’, not only off ering savings to clients by correcting errors in bills but helping them redesign


their networks and


showing them where they are spending money and where they can improve their operations. We’re helping our customers to become more agile.” Brexit is a prime case in point.


EnVista has been able to show its clients what the eff ect of, say, moving a distribution centre from the UK to the Continent might be – or vice versa – or the eff ect of shiſt ing a UK port of entry from Dover, say, to Immingham, Tilbury or Tyne. Other supply chain analysts


purport to off er a similar service but: “I’ve always maintained that


the data in freight auditing is the most accurate shipment data you can have,” McGough states. EnVista can also help its


clients streamline their internal processes, for example by standardising invoices and ironing out things like the inconsistencies that can arise in invoices. Meanwhile, FAP companies


like enVista are being challenged to produce information on shipments ever more rapidly. “It’s evolved from producing it at the end of the month, through post-shipment to at the time of shipment.” Looking ahead, McGough


sees more growth, in line with projected increases in the FAP market in Europe, but


Complexity drives growth in FAP


industry, says Gartner


Freight audit and payment (FAP) complexity, as well as the importance of freight spend visibility, continues to grow due to rising freight costs, says research and advisory company Gartner in its latest report on the Freight Audit and Payment market. At the same


time, FAP


vendors are expanding their services and solutions. Services have expanded over the years to include ‘deep analytics’, oſt en coupled with supply chain consulting. Major FAP fi rms are adding features such as analytic


tools and carrier negotiation, which can achieve cost savings for clients and give clients end- to-end payment visibility and improve overall cash fl ow. But while large, the FAP


market remains segmented according to mode of transport and region and pricing models can vary signifi cantly. While shippers might ideally


want a single platform to audit and pay all their freight bills across all modes, the reality is that many still struggle to fi nd one that accounts for regional variances in payment


also more challenges in the shape of increased regulatory requirements, as well as pressure to turn data around ever more quickly. At the same time, the quality


of the remaining players in the FAP market will increase. While there has, on average, been a major bankruptcy ever fi ve years or so, says McGough, “I think larger and more secure players are now coming in. They have the infrastructure that’s needed to support their customers, and they can carry out more due diligence. These are what you will need to stay in the game. Freight auditing has been around for a very long time, but now it is embracing new technology.”


preferences, not to mention the invoice nuances of each mode. While the Gartner report


focuses on specialist FAP fi rms, it notes that supply chain management business process outsourcing (BPO) providers and


third party logistics


providers also supply FAP as part of their off erings. Outsourcing the FAP function


is well-established in the US and this has resulted in major savings and improved accuracy. The industry was formed by the banking industry at a time when the transportation marketplace was heavily regulated and there was a legal requirement to pay bills within a set period of time. Europe, with no such history


regulatory has not


adopted outsourcing of freight payment to the same extent and


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