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2018 FedEx & UPS Peak Season Surcharges

By | Conferences, Contract Negotiation, Invoice Auditing, News | No Comments

The FedEx/UPS near-duopoly has allowed the two large carriers to control marketplace pricing for years, echoing each other’s rate hikes to the detriment of parcel shippers, small and large. It’s no surprise then, on the heels of UPS’ latest intra-year pricing changes, that FedEx has recently announced its own set of rate increases, effective September 3rd.

The Additional Handling surcharge, for packages weighing greater than 70lbs, will increase from $12 to $20 for domestic express, international express, and domestic and international ground. Similarly, July 8thsaw UPS raise its Additional Handling surcharge on packages weighing more than 70lbs from $12 to $19 and increased its Large Package Surcharge from $80 to $90.

FedEx’s Unauthorized Package Charge will increase 125%, from $300 to $675, keeping them in line with UPS’ increased Over Maximum Limits charge which jumped from $500 to $650 on June 4th.

In addition, shippers will also see incremental, “peak” seasonal increases by FedEx to some of these surcharges to domestic express and domestic and international ground shipments between November 19thand December 24th. Compare these to the peak increases that UPS will institute between November 18thand December 22ndto all service levels and all domestic destinations.

  • FedEx Additional Handling:  $3.20 / UPS Additional Handling: $3.15
  • FedEx Ground Unauthorized Package Surcharge:  $150 per package / UPS Over Maximum Limits: $165 per package
  • FedEx Oversize Charge:  $27.50 / UPS Large Package: $26.20

Shippers saw changes to these same charges earlier this year, in terms of the surcharge amount as well as to how they’re calculated.

These rate increase announcements signal the continuation of a trend that began last year. The carriers don’t want these packages in their parcel network, but in their freight/LTL network. If shippers don’t adjust accordingly, they will find themselves paying a premium.  Expect this trend to continue.

The one area FedEx and UPS differ, in terms of these latest rate increases, is the Peak Residential Surcharge. Surprising many, FedEx will not implement this surcharge for the second straight year, while UPS will not only apply the Peak Residential Surcharge once again, but will raise the rates established last year.

ups and fedex peak season pricing

This could give FedEx a competitive advantage with shippers looking to shift some volume prior to peak.

LTL Fuel Surcharges: A Helpful Guide

By | Contract Negotiation, Invoice Auditing, News

Millions of businesses around the world rely on less-than-truckload (LTL) shipping for their logistical needs. LTL shipping offers freight service at low costs, making it a great choice for shippers looking to move bulk products at attractive rates. However, like other shipping options, LTL shipments can incur a number of additional surcharges.

These accessorial charges can quickly add up on LTL shipments, yet it’s not always clear what surcharges are being applied to your shipments and when they are being applied. Many shippers simply don’t pay close enough attention to their shipping invoices to see the significant impact that accessorial charges have on their overall shipping costs.

In order to shed some light on this topic, we’ll share some details about important surcharges that can be applied to your LTL shipments. We’ll break down what these charges are, when they are applied to your shipments, and provide some helpful insight into ways to reduce or eliminate surcharges altogether.

What are Shipping Surcharges?

Shipping surcharges are fees that are added to a shipment by carriers as a means of offsetting costs or charging for an extra service. Shipping surcharges can be applied for a wide array of services and extra handling costs. Nearly all special delivery requirements, including Saturday delivery and even residential delivery incur a shipping surcharge. Different types of shipping surcharges are often added to the same shipment, leading to a substantial increase in the cost of the shipment.

Despite the impact on the cost of shipping that surcharges can have, many merchants and businesses fail to accurately assess how shipping surcharges are affecting their shipping costs. A contributing factor to this is the vague way that surcharges are invoiced, making it difficult for shippers to discern what specific surcharges have been applied and what the rate for the surcharge is.

Surcharges often appear on an invoice as a service or handling fee. Identifying what you are paying in surcharges is made even more difficult by the fact that surcharge pricing and naming varies among carriers, and carriers often apply surcharges to a shipment after it has been accepted. This highlights one of the primary challenges shippers face in quantifying and understanding the role that surcharges play in their shipping costs.

What is a Fuel Surcharge?

Fuel surcharges are fees that are widely applied by carriers to shipments within their network. Simply put, fuel surcharges are used to offset the cost of fuel. This charge is in the form of a percentage that is then applied to the base shipping rate. Each carrier determines the fuel surcharge in their own way, so fuel charges vary between carriers. Carriers also reserve the right to change the fuel surcharge at any time, including how it is calculated.

Carriers use fuel surcharges to maintain profit margins if fuel costs rise. This makes sense, given that fuel represents the second largest expense for carriers. Because most shippers are in a long-term contract with carriers, the carriers must be able to account for rising costs of fuel over the course of that contract in order to maintain a profit. Major carriers typically update their fuel surcharges weekly, and calculate fuel surcharges based on the U.S. On-Highway national average for a gallon of fuel, which is provided by the U.S. Energy Information Administration.

LTL Fuel Surcharge

If you are shipping through an LTL carrier, it is almost certain that you are being charged fuel surcharges. LTL carriers apply fuel surcharges to almost every shipment, and they base their fuel surcharges off of the on-highway average cost for a gallon of diesel fuel, the same way they calculate it for other shipment types.

LTL shipments tend to have a much higher fuel surcharge applied to them. LTL fuel surcharge costs vary between carriers, as each carrier calculates theirs differently. For example, FedEx LTL fuel surcharge information can be found here, while the current UPS LTL fuel surcharge percentage can be found here. Although they are based on the same fuel data provided by the government, they may be different due to unique calculation methods that each carrier uses.

For shippers that utilize LTL networks, fuel surcharges represent a substantial portion of their total shipping costs. As such, it is important to explore avenues to reduce these fees. In order to do this, the most important tool that a shipper can have is a means of collecting comprehensive data on all of their shipments.

By doing so, they can quantify exactly how much they are paying in fuel surcharges per package. Once they have this information, a shipper can leverage that data to negotiate a more favorable pricing contract with their carrier. For example, a carrier may reduce fuel surcharge pricing on LTL shipping for a business in exchange for a higher base contract cost. If you know how much you are paying in fuel surcharges, then you can accurately determine if this would drive down your total shipping costs.

Additional LTL Shipping Surcharges

Although fuel surcharges are the most common accessorial fee applied to LTL shipments, there are a number of other fees that can be added to your shipping costs as well. Because these surcharges are often added onto your invoice after the shipment has been made, they can be difficult to anticipate or monitor. It is important to remember that, like fuel surcharges, many other accessorial fees can be negotiated down with your carrier. This can represent substantial cost savings for shippers that incur these fees frequently.

Lift Gate Surcharge

A lift gate surcharge is applied by LTL carriers for shipments that require the use of a lift gate. When calculating your base rate for LTL shipments, carriers assume that the destination address has a loading dock that your shipment can be unloaded on. Addresses that don’t have a loading dock require the driver to use a lift gate to lift or lower packages for delivery.

The lift gate surcharge is a means of offsetting the cost for both the lift gate and time it takes for the special handling of the package. Lift gate fees vary between carriers. If you find that you are frequently being charged a lift gate surcharge, you may consider negotiating a more favorable rate with your carrier of choice to reduce these fees.

Oversize or Extreme Length Freight Surcharge

A handling surcharge is applied to shipments that contain very large packages. Typically, shippers will encounter these fees if the packages they are shipping are 12’ in length or greater. (Note: some carriers are starting this charge at 9’ now.) This fee is called different things by different carriers, including an oversize item surcharge or extreme length freight surcharge. The cost of this surcharge also varies between carriers. In order to accurately track when you are being charged these, you may consider relying on a third-party logistics provider that can provide detailed analysis on your invoices.

Residential Surcharges

As the benchmark report demonstrated, residential surcharges are very common. Residential surcharges are applied by LTL carriers on shipments that are delivered to a residential address. Deliveries to homes are considered residential deliveries by carriers. This is true regardless of whether a business operates out of the same structure.

UPS considers a residential address a house that doesn’t have a publicly accessible address. Because residential delivery fees can be substantial, shippers that use LTL carriers may consider transferring the package to another carrier or delivery network before final delivery to a residential address.

Limited Access Charges

LTL carriers can apply a surcharge for any shipment being delivered to an area that is deemed to have limited access. This can often be difficult for shippers to know prior to shipment. This fee can apply to a wide range of delivery areas, from construction sites to military bases, airports, or piers.

