What is freight, audit and payment?

What is freight, audit and payment?

Freight, audit and payment (FAP) is a system used to great effect throughout supply chain planning. It examines a company’s transportation expenses, tracks performance and analyzes data to gain complete end-to-end cost visibility into a company’s transportation costs.

Through FAP, companies can improve their on-time delivery performance and analyze factors that impact spend across all types of freight. In this way, they can drive operational improvements and optimize their transportation costs. 

What is transportation spend optimization?

While FAP continues to have a role in optimizing transportation costs, transportation spend optimization (TSO) is the next generation – a data-driven approach to maximizing the financial and operational performance of a logistics network.

TSO supports invoice collection, pre-audit, post-audit and payment of transportation invoices across different regions and modes of transport. It comprises advanced analytics, sustainability tracking and supply chain consulting expertise, offering businesses valuable insights into their freight expenditure data.

Why opt for a next generation FAP?

Transportation spend optimization combines cutting-edge algorithms and data-driven insights to optimize transportation cost strategies. It helps businesses utilize resources, minimize the risk of delays and drive efficiency. Notable features and capabilities include:

• Selecting the most suitable carriers for specific routes based on performance, capacity and cost-effectiveness.
• Allocating resources to ensure vehicles, drivers and assets are used efficiently during peak periods.
• Integrating real-time data to dynamically adjust routes and schedules.
• Monitoring carrier performance, delivery times and other key metrics to ensure service level agreements are met.
• Analyzing historical and current transportation data to identify patterns, trends and areas for improvement.
• Simulating scenarios that evaluate impact on operations to aid planning and decision making.

With TSO, a business can simplify the management of its transportation spend, streamline financial complexity, reduce operational risk and maximize technology investments within its supply chain operations. These capabilities optimize transportation networks, enhance customer satisfaction and navigate the challenges posed by peak demand.

Key metrics that determine transportation spend

The features and capabilities below capture some of the most common key performance indicators (KPIs) used for transportation spend benchmarking:

Freight spending: Through big data, shippers can automate administrative processes that streamline auditing and payment, ensuring data accuracy and quality in transportation spend management.

Freight costs per unit shipped: By calculating the total freight shipping costs divided by the number of units shipped over a specific time period, a TSO helps businesses measure the cost-effectiveness of their transportation system.

Freight bill accuracy: A direct measure of FAP and auditing procedures divides the number of accurate freight bills by the total number of bills in the period.

Truck turnaround time: Assessing and minimizing the time between a truck entering a facility to pick up goods and exiting to deliver goods, streamlines load/offload efficiency, which means the truck spends more time on the road.

Benefits of next generation FAP – transportation spend optimization

Transport management optimization is a holistic solution that addresses the whole range of challenges faced by shippers. Beyond standard FAP capabilities, TSO is able to integrate carrier sourcing data and freight bill processing information to produce a sophisticated level of actionable intelligence. The efficiency improvements in shipping operations also result in enhanced customer service levels. Here are some additional ways that TSO provides a new set of operational and financial controls:

Accounts payable

Accounts payable is a cost center with a high overhead, while transportation invoices are complex and time-consuming to review and pay. A TSO reduces payment costs and errors, saving the business money and the cost incurred in fixing mistakes. With transparent visibility into transportation spend, the finance team can make informed decisions in real time.

Business intelligence

Business intelligence gives an organization total visibility into its transportation and helps minimize spend. A company can improve its transit times, directly improving customer expectations and creating a competitive advantage.

Sustainability

Using Environmental Protection Agency (EPA) and International Monetary Fund (IMF) standards, a TSO helps achieve environmental, social and governance (ESG) and Tier 2 emissions goals (those relating to a company’s transportation fleet emissions). It also aids compliance reporting.

Supporting your transportation team’s sustainability initiatives

Infios’s TSO team helps shippers and carriers gauge their carbon emissions and implement measures to reduce or offset them. The introduction of Carbon Emissions Reporting into Infios’s global leading solution, myShipINFO®, streamlines your transportation team’s sustainability initiatives by utilizing EPA and IMF standards for compliance reporting. The data enables our clients to report their emissions to stakeholders, optimize service based on emissions impact and reduce costs by consuming less energy.

What is included in transportation spend optimization

Infios’s TSO solution is designed to streamline complex transportation operations and simplify freight cost management software for dynamic supply chains. It offers strategic transport sourcing and delivery performance management, as well as global freight audit and payment – all aimed at strengthening vendor relationships, improving delivery performance and enhancing customer experiences.

Our TSO solution has earned a place in the 2024 FedEx Certified FBAP program. The program recognizes freight bill, audit and pay (FBAP) providers that have consistently met the high internal standards and analytics that FedEx sets for receiving invoices electronically, processing and remitting payment details, and managing disputes on behalf of customers.

myShipINFO®

At the heart of our TSO solution is myShipINFO®, a proprietary parcel and freight bill audit platform. Its core features include:

• Comprehensive billing and rate audit
• Automated data normalization
• Configurable business rules
• Flexible cash flow management
• Loss and damage claim capabilities

To tackle the issue of inconsistent carrier data, myShipINFO® provides a comprehensive data normalization solution (see text box), ensuring clear, comparable and actionable information across all modes of transportation.

Harnessing the power of business intelligence

To maximize the impact of your data, you first need to normalize, customize and analyze it to derive value for your specific business needs. The steps in brief are:

• Data normalization: ensuring an “apples to apples” comparison across different carriers.
• Data customization: creating logic-based elements, such as shipment type, region or distribution center location. This provides a nuanced understanding of your business.
• Data fusion: enabling the reconciliation of different data points, such as shipping and handling revenue versus actual shipping cost or manifested versus actual operations.

