Freight Payment
Special Report
“ We ’ ve definitely had customers ask if we can do invoice reconciliation ,” he said . “ They ’ ll say , ‘ You ’ ve given us rates , and now can you help us compare it to the invoice ?’”
The challenge is often more political than technical , however . Rate management software providers establish relationships with container lines to get direct feeds for ocean rates . Those feeds are piped to forwarders , who then convey the container line rates to shippers , with a margin added .
If the rate management provider is then helping a shipper streamline its invoice auditing process by connecting rate data to the invoice received , that could potentially ruffle the feathers of both the carrier and forwarder . The carrier would be concerned that invoice reconciliation only benefits the cargo owner who might have overpaid , and not instances when the carrier has underbilled . Forwarders might be concerned that their margin is exposed if the shipper can see the underlying container line rate .
There are ways to shield that data to make forwarders and carriers comfortable but still allow shippers to streamline their auditing and payment process . But the trick is in overcoming the perception that shippers will see data that wouldn ’ t be available to them .
Plus , there ’ s the added reality that freight rate and forwarder margin transparency is as strong as it ’ s ever been due to the proliferation of price discovery tools and rate indexes . Viswanathan , for his part , believes the digitization of rates will eventually help the situation .
“ Invoice errors will eventually go down as more rates and quotes become digital ,” he said .
Single-solution option
There ’ s also the matter of whether shippers are set up to piece together a point rate management system with an invoice auditing solution . Another option is to use a software suite that includes rate management and invoice auditing . Generally , those suites are built around transportation management , such as those offered by the likes of Infor Nexus , e2open or Descartes .
“ Invoice errors will eventually go down as more rates and quotes become digital .”
Some shippers are fine with what Steve Ontiveros , supply chain solution consultant at Infor Nexus , called a “ basic two-way match ,” in which the invoice is compared with the rate in a contract or spot quote . But a threeway match allows shippers to consider a range of details associated with the shipment . That includes whether service levels were adhered to , whether accessorial charges were incorrectly applied and specifics about the route the shipment took .
“ If you ’ re able to understand what the route is , and whether it traveled that route , and were there accessorials assessed that were allowed , that allows you to flag a shipment in a way you couldn ’ t in a two-way match ,” he said .
Ontiveros acknowledged that freight rate management has not been at the top of the priority list for shippers , primarily because most vendors in the space are point solutions that are focused on the logistics intermediary market as customers . Instead , Infor Nexus focuses on shippers using rate management to make better procurement decisions that feed into more streamlined downstream activities , including invoice auditing and payment .
“ In a sense , we have to create demand [ for the rate management tool ] and our differentiator is tying it into execution ,” he said . “ When you have the rates on Nexus , those rates can be exposed to our optimizer , which examines carrier and forwarder contracts .”
The optimizer allows a shipper to compare “ what if ” scenarios on which contract rate to use for a given shipment or whether the shipper should go to the spot market . The rate acted upon flows directly into the audit and pay process , minimizing errors associated with spreadsheet-based rate management .
“ That optimization piece is where the real gold is ,” Ontiveros said . “ The default for shippers has been to turn to the [ forwarder ] market and get updated spot rates every month , and that ’ s harmful because it ’ s not a smooth process .”
The through line between rate management and payment is especially notable for enterprise customers stitching together a “ patchwork of systems , often through acquisitions ,” where aligning contracted rates and confirmed spot quotes with the payment process can get clunky , Ontiveros said .
“ If you have a TMS ... we ’ re not going to resell you that ,” he said . “ But we can take a feed from your TMS , and in that case , we ’ re more agnostic . It ’ s freight rate management combined with execution . The market has broadly coalesced itself around settling for [ rate management ] point solutions .”
email : eric . johnson @ spglobal . com
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38 Journal of Commerce | February 12 , 2024 www . joc . com