If you are frequently incurring a limited access charge, you should consider negotiating a reduction in these fees with your carrier. For example, if a high proportion of your shipments go to an area with limited access, like a military base, your carrier will probably work with you to reduce or eliminate the charge.

Additional Services

There are a large number of additional services that can incur surcharges on LTL shipments. Carriers typically apply a surcharge to any shipment that requires additional handling or services, so the range of surcharges that can be applied to packages is necessarily large.

Services that often incur a charge are scheduled pickup services, signature requirements, deliveries into a building, or deliveries that require the driver to take a payment (Cash on Delivery). Each carrier will either publish their complete list of accessorial fees on their website or provide them to shippers upon request.

Other Factors That Affect LTL Shipping Rates & May Cause Increases

There are other factors that can contribute to shipping rate increases that aren’t considered surcharges. Although these are not surcharges, shippers should still be mindful of these factors when determining overall shipping costs.

These factors include shipping mode, freight type, and freight class. Shipping mode can have a substantial impact on LTL costs. Many carriers offer one, two, or even several tiers of expedited shipping. Each of these tiers has a cost increase associated with it, resulting in a much higher base shipping price.

Freight type can have an impact on your base shipping costs as well. Freight that is hazardous or fragile, for example, will have higher shipping rates because they must be handled differently. Alongside freight type, freight class is worth paying attention to for shippers. A shipment’s freight class is primary based on the freight density of the shipment. Shipments that have less density, or pounds per cubic feet, are considered a higher freight class and charged at a higher rate.

Shippers can often negotiate more beneficial freight class ratings with their carrier. This is referred to as Freight All Kinds (FAK) and allows shipments to be rated at a class that is lower than the actual class.

Summary

For businesses that rely heavily on LTL shipping, being aware of what surcharges you are incurring on your shipments is crucial to understanding your total shipping costs. This is because shipping surcharges are frequently added onto a shipment after it has been released to a carrier, making surcharges difficult to track and quantify for shippers.

The good news is that the amount you are paying in surcharges can probably be reduced by negotiating with your carrier. Many shippers aren’t aware that carriers are willing to negotiate reductions for surcharges. Central to any negotiation strategy with a carrier is to first know exactly how much you are paying for surcharges, what those surcharges are, and when they are being applied.

Shippers may consider outsourcing this to a third-party logistics provider that can track each shipment, including its dimensions, real weight, billable weight, and any surcharges that were applied to the shipment. This information can then be leveraged to pursue cost reductions in the surcharges that have the greatest impact on your total shipping costs.

fedex-fuel-surcharges

FedEx Fuel Surcharges: What to Know

By | Contract Negotiation, Invoice Auditing

Based out of Memphis, Tennessee, FedEx is one of the most recognized and relied on  package carriers in the world. Processing over 14 million shipments per day, FedEx represents a key logistical resource for millions of merchants, shippers, and consumers in over 220 countries.

Clients find that working with FedEx as their third-party logistics resource can be both beneficial and challenging at times. FedEx provides access to a shipping network that is efficient, reliable, and massive in scale. Yet because of this scale, FedEx often has few competitors, presenting a challenge for businesses interested in alternative shipping options.

One of the primary reasons shippers explore different shipping options is to reduce or eliminate shipping surcharges. Like all other major carriers, FedEx applies shipping surcharges (in addition to transportation charges) to shipments that meet certain qualifications. These surcharges can quickly add up – leading to hefty increases to the total cost of a shipment.

One of the most common surcharges that FedEx applies to shipments is the fuel surcharge. This article will provide more information about what the FedEx fuel surcharge is and explore some avenues you can take to lessen it. We’ll also discuss some other common FedEx surcharges and their cost. This article will provide shippers with a greater understanding of their shipping costs and begin to explore avenues for possible reductions.

What are Shipping Surcharges?

A shipping surcharge is any fee applied to packages on top of the carrier’s base transportation rates. Fees are applied for fuel, residential deliveries, packages requiring signatures, etc. Shipments that have multiple special requirements that fall outside of the bounds of a standard shipment will incur multiple shipping surcharges.

Many shippers won’t know that they have incurred an additional charge on a shipment until they review their invoices. The charges appear on an invoice as a service charge or handling fee in addition to the transportation charges. This can lead to difficulty in keeping track of what exactly you are paying for when you are shipping an item.

Because there are so many different types of shipping surcharges, costs tend to add up quickly for shippers. This, along with the vague way that shipping surcharges are often invoiced, leaves many shippers unaware of how much they are paying in shipping surcharges.

Furthermore, many merchants and businesses don’t realize that there are proven strategies and tools that can help reduce or eliminate the amount they pay in shipping surcharges. The first step in reducing the amount you are paying in surcharges is to understand exactly what shipping surcharges are, when they are applied to your shipments, and what alternative shipping options exist.

Benchmark Report of Surcharges

To highlight the necessity of understanding exactly what shipping surcharges are and why you need to monitor them, we conducted a comprehensive benchmark report at Multi-Channel Merchant. The benchmark report yielded some results that may surprise most merchants.

First, it demonstrated the impact of surcharges on the total cost of shipments. Across a sample size of over 4.6 million shipments, accessorial surcharges accounted for 28% of total shipping charges. Put another way, surcharges can total nearly one-third of all shipping costs. The report also shows the frustration that many shippers feel towards surcharges, with 69% of respondents saying that if they could change their pricing agreement it would be to have fewer surcharges.

In addition to demonstrating the impact of shipping surcharge costs, the report also sheds light on the difficulty many shippers face in pricing agreement negotiations with carriers. 41% of respondents said that they felt that negotiating agreements with carriers was harder. This was primarily viewed as due to a lack of competition between carriers.

However, an important point to highlight here is that pricing agreement negotiation is possible, and data can help. The majority of respondents said that they relied on reporting and benchmark data to drive their negotiation. For shippers looking to save money on surcharges through more favorable pricing agreements, comprehensive shipping data for their operations is essential.

FedEx Fuel Surcharge

One of the more controversial surcharges that FedEx and other private carriers apply to shipments is the fuel surcharge. Fuel charges are applied to shipments to help carriers offset the rising costs of fuel and are calculated as a percentage the package cost. Because fuel surcharges are so common, and because they are calculated differently than other surcharges, they are worth spending some time to understand.

One of the major differences between fuel and other surcharges is that fuel surcharges are updated on a weekly basis. FedEx Ground shipping is subject to weekly rate updates, while FedEx Freight is updated and effective every Monday. This means that shippers must stay abreast of how fuel surcharges are affecting them on an ongoing basis. The current FedEx fuel surcharge can be found here.

As one would expect, FedEx calculates their fuel surcharge based on the cost of fuel. Specifically, FedEx uses the U.S. on-highway average price for a gallon of Diesel Fuel for Ground shipments and the U.S. Gulf Coast (USGC) spot price for a gallon of kerosene-type jet fuel for Express. Both are updated on a weekly basis by the U.S. Energy Information Administration and can be found here (gasoline/diesel) and here (jet fuel).

The FedEx fuel surcharge is a percentage that is applied to the transportation charge, meaning heavier packages and those moving longer distances will have a much higher fuel surcharge. The FedEx fuel surcharge is applied to a variety of shipping methods, including FedEx Ground, Express, and Freight. The fuel surcharge is applied on the net package rate and in addition to other transportation-related surcharges, such as residential delivery, on-call pickup, and oversize packages.

When looking at the fuel surcharge rate percentage you may notice that it differs from other carriers that you use. This is because each carrier calculates fuel surcharges differently. This is one controversial aspect of fuel surcharges. Because there is no law requiring carriers to calculate fuel surcharges the same way, and because fuel surcharges are a way to maintain profitability even when fuel costs rise, fuel surcharges can seem more tied to profit margins than to the actual cost of transporting goods.

Additionally, carriers aren’t actually required to pass on the money they accrue from fuel surcharges to the freight carrier or transporter who actually purchased the fuel. All of these factors can lead to frustration on the part of shippers.

There are a number of different strategies that shippers use to reduce the amount they pay in fuel surcharges. One of the most effective is data-driven. If shippers utilize a software platform that can track and analyze their comprehensive shipment data, they can then leverage that data in negotiations with carriers. Shipping carriers are often open to negotiating reductions in their fuel surcharge rate. For example, a shipping carrier may substantially reduce your fuel surcharge rate in exchange for a higher base shipping price.