Infios PayPlus and transportation finance automation

Infios PayPlus offers a dedicated support team to handle carrier inquiries and ensure secure, prompt payments. This solution includes transportation finance automation for general ledger coding and accruals, reducing the manual effort required while increasing accuracy.

Business intelligence (BI) and analytics

This comprehensive analytics suite provides shippers with quarterly spend reviews, market alerts and proactive savings callouts. It enables:

• Carrier performance tracking
• Accounting and financial reporting
• Accrual reporting
• Open/unpaid invoice reporting
• Payment cycle time reporting
• Tracking audit provider performance
• Carbon emissions and sustainability reporting

The data-driven insights of BI analytics help businesses to set short-, medium- and long-term goals – a strategic imperative for shipping cost management:

• Short-term goals: Identifying high-level cost indicators, implementing a systematic, proactive analytics program, and swiftly recognizing and addressing changes in shipping behavior.
• Medium-term goals: Generating actionable insights, understanding root causes and formulating strategies to drive cost reductions.
• Long-term goals: Implementing organizational change with established data visualizations and data-driven decision making; identifying large-scale projects such as network fulfillment strategy or inventory positioning strategy.

Transportation Spend Optimization (TSO) case studies

Peet’s Coffee – Creating data visibility across distribution channels

Peet’s Coffee sources the world’s best coffee beans and tea leaves, which are then retailed through more than 12,000 grocery stores across the US. 

Because of the company’s existing relationship with Infios’s freight pay and carrier sourcing operations, Peet’s Coffee asked us to help with their KPI tracking and data visibility. We implemented our web-based platform, myShipINFO®, to enhance visibility into the company’s transportation expenses. Using the platform’s embedded BI tool, we established custom fields for KPI analysis and implemented robust visualizations. 

As a result, Peet’s Coffee achieved KPI visibility across all its distribution channels. Through the BI tool, they could create allocation and accrual dashboards and evaluate cost optimization opportunities that drove hard savings and internal efficiencies. 

Vera Bradley – Conducting a carrier benchmarking analysis

Vera Bradley is an industry-leading shipper of bags, fragrances, luggage, accessories and gifts. Prior to commissioning Infios, they single-handedly sourced parcel shipping with a national carrier. The company was shipping close to 2.8 million packages per year. They asked us to analyze whether existing pricing agreements were aligned with the market and the company’s shipping patterns, package attributes and business requirements.

We conducted a benchmarking exercise to compare Vera Bradley’s carrier service to similar carriers and determine differences in shipper metrics. Based on the results, they invited us to manage a parcel contract analysis and negotiation project. The benchmark analysis suggested that the company was significantly overpaying for parcel services.

After presenting them with multiple carrier award scenarios, they chose to pursue a single carrier solution that provided the maximum net cost savings.

Transportation Solutions Consulting (TSC)

Infios is uniquely positioned to provide consulting services on transportation sourcing, strategy, modeling and analytics. Features for TSC services include:

• Market intelligence trends
• Contract optimization
• Scenario management
• Strategic sourcing
• Peer benchmarking
• Strategy road mapping
• Monthly KPI analysis
• Reduction in low value-add tasks

We also offer analysis around optimization, order consolidation, mode selection, transit time studies and rate comparison.

Transportation spend optimization technologies

TSO relies on an integrated solution that absorbs upstream data from multiple systems, including enterprise resource planning software, order management systems, warehouse management systems and transportation management systems. These can be summarized as follows.

Enterprise resource planning (ERP)

An ERP is an integrated platform that connects and supports multiple functions across an organization, including supply chain, operations, HR, finance and procurement.

Acting as a central hub for end-to-end workflows and data, ERP systems provide transparency across all business processes and minimize repetitive data input – thereby increasing information accuracy.

Order management system (OMS)

An order management system provides complete visibility, from inventory availability and order receiving to fulfillment, tracking and shipping notifications. It has proved hugely beneficial for retailers, wholesalers, manufacturers and third-party logistics (3PL) providers.

An advanced OMS software tracks fulfillment costs such as picking, packing, shipping, product defect and return rates. The most sophisticated systems provide fulfillment reporting and insights, so that retailers, warehouses and distributors can track key performance indicators.

Warehouse management system (WMS)

A warehouse management system organizes all warehouse activities through a single interface, giving users visibility and control of their entire warehouse operation. It produces real-time data to drive the most efficient and cost-effective movement of goods, people and processes.

WMS software automates your end-to-end warehouse processes by sending real-time data across functions such as yard management, goods in, stock control, materials handling, dispatch and transportation. It streamlines every process, from the moment goods enter the warehouse to when they leave.

Transportation management system (TMS)

A transportation management system can automate most processes across both single- and multi-stage transport networks. It automatically updates route planning in the case of disruptions, then tracks and traces shipments right through to delivery.

Some of the features of a TMS include transport planning, automatic load updates, order management, routing optimization and process confirmations from drivers, plus financial functions such as freight billing, payroll and invoicing.

12 benefits of a TMS at a glance

• Fleet, equipment and people management planning support
• Master route management and real-time driver location visibility
• Consolidation of all transportation orders
• Monitoring of operational transport processes
• Flexible billing models with automated or manual invoicing
• A web portal for sharing information with stakeholders
• Compliance with regulations and applicable laws
• Efficient logistics management
• Faster resource allocation
• Proactive notifications
• Web portal access to all parties
• Minimal set-up time