CASE STUDIES
Latest Resources
Automated System does not entirely eliminate the risk of error
Why internal controls in the billing process are important? Many established shippers these days require that invoices from carriers be entered into their portal. The information is then electronically analysed and discrepancies with PO/Rate confirmation can be immediately identified. This reduces the time needed to review and process individual invoices, this process however does not entirely eliminate the risk of processing errors. The designated staff maybe tasked with the responsibility of processing higher volume of invoices, but certain internal controls within the system must still be instituted to avoid override of controls. The controls established within these systems, i.e., parameter to override certain discrepancies may still exist and therefore to manage the risk of inappropriate or unauthorized approval of additional charges, certain controls such as requiring the need to perform daily reconciliation of issued POs against invoice total is still a necessity. Application of Data Analysis Performing freight audit using another external firm, maybe deemed a practical option, but it may not present the perfect long-term solution towards reducing and eliminating entirely the risk of errors in freight invoice processing. Shippers should consider using its IT platform and attempt to perform review and checks on all invoices to eliminate the possibility of errors through use of data analytics and trend analysis. Comprehensively utilizing the data stored within the transportation management system can potentially provide huge commercial value and savings to the shipper. Shippers can immediately gain visibility of cost and margins on a given lane based on real time data and this would help shippers make better decisions in term rates when negotiating with customers. What we offer Here at Freight Analytics, we recognised the importance of having a strong data analytical approach to managing your daily processes and you can be assured that the assigned staff would attempt to best utilize the data stored within your transportation system to provide your firm insightful analysis of both financial and operational performance on a real time basis.
Prospect of Outsourcing vs Shared Service
Differences between Outsourcing and Shared Services Solution Outsourcing or better known as business process outsourcing (‘BPO’) is method of subcontracting various business-related operations to third party vendors, and process outsourced are usually less complex and mainly include back-office function or front office function. Shared services centre is often a spinoff of the corporate services to separate certain operational task from the corporate headquarters and is more cost-sensitive, with processes designed to increase productivity while reducing cost. The relationship between the shared service centre and its corporate headquarters or parent entity is governed by Service Level Agreement (SLA) that covers all aspect such as quality, responsibilities, and performance. Although business process outsourcing market has registered strong growth every year, many global multinational firms, are progressively switching towards adopting a global shared service delivery model, where centres are established to perform higher value adding services as compared to the common services provided by the traditional BPO firms which are more accustomed to performing basic processes which are less complex. How Technology has help shift the trend towards Shared Service Model Digitalisation of business process and the availability of much more advanced network systems such as cloud computing has provided the right foundation for many firms to established shared service centres in countries with lower labor cost to perform and execute multiple set of processes and activities that would otherwise not be considered in parent entity due to high labor cost requirement. The outsourcing strategy would have been the right solution in prior years, where most processes were standardized, and a great amount of manual intervention was required in a given activity. This trend however is expected to change, and more firms will likely pursue wide scale adoption of more efficient transportation management back-office system which will likely demand a more analytical approach towards completing and managing daily back-office functions. Assigned personnel would be expected to process higher volume of invoices with higher level of accuracy and apply analytical tools to generate meaningful analysis for management. This would require greater investment in training on use of software specific to that entity’s operation, and the approach of having an external firm perform this may not be viable since, the shipper’s obejctive of achieving higher efficiency with a given set of labor hours may not be perfectly aligned with outsourcing firm’s long term strategy and objective which maybe to offer more labor hours even if it may be deemed less efficient in the long term. What we offer Here at Freight Analytics, we firmly believe that upon achieving the milestones of performing a set of given activities successfully with a group of personnel that are already accustomed to the shipper or carriers’ business process, it is critically important for the shipper or carrier to own the shared service and remain focus on using technology to drive process innovation and yield higher efficiency. We would like to see our customers, benefit economically from both labor arbitrage and still benefit from continuous process improvement and innovation through application of best-in-class technology systems and platform.