For many merchants, this would result in significant net savings. In addition, shippers can use their data to show lower fuel surcharges with a competitor which may push the carrier to reduce their surcharge to match the competition. Lastly, while private carriers apply fuel surcharges to a variety of shipments, the U.S. Postal Service does not. Therefore, shippers may consider utilizing USPS Priority or Express shipping in order to avoid shipping surcharges.

Additional FedEx Shipping Surcharges

In addition to fuel, FedEx applies a variety of other surcharges. They can add up quickly, leading to substantial cost increases per shipment for many merchants. We’ll go over some of the more common FedEx surcharges in this section and break down what they are and how much they will cost you. This list will focus on only some of the most common surcharges, but you can access a full list of surcharges and how much they cost here.

Additional Handling Fee

The additional handling fee was introduced by FedEx in June of 2016 with UPS  introducing a similar fee shortly thereafter. The thresholds for the fee were updated in January 2018. Essentially, the additional handling fee is a fee applied to items whose dimensions, weight, or packaging exceed the thresholds set by FedEx.

A package may not exceed 48 inches on its longest side, 30 inches on its second-to-longest side, or 70 lbs. There are also a variety of restrictions on packaging type. The additional handling fee applies to domestic and international Express, Freight, and Ground shipments. For domestic and international ground and express shipments, a fee of $12.00 is applied to each package. For domestic freight shipments, a fee of $140.00 is applied to each freight handling unit.

The introduction of additional handling fees hit certain shippers much harder than others. Specifically, merchants who regularly shipped items that exceeded the size thresholds set by FedEx saw a substantial increase in their shipping costs almost overnight. While many shippers who are most affected by additional handling fees are already highly aware of them because of this, they may not know that there are a couple of different ways to go about reducing these fees.

First, it isn’t always easy to know exactly when you are being assessed an additional handling fee. Discerning this requires the use of a robust analytics platform that can analyze each shipment and the associated fees. Merchants that are incurring a high number of these fees are encouraged to perform a line-by-line audit of their invoices to pinpoint exactly how often they are being charged for them.

Many shippers are being assessed additional handling fees on otherwise lightweight packages, when they could simply use a smaller shipping container. As a final option, shippers can seek to negotiate more favorable pricing contracts that reduce or eliminate additional handling fees for their packages.

Delivery Area & Extended Area Surcharges

Delivery area and extended area surcharges are applied to shipments that fall outside of normal shipping locations. The addresses or destinations that fall into these categories are determined by the carrier. These may appear on your invoice as a delivery area surcharge (DAS), or extended delivery area surcharge (EDAS). These surcharges were put in place to offset the costs of deliveries to out-of-the-way or rural areas.

For FedEx, these charges are assessed based on the ZIP code where the package is being delivered. The use of ZIP codes to determine when to apply the surcharge is problematic for a number of reasons. First, ZIP codes are inexact and may be shared across a wide range of locations.

For example, a business based in an urban area may share a zip code with a rural area and may be charged for a delivery area surcharge on every shipment. The complete list of U.S. ZIP codes that are included in this fee can be found here.

An important caveat to keep in mind is that FedEx operates multiple independent delivery networks for Express, Commercial Ground, and Residential Ground delivery, and the delivery area surcharges differ for FedEx Ground Commercial with Residential Delivery and FedEx Home Delivery.

Because of this, shippers must ensure that they are shipping within the network that will reduce the surcharges that they are paying. One of the best ways to reduce costs associated with delivery area surcharges and extended area surcharges is to carefully select the appropriate delivery network.

For example, if a delivery to a residential address falls into a ZIP code that incurs a delivery area surcharge, the shipper would save $1.10 per shipment by shipping the package through FedEx Home Delivery rather than through FedEx Ground since both the residential and delivery area surcharges are lower for residential packages moving through the Home Delivery network.

Oversize Charge

FedEx will apply a substantial fee of $80.00 per oversize package. If your package exceeds the thresholds set forth by FedEx, then an oversize charge will apply. Packages that exceed 96 inches in length or 130 inches in length and girth are considered an oversized package.

For shippers that frequently ship oversize packages, the best course of action to reduce the amount of money they are spending on surcharges is to negotiate more favorable pricing in their contract. In order to do this, shippers will need comprehensive shipping data from past shipments that have incurred this charge. Often, carriers will reduce the oversize package surcharge in exchange for a higher base shipping rate which can result in substantial cost savings over time.

Residential Delivery and Pickup Charges

FedEx will also apply a fee for deliveries to residential addresses. In addition, FedEx charges a wide variety of fees for shipment pickup. Pickup fees are assessed on a weekly basis, and depend on whether the pickup location is residential, same-day, or in an extended delivery area. Residential delivery fees are based on the destination address, regardless of if a business is operated out of the same address. This leads to frustration and confusion, particularly for small businesses that operate out of a residence, or where businesses operate out of a building that has been rezoned from commercial to residential.

The most effective way around residential delivery surcharges is simply knowing what your options are. FedEx operates multiple independent shipping networks that can perform residential deliveries, but using the right one will result in the lowest package charge.

Additionally, shippers can consider shipping through USPS, which doesn’t charge a residential delivery fee. Alternatively, shippers can ship via FedEx SmartPost, which utilizes USPS for the final leg of the shipment and eliminates residential delivery fees.

Summary

FedEx shipping surcharges can quickly add up for shippers that aren’t paying close attention to their shipping costs. As we have seen, these surcharges are applied to shipments for a number of different reasons and range from fees associated with fuel to residential deliveries. The most important step a shipper can take towards reducing the amount they are spending in surcharges is to collect comprehensive data on their current shipping.

This can be difficult due to the obscure way that shipping surcharges are invoiced. Outsourcing this to a third-party logistics provider like Shipware can be a cost effective means of accessing detailed shipping information across all of your shipping channels. This data will potentially highlight areas where you are overpaying for shipping surcharges and can be leveraged to negotiate more favorable pricing on surcharges. Remember, surcharges account for up to one-third of all shipping costs, making this a top area for cost reductions.

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Types of Shipping Surcharges: A Guide

By | Contract Negotiation, Invoice Auditing, News

The cost of shipping continues to rise – making it very challenging for merchants to maintain profit margins in today’s competitive markets. One of the major sources for the rise in shipping costs is the abundance of shipping surcharges imposed by carriers. Shipping surcharges are tacked onto shipments for a variety of reasons and can add significantly to the cost of shipping goods both domestically and internationally.

The challenges facing merchants are twofold. Shipping surcharges tend to add up quickly yet remain obscure and difficult to discern for merchants that don’t pay particularly close attention to their weekly invoices. Maintaining ongoing oversight over shipping surcharges requires time and extensive knowledge of the shipping industry. Additionally, the way that each carrier applies surcharges varies – which only adds to the amount of information logistics managers need to keep top-of-mind when they are reviewing their invoices.

These factors make being aware of shipping surcharges and keeping track of them over the long-term difficult and time-consuming. In order to shed light on the impact of shipping surcharges, this article will explore what a shipping surcharge is, what different types of surcharges exist, and how they vary by carrier.

We’ll also provide some insight into how merchants can save money on shipping surcharges or even avoid them altogether. This information will prove beneficial for merchants looking to reduce their bottom-line, expand their profit margin, and eliminate paying for needless shipping surcharges.

What Are Shipping Surcharges?

Many merchants may be vaguely aware of what a shipping surcharge is, but may not realize that there are a variety of different surcharges they can be hit with. Gaining a greater understanding of what exactly a shipping surcharge is, and what specific types of shipping surcharges exist on the market can illuminate the extent to which shipping surcharges impact their shipping costs.

Shipping surcharges can appear on invoices as a number of different things, but most often are categorized as a “service fee” or “handling charge”. Regardless of how they are labeled, these fees tacked onto a shipping invoice all represent a shipping surcharge.

At the most basic level, a shipping surcharge is a fee that is added to the base cost of transporting goods. Thus, service fees and handling charges are a vague way of referring to a shipping surcharge.

The wide range of shipping surcharges further lend to confusion for merchants and make it more difficult to assess what their base transportation costs are. Private carriers like FedEx and UPS apply a number of different surcharges to shipments in order to offset transportation costs or additional handling associated with a package. These shipping surcharges can include things like residential delivery fees, signature fees, fees for deliveries outside of normal service areas, and fees for Saturday or weekend delivery.

