Vice President Sales at enVista

When shippers think of freight audit and payment (FAP), their focus is typically on invoice data and basic auditing capabilities. However, completing audits and gathering the data is only a small portion of the FAP pie. What shippers do with that data is where the gold truly lies.

Beyond the basics of FAP, there are several use cases and value add for the data that is gathered during the auditing process. With these use cases, shippers can ensure that they are gaining the right service levels for the money they are investing in carrier services.

The value of FAP is based not only on how well you can gather data, but also how you visualize and draw conclusions from that data leveraging a Business Intelligence (BI) tool. With this data, shippers will be able to make better financial decisions for the business, optimize supply chain management and enable transportation status tracking for carrier accountability. Once upon a time, we would have said that data is not important, rather turning data into information is key. Now we understand that information is not valuable if a user cannot act upon it. This next-level application is called “actionable intelligence”, and it is what shippers should strive toward.

Financial Applications

One undeniable benefit of freight audit and payment data is how it can be leveraged to make important financial decisions for the business. One way of doing this is by feeding order level information, such as shipment cost and service level details, back into the firm’s enterprise resource planning system (ERP). This will enable the finance, merchandising, supply chain and logistics and other teams to make better, more informed decisions on behalf of the business.

Additionally, this data can help users understand the unit economics of order fulfillment in order to manage gross margin and total cost of ownership for transportation and logistics. This can be done across both B2B and B2C organizations. This will mean big wins for a shipper’s profitability and bottom line.

"The value of FAP is based not only on how well you can gather data, but also how you visualize and draw conclusions from that data leveraging a Business Intelligence (BI) tool"

Finally, having this data will allow organizational leadership to make any necessary pricing model adjustments to shipping costs or individual SKUs, accounting for market data and other key data elements. Having a pricing model that is well represented by data will help the shipper maintain a competitive advantage.

Supply Chain Management

In addition to its benefits for the business’ overall finances, FAP data allows for significant improvement in managing the supply chain network. For example, shippers could leverage this data in the aggregate over time to adjust the distribution network and optimize all distribution nodes, such as fulfillment centers, regional distribution centers and stores.

Shippers can also optimize shipment modes using this data, ensuring that shipments are received when they are anticipated or needed based on mode service levels. For example, a shipper could downgrade air shipments to ground if a service level agreement (SLA) for certain lanes could be met using ground services. This would save on cost while maintaining the service levels expected from customers, adding to the shipper’s competitive advantage. Conversely, the shipper could upgrade shipments to handle the tail for distribution for the most distant points to meet the SLA and avoid having shipment delays.

Transportation Status Visibility

A third and incredibly valuable way that shippers can leverage FAP data is to create visibility into transportation status. This type of tracking involves monitoring the internal supply chain infrastructure to ensure all carriers are tracking at the services levels that were promised. While shippers and carriers should always strive to have a working relationship built on trust, this also creates an environment of accountability and alignment for the shipper and all of its carriers.

Another benefit of having transportation status visibility is being able to manage the shipment experience. Spanning both B2B and B2C channels, B2B leadership teams can assist buyers with consignment planning and labor management, while B2C teams can manage shopper experiences around shipment receipt and security and loss mitigation.

A final, often hidden benefit of transportation status visibility is that it will enable shippers to come to carrier negotiations with more leverage and a position of strength. Shippers will be armed not only with market data, but also with immense amounts of internal data with which to negotiate carrier contracts and make the best decision for their business.

Conclusion

Freight audit and payment is a great tool for ensuring you are getting the best return on your carrier investments, and it is something that really all shippers should be investing in. However, FAP is useful in so many other ways that are often overlooked. Shippers that pay more attention to the wide-ranging value adds of FAP, including better financial decision-making, supply chain management and internal and external transportation visibility, will benefit from a competitive advantage in the market and more brand loyalty with their customers.