CSCMP Edge Conference – Orlando October 2023
We have seen a lot of change within the transportation/logistics market over the last few years.
During the COVID lockdowns, when supply was constrained vs. demand, capacity was limited, and prices for both transportation and warehousing were high.
Like a pendulum that completely changed post-COVID, and according to most analysts, we entered a freight recession where capacity was high, and prices fell across almost all modes of transportation – influenced by high-interest rates as the Fed continues to tap down inflation.
Furthermore, the LSP market has never been more fragmented, with many smaller carriers entering the market when capacity was tight.
One thing that has not changed is maintaining good carrier/LSP relationships to avoid supply chain disruption.
A key to maintaining a good carrier/LSP relationship is on-time payment – pay the right amount at the right time.
Due to the complexity of the end-to-end order-to-payment process and the governance required to ensure invoices are valid, properly cost-allocated, and compliant with contractual agreements or spot quotes, often on-time payment is challenging to manage.
Key Takeaways
- Shippers should have a robust freight audit and payment process to avoid fraud, detect and action non-compliant invoicing, and use technology to automate this process to reduce cycle time
- Maintaining a good relationship with your carrier includes on-time payment, but carriers must also be part of the solution: one-time submission, proper data quality on the invoice, accurate billing, and good security and risk mitigation procedures.
- Payment optionality (early payment) can be a good option for managing payment terms and promoting on-time payment given a complex data flow, especially when considering cost allocation requirements.
- While service and cost are important, carbon emissions are quickly making their way into most C-level conversations. Shippers should be calculating their scope 3 emissions (from third parties) and can use this information to optimize cost and reduce carbon emissions.
Trax at CSCMP Edge
At this year’s CSCMP Edge Conference, Trax framed up managing the carrier/LSP network by considering three fundamental areas of measurement:
Service, Cost, and Sustainability.
A healthy QBR with your carrier/LSP should include all three areas of measurement in addition to reviewing your statement of account.
Service
From a service perspective, the most common measurement is on-time delivery and product loss/damages.
Evaluation of a carrier/LSP's ability to meet an on-time delivery target is important for proper inventory planning and, for some shippers, critical to the viability of the product (pharma).
Product loss and damage are also important to measure – how well the carrier/LSP manages the transportation and security of goods will result in lower damage ratios or losses during transit or while in detention.
Cost
From a cost perspective and to promote on-time payment, a carrier/LSP not only should have competitive rates but also be able to invoice on time, provide the necessary data quality/content on the invoice, and maintain a high level of billing accuracy (per the contract or spot rate).
The complexity of the process of order to payment requires shippers to have the proper governance to avoid fraud and overpayment, properly match against sources like the ASN/Manfiest, cost allocation to the gl code or even product level, and do all of this within payment terms.
Carriers/LSPs should support on-time payment, but they must also meet the targets for submission cycle time, data quality, and billing accuracy.
Proper governance by a best-in-class freight audit and payment process ensures these KPIs are measured and can alert shippers of potential fraud or corrupt behavior. Proper rigor and controls associated with payment are important, as well as payment options to support on-time payment by shortening some aspects of an approved invoice cycle time.
Sustainability
Finally, measuring a carrier/LSP’s financial risk is important along with their commitment to ESG – more specifically on ESG, reducing greenhouse gasses, the most significant being carbon emissions.
The challenge is the measurement of carbon emissions, and if a shipper depends on carriers/LSPs for this information, there is a lot of variance and interpretation and a significant consolidation effort if shippers utilize a large number of carriers/LSPs in their network.
The better method is to derive the carbon calculation from the carrier invoice using mode of transport, weight, distance (derived from the O/D pair), and a carbon emission standard.
The calculation is consistent and should be part of the service, cost, and sustainability scorecard. As with most cases, reducing carbon emissions can also result in lower costs (fuel, rate, total cost to serve). Operationalizing all of this data is important for shippers to have choices and maintain a best-in-class and optimal execution strategy.
Key Takeaways and Trax’s Impact
Trax technologies solve many of the major challenges companies face around data silos, operationalizing data, emerging technology, fraud, and sustainability.
Data Silos
Companies continue to struggle with data silos, and technology providers continue to attempt to integrate/partner with others to assist in solving the data silo problem.
Most larger mature companies are building a “control tower” concept and are faced with combining data into a cohesive, normalized, and integrated set of data that can power not only data-driven decisions via dashboards and analytics but also have a chance at leaning on ML/AI to interpret the information.
Trax is a major consolidation point of cost data.
Operationalization of Data
As SaaS technology vendors, we see a recurring problem – a lack of adoption of the products into a company’s operational process/governance. This is especially true when it comes to “carbon accounting” and leveraging the sustainability data to influence execution.
Trax prioritizes this, ensuring our customers understand the value of our technology and know how to utilize it to govern the very processes that they initially were trying to improve.
Emerging Technology: AI, ML, and More
The reality is that AI/ML is not ready for complex, uncertain problem-solving at this time.
The other blocker to true AI is good data and consistent refreshes of current data.
Until AI can differentiate good and bad data and have access to more recent information, it will not be able to provide accurate results that do not require human scrutiny and review.
AI or ML can be used to evaluate and learn data patterns that, over time, will produce good data to actually support ML/AI models.
Theft, Fraud, and Non-Compliance
At the CSCMP, the conversation about fraud was not simply product loss/theft but cyber fraud – impacting the security of information and the payment process.
Trax technology has a major impact on financial fraud by detecting unauthorized billing, non-compliant billing, and if making carrier/LSP payment, having the proper controls to avoid fraud during the actual funding process.
Sustainability – ESG
Sustainability continues to be a significant area of focus for most companies. However, many still struggle to balance the cost vs. green equation.
In the current economic conditions, most will lean towards cost, but at the same time, most shippers don’t have the data to correlate cost savings initiatives and tie that to carbon emission reductions.
Regulations and mandates will determine the ultimate timing of adoption. However, most shippers realize that they need to get on the ESG bus soon.
Trax has been an early provider of carbon emissions tracking tools, equipping our clients with the tools they need to enact streamlined, environmentally conscientious initiatives.
Connect With Trax
To learn more about our enterprise-ready solutions, contact the Trax team today.