Typically, private carriers adjust their shipping surcharge rates an annual or biannual  basis, while things like fuel surcharges tend to be updated on a weekly basis. This can lead to unexpected jumps in shipping prices for merchants on a weekly or semi-annual basis. For example, rising oil prices one week will almost certainly lead to an increase in fuel surcharges in the following weeks.

In contrast to private carriers, the U.S. Postal Service does not apply shipping surcharges for fuel, Saturday deliveries, or residential deliveries. This important difference between carriers can result in substantial savings for merchants who are selective about their shipping carrier. Merchants must recognize the differences between carriers and weigh the costs versus benefits of utilizing a private carrier.

If using a private carrier, merchants must stay informed about changes to shipping surcharges on an ongoing basis and apply that knowledge to each shipment. Merchants must determine the current shipping surcharge rates for private carriers and then account for how those surcharges will impact their shipping costs with an eye towards the weight of their shipment, their delivery area, and any special handling considerations their shipments require. If merchants fail to pay attention to the way shipping surcharges affect their shipments, they may be paying significantly more for their shipments than necessary – even when more cost-effective options exist.

Types of Shipping Surcharges

The broad spectrum of shipping surcharges that can be applied to shipments can have a substantial impact on shipping costs. At the same time, they can lead to confusion for merchants attempting to calculate how much they are paying for shipping surcharges for each shipment.

Understanding the types of shipping surcharges that appear on your invoices can provide insight into where you can save costs while continuing to maintain timely shipping speeds. The following breakdown of the types of shipping surcharges can help merchants make more informed decisions about their shipping needs and avoid any unnecessary shipping costs.

Fuel Surcharges

Fuel surcharges are calculated by private carriers on an ongoing basis and are tied to the market price of fuel. For carriers, fuel surcharges represent an important facet of maintaining ongoing profitability due to long-term contracts with shippers. If rising fuel costs aren’t adequately accounted for, private carriers can lose money on each shipment they deliver.

Tracking changes to fuel charges is important because fuel surcharges can lead to a substantial increase in shipping costs for merchants. We recently conducted a study that determined that fuel surcharges across over 2.5 million shipments resulted in an additional $2.2 million dollar cost for those shipments, or roughly $0.88 more per package.

Fuel surcharges are calculated by each private carrier, which accounts for variation in fuel surcharges between carriers. Gaining a greater understanding of how these surcharges are calculated can illuminate the crucial role that fuel surcharges play in determining ongoing costs.

In order to illustrate this, let’s take a closer look at how two of the major private carriers in the United States calculate their fuel surcharges. Both UPS and FedEx calculate their ground fuel surcharge according to an index reference based on the U.S. Average On-Highway Diesel Fuel Price that can be found here.

UPS fuel surcharges go into effect each Monday, and are calculated from their index reference for fuel charges from the two-weeks prior to the rate change. In contrast, FedEx calculates their ground service fuel surcharges slightly differently by only drawing from the average diesel cost for the previous week. Shippers can find more information about current FedEx fuel surcharges for different services and how they are calculated here, and UPS fuel surcharges here.

Fuel Surcharges: Tips for Shippers

Fuel surcharges can result in substantial changes in shipping costs due to the volatility of the international oil market and the subsequent impact on rising fuel costs. Although both FedEx and UPS calculate their fuel surcharges from the same data source, the period of time they are considering is slightly different, leading to discrepancies in fuel surcharges between the different carriers.

What many shippers don’t know is that fuel surcharges can often be negotiated with carriers to bring down the cost of shipments. As such, shippers can use this information to their advantage by leveraging lower costs with one carrier to gain a more favorable rate with their preferred carrier.

Residential Delivery Surcharge

If you are a shipper that delivers directly to residential destinations, it is important to understand what residential delivery surcharges are and how they are impacting your shipping costs. As the name suggests, residential delivery surcharges are fees that carriers levy for deliveries to residential dwellings.

The confusion surrounding residential delivery surcharges comes into focus when determining exactly what constitutes a residential dwelling. Typically, this charge is based on the delivery address, and whether the address is categorized as a residential or commercial structure is up to the carrier.

There are discrepancies between how private carriers determine this. For example, UPS determines an address is a residence if the delivery is to a house and the house doesn’t have an entrance that is open to the public. Therefore, if a shipper is delivering to a business located in a home, they would have to pay a residential delivery fee.

FedEx calculates residential shipping surcharges similarly to UPS in that deliveries to a home address are considered residential deliveries, regardless of if a business is operating out of that address. The key difference between these two private carriers lies in the availability of different delivery networks.

While UPS has only one ground network that makes both commercial and residential deliveries, , shippers could take advantage of FedEx’s Home Delivery network in order to pay a reduced residential surcharge  relative to what they would have paid had they shipped the package via FedEx Ground.

Residential Surcharges: Tips for Shippers

The best way to reduce residential surcharges is to be mindful of different shipping options and networks that allow you to reduce or even eliminate the surcharge completely. FedEx’s Home Delivery is one such network that charges a reduced surcharge for residential deliveries. Other options include utilizing FedEx Smart Post or UPS SurePost. Both networks handle the package for the majority of transit before handing it off to USPS for final delivery – eliminating the residential delivery charge for shippers.

Intelligently utilizing alternate shipping networks can allow shippers to avoid the hefty delivery fees that are tied to residential deliveries. These fees are continuing to rise, making this an ongoing avenue of cost-savings for shippers that will only continue to become more important over time.

Oversize Package Surcharge

The oversize package surcharge is applied to shipments that exceed the weight or size thresholds of private carriers. Incurring an oversize package surcharge can result in a substantial increase in shipping costs for shippers.

According to our benchmark study, 594 oversize shipping surcharges resulted in an average cost increase of approximately $50.00 per shipment over a period of 12 months. This highlights the need for shippers to be particularly mindful of situations where they might incur an oversize package surcharge and to be aware of alternative shipping options for those packages.

Both UPS and FedEx apply oversize package surcharges when a shipment exceeds either the size or weight thresholds they have set forth. For both private carriers, shipments cannot exceed the dimensional girth of 130 inches.

Weight thresholds depend on the delivery network the shipper chooses to use. If a package has a dimensional girth smaller than 130 inches, but weighs over the threshold set by the carrier, then the package is considered oversized and charged accordingly. If a package is over both the weight and size thresholds, then the carrier may apply multiple surcharges.

Oversize Package Surcharges: Tips for Shippers

The most important tip for shippers is to be very mindful of the rates for oversize packages and the thresholds set by the shippers. These rates change frequently, requiring shippers to stay abreast of any rate changes that may impact them.

If shippers frequently ship oversize or large packages, they may be able to leverage rate changes that have a substantial impact on them. For example, shippers that regularly use FedEx for transporting oversize packages may be able to negotiate their contract to eliminate handling fees on those packages, resulting in substantial cost savings.

Saturday Surcharges

Saturday deliveries can be excessively expensive for shippers. If you look at our study, you’ll see that Saturday deliveries cost shippers an additional $13.49 per package. Not only do deliveries on Saturdays incur an extra charge, but Saturday Pickup services also resulted in an average increase of $14.95 per package. For shippers that frequently utilize Saturday Delivery and Pickup services, these surcharges represent a critical channel for cost increases.

As the name would imply, Saturday surcharges are applied to deliveries that occur outside of the normal operating week of Monday – Friday. Since customers are increasingly expecting deliveries to occur on Saturdays, shippers must explore alternative avenues of delivery. One of the most common ways to avoid Saturday surcharges is to ship packages via USPS Priority Mail. Priority Mail doesn’t apply a surcharge for Saturday deliveries, which is a boon for shippers that have a desire to meet their customer’s expectations for weekend delivery service.

Other Surcharges To Be Aware Of

Although we’ve explored some of the most common surcharges that shippers see, there are a number of other less common surcharges that can also substantially impact shipment costs. These surcharges include:

Signatures (Adult, Direct, Indirect)

This is a surcharge for packages that require a signature upon delivery. Signature surcharge prices vary depending on the service. Adult signature surcharges average $4.15, while direct signature surcharges average $3.12 and indirect signature surcharges average $1.92.

Address Correction

Address correction surcharges are applied when a shipment has an incomplete or incorrect address that the carrier must seek to correct. The average cost of an address correction surcharge on ground deliveries is $10.83.

Delivery Area Surcharge

A delivery area surcharge is applied for shipments whose destination is outside of the standard delivery area for that network. The average costs of a delivery area surcharge is $2.58.

