FREIGHT AUDIT & PAY\\\ >> 22


European vendors. encouraged US


there is far less competi ti o n a mong This


vendors At


has to


open offi ces in Europe and also in Asia. However, the diff erent rules in European countries and the lack of consistency in the way carriers invoice, make it a complex market. It’s important, to identify


the right FAP partner and also to assess the solution provided beyond the price of processing and paying invoices, the report continues. FAP data can be used to improve transportation


procurement,


optimise networks and improve performance, says Gartner.


the moment, says


the report, automation of freight invoicing is at a low ebb, particularly among small


and midsize players.


Many companies continue to perform invoice audits manually, or, in some cases, do not audit invoices at all. With most payment still by bank transfers or cheques, the use of payment platforms is still underdeveloped. And while there are established automated solutions for domestic freight payments in the US, they are almost non-existent for ocean freight payments. Large shippers outsource


freight payment much more than small and midsize fi rms


Issue 7 2019 - Freight Business Journal


due to the volume of invoices and complexity of the process, and because they oſt en have diff erent processes in diff erent regions where they may also be subject to widely diff erent local legislation. In China, for instance,


the movement of


money is heavily regulated. As vendors continue to


expand their services beyond audit and payment into technology off erings, such as transportation


management


systems (TMSs), these solutions will become more attractive, even to midmarket companies. This trend is reinforced by the transportation challenges these companies feel, just as much as the larger shippers.


Smaller shippers operating


in the spot market have much higher invoice error rates (up to 30%) than larger shippers working on annual contracts (between 2% and 5%). Also, adds the report, invoices from forwarders tend to be much more accurate (95% to 98%) than those from shipping lines because of more standardized pricing structures and lower freight rate volatility. Gartner estimates that the


total cost of invoicing and payment


processes to the


container shipping industry alone is $34.4 billion per year. The most frequent causes of invoice disputes are bill of lading fees, demurrage and detention, freight


rates, and surcharges


such as bunker adjustment and currency adjustment factors. In 2016,


the global freight


Interest in freight audit and payment and business intelligence services is growing throughout the world, says managing director of the Cass Europe arm of US-based Cass Information Systems, Kees de Jongh. “We’re seeing a more global approach. Our existing US clients are growing in Europe and Asia Pacifi c but we’re also seeing some brand new prospects in Europe too,” he explains. An important part of the


process is to make sure the correct amounts are paid. Keeping track of freight rates is no easy task and it pays to have the services of an expert on hand. The Global Shippers’ Forum and others have complained recently of the proliferation of diff erent surcharges in ocean freight and airfreight rates too are similarly complex. “I would say that 70% of


all rates leave some room for interpretation or are not complete and our job is to analyse them and make them clear,” says de Jongh. The diffi culties of myriad rates and charges are compounded when exchange rates are brought into the picture and getting a handle on these depend on knowing what the source of the conversion rate is, whether it is a buy or sell rate and the date on which it was applied. As well as a desire by


companies to get a handle on their supply chain costs, another main driver is a stronger focus on compliance – including the GDPR data regulations in Europe, along


with tighter tax and invoicing rules and e-security concerns. As a fi nancial holding company Cass is well placed to address all of these issues for its clients. A new focus for Cass, and one


that is closely allied to its existing freight audit activities, is claims management, he continues. “While we have off ered this service in North America for many years, we are now off ering it in Europe too,” he says. “It can be theſt , or damage during transport, loading or unloading, and we can manage the whole process electronically and collect payment from the carrier or the insurer.” Not only does the Cass service


save collection costs for the client but, perhaps more importantly, its data shows where in the supply chain losses are damage are occurring. It’s all part of the increased


visibility into supply chains that Cass can provide its clients, says de Jongh, who points out: “It’s remarkable – if you talk to companies that have not outsourced their freight payment, they have real diffi culties


in specifying,


for example, the number of shipments they move or what their supply chain spending is. “Clients are also making more


detailed requests on security and storage of data,” de Jongh explains. “There’s also a very much increased focus on compliance, and on codes of conduct.” Firms want to know how well data and systems have


been secured, and this must be documented and proven. “Of course, we’re long used to security reporting,” says de Jongh, “but we are now seeing more and more clients require it.” Memories of the events a


couple of years ago when major shipping lines and express operators suff ered breaches of their data security are still fresh and while you can never be 100% certain that it will never happen again, says de Jongh, all companies’ eff orts are focused on preventing a recurrence. Nothing stays the same


forever in freight and international


could additional costs


impose or


commerce,


including in the UK, where Brexit


some have


implications for cash flow. If consignments that previously moved from the EU to the UK (or vice versa) on the basis of a simple dispatch note need complete and accurate invoices, and customs entries, that is a cost that will need to be factored in. If Brexit does lead to delays in ports, there could


be extra demurrage


charges too. When and where VAT is charged could also change and will have cash-flow implications. One unfortunate side-effect


of Brexit, says de Jongh, is that companies have been so distracted by the issue that they have delayed making important and desirable improvements to their supply chain – something that should be addressed in the very near future, he argues.


payment services market was valued at almost $19 billion but is expected to reach around $29 billion by 2021, although quite a large part of this market is controlled by 3PL vendors such as DHL, Kuehne + Nagel, DB Schenker, Nippon Express and


C.H. Robinson, rather than pure- play FAP companies. Gartner lists 16 companies


that it considers global FAP providers and a further 19 that it describes as regional providers. Companies are getting rid of


manual processes and are also increasing their outsourcing to gain cost effi ciencies. Rising transportation costs are increasing the need for better freight spend visibility, while benchmarking is also used to understand if there are opportunities to procure better rates. Further globalisation of the


FAP market outside the US is also a factor, with US vendors expanding into international markets, as well as the emergence of some European vendors. At the same time, the shippers’


requirements for FAP services has shiſt ed from rate audits used to deliver savings to extensive analytics and benchmarking. Most FAP solution providers can create a central data warehouse that allows shippers to better manage their global


23


supply chain through rate and shipment analysis, as well as benchmark their rates against the industry. The freight bill payment industry has evolved from a pure settlement service to an information service, says Gartner. Providers are now also off ering claims management, carrier contract negotiation, hosted transport management service (TMS) solutions. Shipping lines in fact devote


considerable resources to dealing with invoice issues and identifying and correcting bad data is in everyone’s best interest. Gartner notes that some FAP companies deploy considerable resources to nurturing carrier relationships for this purpose and maintain departments specifi cally to interact with carriers. In a tightening world shipping market, it is in shippers’ best interest to collaborate with their carriers and increase the chance of carriers accepting their tenders. Some FAP fi rms are also


investigating new technology such as the Blockchain.


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