More supply chain leaders are learning to leverage technology to improve performance and lower landed costs. Unfortunately, there remain opportunities to recapture freight spend within the freight settlement process that automated freight settlement could solve. Consider this example. According to Inbound Logistics, the costs of failure to consider automation in logistics and freight settlement is a significant issue: “Could your company be spending millions on expedited air service and not know it? It happened to one shipper who didn’t audit their freight payments for several years. It turns out one shipment went out air expedited, and somehow every customer order after that went out the same way. A lack of oversight cost the company tens of millions of dollars in unnecessary freight spend.” Freight management leaders need to know the risks and challenges of the traditional settlement, how automation solves them, and a few tips to effectively apply automated resources.
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Challenges in Traditional Freight Settlement
Moreover, traditional freight settlement relied on a series of disparate systems and limited resources. As explained by The Loadstar, “For a long time, forwarders relied on transport management systems to manage invoicing processes, while shippers were either reliant on reports from their forwarders or forced to deploy complex, and often hugely expensive, enterprise resource planning (ERP) software.” Yet that barely scratches the surface of the problems that may arise. For instance, leading challenges in traditional freight settlement may include but are not limited to:
- Inability to identify errors in billing in real-time.
- Trouble maintaining compliance with routing requirements.
- Increased total landed costs.
- Difficulty maintaining compliance with contractual obligations.
- Limited visibility into carrier performance.
Automated Freight Settlement Creates New Opportunities to Conserve Resources
Automation allows freight managers to consider all aspects of the operation and avoid unnecessary spending. In other words, they enhance resource conservation. It’s important to realize how automation looks within the freight settlement side of the supply chain.
It begins with the carrier sending an invoice and supporting documentation to an organization’s accounts payable department. A traditional settlement process would result in a manual review of the material, authorization of payment, and countless minutes lost in adding payment data for processing. While a few minutes may seem minor, they quickly stack up when applied across thousands of invoices.
Instead, automated freight settlement processes can ingest the email, using robotics process automation (RPA). The system automatically identifies the carrier and matches the invoice to the quote within the TMS. It confirms the carrier documentation and references. It then alerts the team of missing data, if applicable. And it finalizes payment account data, initiating an AHR transfer or even the printing of physical checks. It all adds up to an instantaneous process that reduces the manual work in the process.
Of course, automated freight settlement further leads to additional automated functions within the supply chain. For example, RPA could also be deployed to evaluate and streamline carrier quotes from the cradle to the grave. As a result, the companies can better manage by exception.
Tips to Apply Automated Settlement in the Supply Chain
Supply chain leaders realize a TMS is an invaluable tool in attaining supply chain efficiency. However, it always helps to have a few tips in the background that will help with automation in freight settlement. These include the following:
- Integrate the TMS with the freight invoicing and payment platforms.
- Leverage analytics to compare freight quotes against submitted invoices.
- Remember to count the accessorials and their accuracy.
- Eliminate the manual work of tabulating and initiating payment processing.
- Let RPA isolate and address exceptions.
- Track the system’s performance with KPIs that indicate invoices approved and those kicked back for errors or missing data.
- Stay informed of what carriers, regardless of mode, are doing to require prompt payment or digital invoicing, as noted by Peter Moore via Modern Materials Handling.
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The goal of supply chain efficiency resides within an end-to-end approach to optimization. And that includes using optimization within freight settlement. Automated freight settlement brings these needs together. Using a TMS that offers such capabilities can help companies recognize the problems in existing settlement processes, identify the best way to overcome them, and ensure the results deliver. Companies that wish to survive in the disruption-prone future need to start leveraging automated settlement now to work out the bugs and reap its full potential.