Good dispatch system can set you apart
Almost all trucking entities have cited that truck driver retention is the single biggest challenge they face in managing their operations. Increments and good benefits alone cannot guarantee a driver loyalty to a given company beyond a year. If a good compensation package is not sufficient, what is the other non-financial reasons for the high truck driver turnover? One key aspect for the high turnover is how drivers are dispatched. A poorly setup dispatch process may lead to high levels of dissatisfaction when drivers are treated merely as a number without much attention given to their needs. The most common complaints drivers have and reasons for resigning are as follows: Not fairly treated by the dispatch team. Schedule setup not aligned with the ELD hours they have available. Home time compromised by poorly planned schedule. Dispatch not available after hours to help resolve issues at loading or unloading facility Drivers lacked visibility on their schedule for the next few days making it difficult for them to plan their ELD hours. Dispatch team not responsive to the issues they raise, and many times feel the lost of time at both loading and unloading facility was preventable if there was better communication with the broker or shipper The issues raised here can all be resolved by establishing a dispatch system that looks after the well being and interest of the drivers. Close communication among drivers, brokers and shippers is key to ensuring driver available hours are optimize for driving and unnecessary hours waiting at loading and unloading facility is drastically reduced. How your assigned Freight Analytics Associate can help you manage this process better: Schedule loads for drivers based on their available ELD hours that incorporates sufficient time for them to take their break and offer a consistent shift for them to get their rest. Maintain close communication with drivers to ensure brokers and shippers can be advised of close to exact ETA thereby providing the warehouse personnel advance notice for them to prepare. Reducing wait time at the warehouse facilities will help drivers eventually gross more a week. Offer a good after-hours support. A lot of loads are picked and delivered before 8am and after 5pm. Carriers should offer 24/7 dispatch service that is managed full time by dedicated personnel rather than someone on standby basis. Dedicated personnel after hours will certainly help improve the quality of dispatch and ease many of the issues drivers faced after hours. Plan the schedule well by ensuring drivers available hours are optimized safely for the benefit of both drivers and carriers and that rest times are properly planned for drivers to take their break at their desired location. Keep track of issues encountered and work with drivers to see how both dispatch and drivers can improve their part ensure both parties do well in keeping brokers and shippers happy and the truck safely optimized. Dispatch to driver’s ratio may differ depending on the nature of the loads hauled but having a systematic process that looks after the interest of the drivers will certainly help improve quality of service and reduce driver turnover. The estimated average cost of truck driver turnover is close to $8,000. If a fleet has 50 drivers resigning each year, reducing this number by 50% can lead to cost savings as much as $200,000.
Risk of Error in Billing Process
Detailed below are just some of the risks all trucking companies face in their billing process. Not having an established set of control to mitigate and manage this risk can result in significant financial losses. Not accurately accounting the potential extra charges it may charge its customer for the delays caused by the customer ie detention time and billing the customers for these charges. Many trucking companies do not have an established set of process to correctly justify and issue detention charges on its freight invoices. Not issuing the invoice on a timely basis as well as not providing all the needed documentation in the manner required for fast processing. Invoices that should take less than 3 days to process for payments may sometime take up to 7 days, due to errors or unclear scanned copies being attached in the freight invoice.On an individual invoice basis, this error may appear insignificant but if aggregated and reviewed on annual basis, there can be an incremental loss of working capital funds that maybe unnecessarily tied up in receivables.Assuming a company has sales of $5 million a year, a delay of 5 days may result in the company having an additional $70,000 tied up in receivables at any one time. Additional items needed to be included in the freight invoice such as fuel surcharge, lumper fee or last-minute changes from customers are not properly and accurately accounted for in the freight invoice. Lack of review on oversight on the additional charges needed to be included in the freight invoice will more often than not lead to these items not being billed to the customer. Not correctly reconciling receipts to invoices issued do also increase the risk of trucking companies failing to identify brokers or shippers who may have deducted their freight invoices unfairly for reasons that was not agreed in the contract or aligned with industry practices. Establishing a process to follow up on freight invoices with issues, is extremely important to ensure trucking companies are fairly treated for loads that had unplanned complexities. The aggregate value of loads such as this can be significant when evaluated on a yearly basis. How your assigned Freight Analytics Associate can help you manage this process better: Maintain close communication with dispatch team, to identify loads, that will incur additional charges, ie detention time or lumper fees and secure the additional documents needed to ensure these charges are correctly invoiced. This can be achieved by maintaining a master record of loads that had delays and developing a reporting system to track these delays with assigned Sales Order number. Develop controls within the freight billing process to ensure each incremental billable item is assigned a Sales Order number and that each of this additional charge is invoiced accordingly. Increase the efficiency and effectiveness of the freight billing process by ensuring invoices are issued correctly with clear supporting documents especially when additional charges such as detention time is included in and that this process is completed in a timely manner. Perform analytical analysis on a weekly basis to provide management an insight as to how many invoices were processed smoothly and how many had its specific issues and how those issues were followed up and resolved. Develop KPIs based on the individual business setup and define goals this specific process should strive to achieve. Losses from unclaimed or unpaid detention time should be accounted and reviewed along with any other losses related to the freight invoice process, so that incremental improvements can be planned and setup to further reduce the risk of errors within this process
Potential Loss from Inaccurate Billing
Freight Billing for transportation companies may appear as a simple process without much complexity, however any error or mistakes in billing even at 1% of total revenue can lead to significant losses on the company’s net profit. Detailed below is an example of losses a company may incur if it incorrectly under bill its customers by 1%. Example: Trucking Company A has 50 units with a net profit margin of 5%. On average each unit delivers 5 loads a week and 5 invoices are issued a week for one truck. This translate to 250 invoices that will need to be issued a week. (50 trucks x 5 invoices a week). In this example this company is entitle to $50 claim for every approved hour of detention time at the customer warehouse. Assuming if 10% of the loads delivered had issues on detention time, averaging 2 hours a week. The detention claim for a given week would amount to 25 loads x 2 hours = 50 hours. This will translate to 50 hours x $50 = $2,500 a week. If extrapolated to a year, the detention amount will sum to $2,500 x 52 weeks = $130,000. If 20% of the loads have detention claims averaging 2 hours a load, the total possible detention claim in a year would amount to $260,000!. If this company does not have a systematic process to manage its claims on detention time, it will incur a substantial loss. Detention claim when reviewed on an individual invoice level maybe seen as insignificant however when reviewed on yearly basis, under billing of 1% of revenue can have an impact as much 20% to 25% on the trucking company’s net profit.