Declared Value Surcharge

A declared value surcharge is applied to packages whose value exceeds the carriers liability limit. Typically this limit is $100.00. The average cost of a declared value surcharge is $10.91.

Weekly Service Charge

The weekly service charge is applied for shippers who have regularly scheduled pickups from a carrier. The average cost of a weekly service charge is $12.65.

How to Avoid or Lessen Shipping Surcharges

There are a couple different avenues through which shippers can reduce the amount they are spending on shipping surcharges. One of the most impactful things that shippers can do is gain a better understanding of how shipping surcharges are impacting their shipping costs, and what alternatives are available that might have reduced or eliminated surcharges.

By understanding the different shipment options available to them, how carriers calculate and apply surcharges, and which networks are ideal for specific packages, shippers can reduce what they pay in shipping surcharges or avoid them entirely. Shippers can also use this knowledge to renegotiate carrier contracts that are more beneficial to them. For example, a shipper that frequently ships oversized packages may be able to leverage differences in rates and thresholds between carriers to reduce or eliminate the surcharges associated with oversize packages.

In order to avoid overpaying for shipping surcharges, shippers need to be aware of what a shipping surcharge is, what the different types of surcharges are, and how they are calculated. With this base of knowledge, shippers can make more intelligent choices about how their packages are shipped.

One of the main challenges that face shippers is keeping track of this information. Shipping surcharge rates change frequently. Fuel surcharges for private carriers change weekly, while other surcharges are typically updated on an annual or bi-annual basis. Utilizing a third-party logistics provider can help businesses itemize their shipments, accounting for each shipping detail and supporting a data-driven approach to their shipping logistics.

By combining detailed shipment analysis with other tactics to reduce shipping surcharges, like renegotiating contracts with carriers, shippers can reduce their shipping expenses and, consequently, their bottom-line.

UPS Strike Averted, But Shippers Should Consider MultiCarrier Shipping

By | News

Several weeks ago, 93% of UPS package workers* authorized their union to strike if a deal couldn’t be reached with UPS management to replace the existing contract by the July 31stexpiration.  The vote undoubtedly gave the union more leverage and ramped up pressure on both sides to get a deal done.

While it looks like a strike has been averted with a tentative deal between UPS management and labor negotiators on June 21st, the possibility of a labor disruption still exists until the agreement can be ratified.  Union dissidents are reportedly upset over several of the outcomes of the new, tentative labor agreement with concerns over “hybrid” driver status, potential Sunday hours, annual wage increases less than the rate of inflation, and concerns over ongoing management harassment.

Some UPS rank and file union workers are denouncing the outcome as a “sellout” deal.  Teamsters and UPS will continue negotiations on July 9thand, ultimately, a vote will be held.

For many shippers, this was not the first time they’ve had to deal with the possibility of a UPS strike. In 1997 the threat became a reality as workers walked out for more than two weeks.  Some UPS customers learned a hard lesson about carrier diversification and the inherent risks associated with being overly reliant on a single carrier. Those shippers who have taken critical steps to mitigate the impact of another strike are obviously in a better position to withstand one should it happen again.

But what about those shippers who either didn’t experience the 1997 strike or those who did but didn’t learn their lesson?  What can those shippers — and all other shippers for that matter — do to ensure that, if UPS workers go on strike this year or at any time in the future, their packages will still get picked up and delivered?

After 1997, many shippers took steps to diversify their carrier mix.  Many switched their primary carrier to FedEx (whose driver force remains mostly non-union), while others simply engaged alternative carriers like FedEx, USPS, DHL and regional carriers to carry at least a small percentage of their overall volume.  With systems in place to facilitate multi-carrier routing and operations, those shippers are much less likely to have lost sleep over the past few weeks as talks between teamsters and UPS management dragged on.

Even though a strike has likely been averted, smart shippers would still be wise to reach out to alternative carriers to begin the process of diversification and modal optimization.  It shouldn’t take the threat an imminent strike for shippers to take action!  Talk to all your carrier reps, get pricing in place and maybe even do some testing or move a small percentage of your volume away from UPS.  You’ll sleep better at night if you do.

As part of that effort, shippers would be smart to do a thorough evaluation of their TMS platform to ensure that it is carrier agnostic and allows for the seamless implementation of new carriers.

It’s also worth noting that carrier diversification can have a positive impact on your parcel program beyond strike impact mitigation.  Strategically introducing alternative carriers can reduce costs and improve transit times as well.  Modal optimization, or the utilization of alternative carriers for certain segments of your volume for price or time in transit considerations, is a smart business practice. Modal optimization allows a shipper to take advantage of each carrier’s strengths (while avoiding their weaknesses) while also keeping carriers hungry for that piece of the business that they don’t carry.  This can be great leverage for future pricing discussions!

Of course, carrier diversification is not without risk and complexity.  Understanding what volume can be moved without negatively impacting costs with your primary carrier is a critical piece of the puzzle.  A complimentary modal optimization assessment from Shipware can help you understand which carriers would be appropriate to consider, and measure critical items like cost and time-in-transit impact.  Good luck!

 

*Of those who voted. Voter participation numbers have not been released.

what-is-parcel-auditing_shipware

What is Parcel Auditing?

By | Invoice Auditing, News

The rise of e-commerce and changes in consumer trends are driving massive increases in parcel shipping volume worldwide. Between 2015 and 2017, global parcel shipping volume increased by nearly 50%. Over $95 billion was spent on parcel shipments in 2016 in US markets alone.

On an average day, FedEx can expect to ship over 14 million parcels to 220 different countries and territories, while UPS delivers another 19 million per day. That’s nearly 9.5 Billion shipments annually, between only two common carriers. Amazingly, almost all of these deliveries are covered by the carrier’s service guarantees. These guarantees are detailed in each carrier’s Service Guide. They ensure that a package will be delivered on time, without so much of 60 seconds delay for express services and one day ground services, or the costs and fees will be refunded in full. The companies are contractually obligated to repay expenses for undelivered services.

Parcel Shipping Today: By The Numbers

Today’s parcel carriers pride themselves on their rates of on-time deliveries, and shipping companies pay for these guarantees at the time of shipment, not the time of delivery. Mistakes happen, and, in reality, between 1 and 7 percent of all FedEx and UPS shipments are delivered late. A late delivery usually results in a violation of the Service Guide that the carrier has with the shipping company. Therefore, the shippers of each package are entitled to refunds on their shipping charges. That could amount to a savings of up to 7% of a company’s shipping costs per month! That is why parcel auditing should be an essential part of any company’s operations.

So, how does a company discover a service violation after delivery and recover the refund they deserve? To put it simply, most do not. While carriers will honor valid requests for refunds, it is the responsibility of the shipper, not the carrier, to review shipping invoices for errors and then submit these errors to the carrier as proof of a violation of the service guide. The carriers are contractually obligated to refund costs paid for service failures.

What is Parcel Auditing?

One thing that a smart business should not neglect is the last stage of the traditional shipping lifecycle. Parcel auditing is, quite simply, reviewing all of a company’s shipping bills and invoices to locate instances of overcharging and service failures due to late delivery. A business could see 5% decreases in shipping costs on these refunds alone. Parcel auditing would be considered a best practice and should always be done.

A proper auditing process will leverage software technology for a thorough audit of every charge, a refund request, and carrier credit issued. Every shipment should be reviewed for errors or violations of service standards. Carriers will issue refunds on service failures and overcharges, some of them including:

  • Late Deliveries: The parcel was delivered past its guaranteed delivery time and date.
  • Non-Shipments: The parcel was entered into the carrier system and billed, but never shipped from the shipping company.
  • Incorrect Saturday Charge: The parcel was supposed to be picked up on a Saturday, but was not.
  • Duplicate Charges: A parcel was billed more than one time.
  • Incorrect Address Corrections: The carrier charges fees for an address correction that was not necessary or was initially correct.
  • Incorrect Dimensional Weight Charges: The carrier used the wrong dimensions or applied an incorrect DIM factor.
  • Incorrect Rate: The carrier did not apply the correct discount which is stipulated in the shipper’s carrier agreement.

When a company finds a valid problem, the tracking number for that delivery and a request for refund must be submitted to the parcel carrier. When the carrier approves the refund request, the cost of shipment is credited to the shipping company’s account. If all service failures and overcharges are credited, that could mean a significant reduction in overall shipping costs.

In addition to saving shipping costs up-front, completing a parcel audit on all shipments allows a company to better understand where the carriers are failing to deliver on time. A manual audit is a costly, intrusive process that interrupts regular workflow and often results in a net loss due to labor cost versus what is actually recovered. But in modern shipping, effective audit technology can break down carrier invoices  into clear, essential performance indicators. Data collected through a parcel auditing processes will allow companies to better evaluate shipping costs, and to make much more informed decisions regarding carrier choice and shipping options.

Manual Parcel Auditing

Traditionally, parcel auditing would not be done at all. If an employee were tasked to each shipping invoice line-by-line, it would be challenging to identify all billing errors and oversights are certain to occur. As the volume of individual small package shipments increases so too does the number of invoices to review, as well as the complexity of various fees charged on top of base shipping costs. At a certain point, the number of work hours needed to process the information will cost more than the savings gained.

For an internal auditor working for the company to be cost-effective, they need to handle thousands of pages of paperwork, documents, and spreadsheets from various carriers and shipments. They would need to discover enough opportunities for refunds to not only reduce the costs of shipping for the company but to cover the additional expenses of hiring employees to do the labor-intensive auditing work. Due to the sheer number of shipments on invoices, human auditors can hardly expect to review 100% of the invoices hoping to find billing errors and service failures. This results in less than optimal returns on costs, as human auditors will not be able to analyze 100% of a company’s shipping bills. Not only does this effectively lead to fewer refunds, but it also results in limited information about the nature of all the billing errors and service failures. This is no longer cost-effective.

Software Assisted Auditing

As worldwide shipping volume increases and e-commerce drives small-parcel delivery growth, companies must recognize the need for innovative software and technology to optimize their operations and maximize profit while reducing costs. Parcel auditing software enables shippers to review their invoices electronically and compile data that a human auditor would not be able to analyze alone. This increased efficiency leads to increased refunds, as well as a reduction in tedious, labor-intensive analysis work.

It reduces the effect of human error. As the number of opportunities for refunds grows, so does the cost of shipping decrease. The company is also equipped with better data and information to analyze and optimize shipping methods that will reduce costs and maintain a competitive edge in the market. While returns increase and data is more readily available for analysis, additional labor is still required to implement new technology.

Outsourcing Parcel Auditing

What does a parcel audit company do? Basically, they do all of the work for you! They are equipped with a dedicated staff as well as the proprietary software and analytical expertise to recover the refunds you are entitled to.  

There are billing errors, overcharges, mistakes, and late delivered packages on every invoice. If a company can get back any amount of money spent on shipping, that means lower overall shipping costs. Small parcel auditing is the most effective way to receive money back efficiently, but it is clear that carriers do not want to make it easy for businesses to identify and receive the refunds to which they are entitled. But most companies do not have the resources to audit these deliveries themselves. Human auditors can scan through invoices, but this is expensive and prone to error. Large volume shippers should consider the benefits of outsourcing parcel auditing to professional parcel auditing companies.

An effective audit firm will have state-of-the-art software and a recovery team dedicated to identifying and recovering refunds from parcel carriers due to billing errors, service failures, and service guide violations, and, just as valuable, analyzing and reporting on massive amounts of data collected from these errors.

All of this is addressed, typically without any upfront costs whatsoever. In return for a percentage of the refunds, the parcel auditing company does all of the work. In contrast to other methods of reviewing parcel invoices, there is no risk involved in hiring a professional parcel auditing company. A qualified firm will identify and recover all shipping charges that would have otherwise been unnecessarily paid to the carrier. They provide the leverage needed for companies to hold their parcel carriers accountable for unmet service standards and ensure that the relationship between the shipper and the carrier is transparent.

Which Type of Parcel Auditing Should I Use?

Parcel auditing should be a regular part of every company’s operating procedure. However, the company will need to carefully consider the different options available to them.

Will the benefits of performing audits in-house outweigh the costs of hiring or training employees to undertake the auditing? Does the organization have the time and resources?

Is the company willing to part with a percentage of the refunds recovered if a parcel auditing company does all the work for them? Would the company be able to produce the number of audits and quality of analysis that a professional parcel auditing company provides?

Parcel auditing reduces shipping costs and proper reporting improves the quantity and quality of business intelligence, which should empower the shipper to make additional cost savings decisions. These benefits can provide  a competitive advantage to any company. The rapid growth of global e-commerce and development of shipping technologies, has created an increasingly complex web of fees, agreements, and guarantees. Specialized companies have filled the niche of parcel auditing to provide vital cost-saving services to small and large shipping companies alike.

how-to-audit-your-freight-invoices_shipware

How to Audit your Freight Bill: Helpful Tips

By | Invoice Auditing, News

Although we are less than two decades into the 21st century, those eighteen years have seen a rapid and radical shift in the modern commerce landscape. The internet boom and the birth of e-commerce signaled the decline of the retail outlets and shopping malls across the country with companies such as Amazon leading a push into new, modern, online markets. Because of this seismic shift within the industry and the emphasis placed on rapid home deliveries, sellers of goods or products are regularly shipping in astronomically higher levels in both frequency and volume as is evidenced by the massive growth, in the billions of dollars, in both the full truckload and less than truckload freight industries.

As a result, retailers or vendors are even more reliant upon their freight carrier than ever before. So, it follows that rates have risen in response to that ever-growing demand. Further, supply chains are longer, lead times shorter, which means freight costs account for an ever-growing share of a businesses’ total overall costs. In response to this, we have seen enterprises emerge within the world of freight whose sole focus is on helping vendors manage their freight and look for ways to optimize and cut costs. Such supplementary businesses include freight forwarders, freight brokers, and third-party logistics companies.

Whether or not you utilize any or all of these services, there are certain critical aspects of your freight logistics that you should not only be aware of but be able to handle yourself. One of the tools you should have at your disposal is the ability to audit your freight bill. Knowing how to audit your freight is essential for a variety of reasons including cutting freight costs, increasing efficiency and keeping your carriers honest and accountable. Below, we will discuss how to audit your freight bill and the benefits of doing so.

What is a Freight Audit?

At its essence, a freight audit is the process of examining and confirming the validity of invoices charged by a freight carrier. Through this careful examination, a shipper can verify the accuracy of their bills. Conceptually, it is quite simple; your goal is to pay the freight charges you owe and not a single cent more. While it is quite popular these days to utilize software to do much of the legwork, some freight audits can only be done by hand. Regardless of the method, an audit will only occur after the freight invoice is received and payment should only be made after you have confirmed the accuracy of all charges.

The Difficulty of Freight Audits

While a freight audit may sound simple on the surface, it is, in truth, anything but. Freight audits are a complicated process, made only more difficult by volatile shifts in global fuel prices. Very few industries’ rates are as inextricably linked to one factor as the transportation industry is to the cost of fuel. Because of this, your freight cost will rise and fall with the cost of transportation, which is directly tied in with the current price of oil. Because of these regular and rapid fluctuations of fuel costs paired with the unpredictability of forecasting future oil costs, your freight costs may vary wildly. As you might imagine, when you have a host of different costs of service, verifying that you are being charged correctly becomes an even more challenging task.

Calculating costs manually can be an even more daunting undertaking when you are handling hundreds of shipments each and every month. Consequently, such freight invoices are increasingly susceptible to human error on either the part of the carrier or the shipper. This is especially true on the part of the shipper (read as auditor) when considering how convoluted freight invoices can be. Therefore, to avoid such processing errors and overpaying a meticulous freight audit must be carried out.

Beginning the Freight Audit

These days, freight audits are typically categorized as pre-audits, which means the bill is audited prior to payment. This allows shippers to have greater leverage and an easier way to pay the proper amount.  Upon receiving a freight invoice, your first task should be to input that data into your system either manually or via EDI (electronic data interchange). This allows you to have instant visibility and gives you an easy way to check that bill or to compare it to past invoices. Once this information is uploaded, your goal is to verify the validity of the invoice.