Understanding CSA Program
The Compliance, Safety, Accountability (CSA) program, run by the Federal Motor Carrier Safety Administration (FMCSA), is designed to hold motorists, including owner-operators, accountable for their role in road safety. The FMCSA groups carriers with those who have a similar number of safety events and assigns each carrier a percentile rank. The safety data is held online in the FMCSA’s Safety Measurement System (SMS) and is organized into seven Behavior Analysis and Safety Improvement Categories (BASICs), which include categories like unsafe driving, vehicle maintenance, and driver fitness. What Goes into a CSA Score? CSA scores are calculated with roadside inspection and crash report data from the Safety Measurement System (SMS) from the last 24 months. The calculations consider factors like crash severity, how long ago the event occurred, and annual vehicle miles travelled. Carriers receive a CSA score for each of the seven BASICs: Unsafe Driving: The Unsafe Driving BASIC pertains to the operation of commercial motor vehicles (CMVs) by drivers in a dangerous or careless manner. Examples include speeding, reckless driving, improper lane change, and inattention. Crash Indicator: the Crash Indicator BASIC considers histories or patterns of high crash involvement, such as frequency and severity. It is based on information from State-reported crashes that meet reportable crash standards (e.g., fatalities, injuries requiring medical attention away from the scene, disabling damage requiring a vehicle to be towed). HOS Compliance: The HOS Compliance BASIC includes violations of the regulations pertaining to records of duty status (RODS) and hours-of-service limits. Examples include a driver operating more hours than allowed under HOS regulations and falsification of RODS. Vehicle Maintenance: The Vehicle Maintenance BASIC pertains to regulations regarding properly maintaining a CMV and preventing shifting loads, spilled or dropped cargo, and overloading of a CMV. Proper maintenance includes, among other things, ensuring that lamps and reflectors are working, and tires are not worn. Examples include operating an out-of-service vehicle, improper loading/securement, or operating a vehicle with inoperative brakes, lights, and/or other mechanical defects, and failure to make required repairs. Controlled Substances/Alcohol: The Controlled Substances/Alcohol BASIC pertains to the operation of CMVs by drivers who are impaired due to alcohol, illegal drugs, and the misuse of prescription or over-the-counter medications. Examples include operating under the influence of drugs or alcohol. Hazardous Materials Compliance: The HM Compliance BASIC addresses the requirements in Part 397 of the FMCSRs as well as those in the Hazardous Materials Regulations (HMRs). Examples include failing to mark, label, or placard in accordance with the regulations and not properly securing a package containing HM. Driver Fitness: The Driver Fitness BASIC concerns the operation of CMVs by drivers who are unfit to operate a CMV due to a lack of training, experience, or medical qualifications. Examples include failure to have a valid and appropriate commercial driver’s license (CDL) and being medically unqualified to operate a CMV. Why having a good CSA score is important? CSA scores are calculated on a zero to 100 percentile scale, with 100 indicating the worst performance and zero indicating the best performance. The FMCSA sets intervention thresholds on a per category level, based on the BASIC’s relationship to crash risk. Carriers with scores greater than 65% in Unsafe Driving, Crash Indicator, and HOS Compliance are subject to FMCSA investigations. For hazardous materials and passenger carriers, the threshold is even lower, at 60% and 50%, respectively. The remaining BASIC categories have an 80% threshold for most carriers, after which the FMCSA will intervene. Carriers with good CSA scores will benefit from lower insurance premiums, fewer DOT audits and roadside inspections, and a better reputation with current and potential customers, so staying well below those thresholds can have an outsize impact on your operations and profitability How your assigned Freight Analytics Associate can help you manage this process better: Perform ELD audits to ensure all ELD logs are correctly recorded. This can be achieved by reviewing the Personal Conveyance (PC) use each week and ensure it’s been applied in accordance with company’s ELD policy and that all unassigned miles are reviewed to ensure it gets correctly assigned and that no one truck was driven with its ELD intentionally switched off, when in fact ELD was meant to be used. Reduce maintenance violation by proactively keeping track of items noted in DVIR and ensuring these items are addressed timely, by highlighting to management list of open DVIR or items that requires repairs. Keep track of schedule service and ensure dispatch team allocates necessary time slot for maintenance. Review and maintain DQ files by ensuring each driver record is up to date, which includes drivers CDL A status and medical card. Ensure that all violation committed are correctly recorded in his or her file to help facilitate the yearly performance appraisal review. Review Fleet Telematics Data and report incidence of unsafe driving event and assist management in ranking drivers’ performance by applying indicators such as unsafe braking and driving speed based on data provided by the telematics system.
Contact Us NOW!
We offer our customers options tailored to meet their specific back office requirement.