Some things worth checking when auditing your freight invoice include:

  • Are there duplicate invoices? – Were you double charged for a freight shipment? Did your carrier count one shipment as two separate shipments? Such a phenomenon is more common than you might think, especially when using electronic services. According to a White Paper study, regardless of industry, “On average, approximately 0.05% to 0.1% of invoices paid are typically duplicate payments—which for a medium-size organization with annual costs of $100 million over a three year period could represent a loss of $300,000.” Multiple invoices can result from different options for receipt and payment of invoices, lack of rigid controls in accounts payable, or unethical carriers. To prevent such a thing occurring look for the following:
    • Search for invoices with identical or similar dollar amounts
    • Search for invoices that have identical invoice and vendor numbers, but have received payment from separate accounts  
    • Search for invoices paid to similar vendors with the same address, bank account, and routing number
    • Search for invoices with closely matching invoice numbers, which could be a result of errors in data entry
    • Search for invoices made to the same vendor from varied source documents
  • Was the proper classification applied? – The National Motor Freight Traffic Association (NMFTA) regularly updates and publishes the National Motor Freight Classification. This sets a universal standard that allows companies to compare commodities. The Commodity Classification Standard Board groups commodities into one of 18 subclasses, ranging from 50 to 500. Classes are based on four factors, density, liability, handling, and stowability. Classes have different rates, so it is vital that you ensure your freight is being appropriately classed and charged accordingly.
  • Have all discounts been applied? – Do you have agreed upon discounts with your carrier? Do you consolidate shipping with other shippers, or ship on off days, or not need your products delivered as quickly? If so, be sure to check that each and every one of these discounts have been deducted from the total freight invoice.
  • Were accessorials charged correctly? – A freight carrier will often charge for services that they consider above and beyond the call of duty, these include delivery area surcharges, additional handling charges, weekly pick up fees, residential delivery, and other such accessorials. Such charges can be exceedingly difficult to examine and confirm, especially since you generally remain unaware of them until after the shipment is made. Regardless, confirm that you not being incorrectly charged for accessorials, and if prior agreements have been made that included the waiving of certain accessorials, be sure to verify that those too are being honored.  
  • Are you using the correct base rate? – Each carrier has their own base rates, but frequently, shippers will have all their carriers use a 3rd party base rate.
  • Does the math add up? – After confirming that you have been charged for all of these categories correctly, make sure that the figures add up correctly. Again, human error is not at all uncommon, so it is entirely possible that everything listed above was applied correctly and yet a simple mistake of addition or subtraction, or the wrong number input, can lead to incorrect charges.
  • Are the freight taxes billed correctly? – Are the most current tax laws being employed and are the rates accurate? If you ship internationally, this is especially important since different taxes or regulations apply to different regions, states, or even countries. So, although countries within the EU or Asia may lie in close proximity to one another, their rules and regulations may vary wildly and thus you will be charged different rates.

Means of Freight Auditing 

If you are looking to have regular freight audits, there are three basic models available to you. They are as follows:

  1. Audit internally – A shipper will perform audits in-house and pay staff to provide oversight required for manually processing invoices and then conducting freight audits. While this is a possible route, it is likely the least cost-effective/efficient model. Manually comparing invoices and performing audits can be an exceedingly tedious affair. The likelihood of mistakes occurring or errors missed grows in proportion to the number or freight invoices received and is compounded if you are regularly shipping internationally.  
  2. Outsource your audit – If you do not want to deal with the logistics and costs associated with internal invoice audits, you may contact a third-party freight audit company to focus on sifting through invoices, checking for discrepancies and recovering costs. In many cases, this may be a more cost-effective method, since it allows you to focus on your specialties rather than waste your time or your employees time on tasks they are not ideally suited. Most third-party firms will use a freight audit system, rather than dealing with freight invoices manually.
  3. Buy invoice audit freight system – You may wish to pay a software licensing company to help you handle your invoices in an in-house manner. Such software allows you to audit bills and track payments seamlessly, however, they do come with extra costs associated with maintaining the system as well as training staff in how to use it.

Benefits of Freight Auditing

Apart from saving your company on costs, a freight audit also supplies you with data that you can study and analyze in order to break down your shipping practices. Such introspection can identify weak spots, logistical breakdowns and highlight ways to improve as a company. While the initial costs recouped are great in the short term, finding areas where you have room for improvement can be far more beneficial in the long run. Doing so allows you to make better choices when it comes to your transportation and shipping practices, which in turn, affects not only your company’s bottom line but your customer’s satisfaction as well. Having such data can also provide you with plenty of leverage when it comes to your freight contract negotiation, and it would be foolish to not use these tools to negotiate discounts and lower rates.

Whether you chose to utilize an in-house audit, a third-party audit team, or a freight auditing system, auditing your freight shipping, odds are you will not only recoup the cost of auditing, but you will likely make more money when all is said and done.

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What Does a Freight Audit Company Do?

By | Invoice Auditing, News

Handling the massive task of processing, organizing, auditing, and paying carrier companies to deliver your goods on time is not only time-consuming and requires a dedicated internal staff, but the opportunity to maximize your profit margin through data analysis will be missed if your company does not take advantage of the intelligence gained from the data.

Charges from transporters are negotiated and impacted by the oil market, among other factors. Without a firm grasp of all the intricacies of the shipping industry, an unquestioning company is at risk of being consistently over-charged. That is why many businesses turn to a freight audit company or a freight audit and payment company to handle the arduous undertaking of auditing their freight bills.

The Importance of FBAP

Freight Bill Audit and Pay (FBAP) is an essential component of any business, yet an astonishing 25% of companies do not utilize technology to pay and manage freight bills, resulting in a lost opportunity of cost savings.

The old school way of manually processing freight bills and hoping for the best will overlook many important and potentially expensive factors. With some companies shipping and receiving hundreds of shipments or more every month, paperwork (in different formats from carriers) can become overwhelming, and errors — either from human inaccuracy or a processing mistake — are inevitable.

In fact, some companies report as much as 1 – 2 percent on outbound shipments, and 2 – 4 percent on inbound shipments being miscalculated. That might seem like a small amount, but if your company is being regularly mis-billed, the costs add up quickly. Most companies do not have the resources to devote to auditing every single bill, so some will resort to a random check, giving the organization only a sample of the entire picture, and risking the forfeit of any lost capital due to overpayment, errors, or redundant costs.

Options for FBAP

It should be clear that a sound strategy should be considered a priority when it comes to Freight Auditing and Payment. Experts estimate that a company can expect freight charges to typically represent up to 10% of a company’s total cost, a significant enough portion to pay attention to and to apply the most effective tactics to minimize. So what options are on the table for a business to not only eliminate over-billing but also to take advantage of an ever-changing market?

In-House FBAP

The first option is a company can handle the FBAP internally. It will need a dedicated and well-trained staff to go over each invoice line-by-line, execute proper data filing, resolve disputes, manage optimal transportation routes, contact and negotiate price with shippers, have a pulse on market trends and oil pricing, and ensure that all charges made to the company are legitimate as the terms and rates continuously fluctuate.

Paper invoices run the risk of becoming lost, and a company loses the ability to analyze bills and data. The cost to a company to internally process and pay freight invoices can be measured at around $11-$12 per invoice. As well as the cost of employing man-power to oversee this laborious task, human inaccuracies or inattention to unforeseen factors may stifle even the most well-intentioned internal FBAP department. Also, the opportunity to file a claim for reimbursement for any error is typically 180 days and must be handled in a timely manner.

TMS Software

There is also software available for purchase which can calculate the most cost-effective way to optimize your shipping, commonly known as a Transportation Management System, or TMS. TMS software can be a useful tool in selecting the most effective carrier for your product, but like any computer program, it must be appropriately configured to suit a particular organization’s rules and values.

Furthermore, trusting these types of systems may lead to the potential for the same errors that will occasionally occur, as information entered into the system by hand. Rate increases must be implemented directly into the system while any caps, freezes or adjustments based on fuel, fees or other factors must be accounted for. Competent knowledge of the essential data to be captured is not the least of concerns when depending on an FBAP administrator in-house. A high level of technical skill and industry knowledge is required when employing any TMS system.  

Outsourcing FBAP

The third option is to outsource your FBAP with a freight audit and payment company. Devoting company man-power to the tedious effort of performing a proper freight audit will usually end up being more expensive in the long run. The $11-$12 spent to internally process and pay each invoice can be reduced by around 7-10% by utilizing a freight audit company and decreased further by approximately 4-8% in recuperation as a result of the audit of freight invoices.  

Besides saving cost, a freight audit and payment company will provide a business with detailed analysis which will allow a company to interpret national and international markets and shipping routes. These crucial analytics add substantial value in addition to cost-saving measures. A company can leverage this data to make sound business decisions and are given an assurance that the most optimized network was utilized.

Freight Bill Auditing Process

When hiring a freight audit company to handle the essential responsibility of freight bill auditing, a specific process is followed to confirm all inaccuracies are noted and corrected, as well as to provide the client with a detailed evaluation of their shipping and receiving procedure based on ad hoc data. The process begins when the shipping invoice is received either manually or through EDI (electronic data interchange). The freight audit company will then verify the bill, inspect for errors or inaccuracies, and ensure that:

  • The invoice has not been previously paid or is not a duplicate
  • Is indeed the responsibility of the shipper to pay
  • Any tariffs were calculated correctly
  • Accessorial charges are legitimate
  • All necessary documentation such as Bill of Lading and purchase order numbers are included.

If any inaccuracies are spotted, they will file a claim to be reimbursed for the mistake or oversight. If they are assigned to make the payments as well, they will handle the processing of the bill to ensure that it arrives as scheduled.

Instant Analysis

The essential data is then gathered into the system for instant analysis. This benefit of utilizing a freight audit company is the most advantageous element for most businesses, as through detailed interpretation of shipping data and trends, an organization can maximize trade routes, plan for future freight costs, and provide concrete data when negotiating terms and rates with shipping and receiving companies.

This is a feature that would not be available using simple accounting from an internal accounts payable department. The insight gained from such relevant and specific data is crucial in maintaining a competitive edge and anticipating cost-saving measures.

Not only are billing mistakes a common headache for companies but due to the nature of the industry, price is always changing. Fuel price has the highest inconsistencies, and shipping charges will reflect the cost of oil on the international market.

With the high fluctuation of fuel cost and the potential unforeseen expense of accessorial charges (charges made for executing services outside of standard pickup and delivery such as waiting-time, inside-delivery, storage charges, fuel surcharge, etc.), rates can sometimes change on a weekly basis. This leads to a complicated outlook when trying to evaluate future costs of shipping your product. A freight audit company will provide information and trends to supply a business with the ammunition to negotiate with the shipping companies and ensure the best rates.  

These companies also serve as the primary communicator with the carriers, providing a service that can help maximize a productive working relationship and hold shippers responsible for agreed-upon terms. Freight bills are never straight-forward and are created individually for each client.

Therefore, two identical shipments of the same size and weight transported from the same city to the same destination can have very different rates. A freight audit company can negotiate on an organization’s behalf to ensure they are receiving the best possible price for the service provided.

Current Trends in Freight Auditing

Today, more and more businesses are shipping directly to consumers, bypassing the retail stores. Once a shipment reaches port, transportation cost depends on volume and distance. This is where the “Hub & Spoke” operations begin.

Think of it like the spokes on a bicycle wheel. The large central stations are the hubs (or DC’s – Distribution Centers), and the small local terminals at the end of the line are the spokes. Getting your shipment to its destination on time takes a well-coordinated effort.

Full Truckload Freight

Hiring a Full-Truckload Freight (FTL) to transport your goods will be costly; therefore most companies will capitalize on an option known as LTL, or Less-Than-Truckload. At the port or at the hubs, truckloads are consolidated to maximize a truck’s capacity.

If a shipment is between 150 – 20,000 pounds (or less than 14 pallets), LTL’s rates are much more desirable. Not only will a shipment be dispatched for a fraction of the cost, but LTL’s also have the added benefit of such services as residential pickup or delivery, inside delivery, and reaching destinations that may not be on an FTL’s mainstreamed express route.

Parcel Services

Using a parcel company such as FedEx, UPS or the US Mail Service will be even more customizable, and will deliver packages that weight less than 150 lbs. Delivering through a parcel company is significantly more expensive than bulk freight, and must be factored into the cost. An auditing company can significantly reduce a company’s transportation expense by maximizing travel routes and coordinating with shippers to improve operational efficiency.

Where Do I Start?

Deciding on a course of action for an FBAP strategy takes careful deliberation and an evaluation of the specific needs and goals of the company. Documenting specific requirements and preparing detailed questions for an FBAP provider will help bring into focus a plan of action. Furthermore, it will help quantify the company’s ROI for hiring a freight audit and payment company.

Things to Consider:

  • What are the company’s expectations when hiring a Freight Audit (and Payment) Company?
  • What is the volume of transactions and what are the geographical locations that will need to be maintained?
  • What modes of transportation will be needed, and can the provider handle everything under one umbrella?
  • What is the time frame to process the audit and the payment of each invoice?
  • How are payments handled?
  • Is the process transparent for both the parent company and the carrier?
  • How big is the provider’s reach across the globe? What specific relationships with carriers will your company benefit from? How do they communicate with the carriers?
  • What is the FBAP provider’s financial strength?
  • What software does the provider use? Is the data compatible across all platforms?
  • How close to real-time are alerts and analytics?
  • What types of analytics are available and how will that help optimize the supply chain?
  • Is the FBAP provider investing in technology to stay on the cutting edge?
  • Is the company’s data and intelligence secure from competitors?
  • How will the company’s ROI be measured for outsourcing freight payment?

When examining how to best handle FBAP, consider that saving time and human resources has become secondary in recent years to the value of the data provided to increase business intelligence. By reducing costs and optimizing the supply chain, an effective freight bill management system can secure a competitive advantage that will benefit any business, big or small. With the high volatility of an unpredictable transportation sector, there is a great benefit to have a freight audit and payment company in your corner to ensure that every dollar you spend on transporting goods is maximized.

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The Ultimate Freight Invoice Audit Checklist

By | Invoice Auditing, News

In the not too distant past, malls and retail stores were booming public marketplaces; gathering places for Americans to browse, shop, eat, hangout, or maybe catch a movie. At that time, when brick and mortar stores and large retail outlets dominated the American commerce landscape, a retailer or vendor’s sales hinged upon a variety of factors and their costs were multivariable.

Although there were catalogs such as those regularly released by Sears or Victoria Secret, most companies aimed to entice customers to come into their physical store. While purchases could be made through the mail, a customer did not know what they were getting until the package arrived and if that item did not fit or was not what they expected, the customer would then have to go to the physical location to return the item. In these pre-internet days, the shopping experience was a drastically different and more time-consuming affair than the one we now know.

These days, however, thanks much in part to the e-commerce boom, customers expect a radically different shopping experience than what they would have two decades ago, with retail outlets and malls increasingly abandoned in favor of the ease and expediency of online shopping.

As a result, those once thriving marketplaces now more closely resemble ghost towns and retailers have been forced to adapt or die the deaths of these bazaars, these relics of the pre-online age. In the era of brick and mortar stores, a company’s shipping, while a factor, was not nearly as significant since the vast majority of the shipping was done from the factory to the warehouse from the warehouse to the store. All of that changed, seemingly overnight, as we experienced a fundamental shift in the way customers shop for those goods and the methods by which retailers sell said goods.

Because of these changes, today’s customers not only expect their goods to be delivered to their home, but to be delivered as quickly as possible, if not on the same day. As a result, a company’s success is increasingly more reliant upon the efficacy of their shipping network. Experts estimate that shipping costs now account for anywhere from 10% to 25% of a retailer’s operational costs.

Now that a company’s freight services are not only more vital but also costlier than ever, it is crucial that shippers have precise and wide-ranging data to measure their successes and failures of their freight services. To obtain these numbers, any savvy company will regularly perform freight audits. Freight audit services used to be a rather cut and dry way of amending and recouping erroneous shipping invoices, but has evolved to include a greater emphasis placed on data analysis. Having precise data allows a company to thoroughly analyze their procedures and systems, which in turn will enable them to make smart business decisions, grow their company and increase profit margins.

While auditing is a tedious task, even for those people in logistics who specialize in freight audits, its import should not be neglected or overlooked, especially if you want to minimize your expenses and get the most out of your dollar. Therefore, if you are shipper who desires payment accuracy, supply chain visibility, and data analytics, it would greatly benefit you to audit your freight invoices regularly. To aid you in this task, below, you will find a comprehensive freight invoice audit checklist.  

Freight Audit Checklist

Auditing a freight bill before paying it can be a powerful means of cost savings and the ideal way of ensuring that all parties are honoring their contract.Before you begin, however, it is essential that you are aware of your options for audits. Traditionally, shippers can audit their goods in one of three different ways:

  1. Manually – In this case, a shipper performs audits internally. This can be done by whomever is in charge or by hiring an in-house specialist or assigning a staff member to handle invoices manually and then audit them. As you might imagine, manual audits are time-consuming and tedious affairs that are quite prone to human error. Further, the likelihood of mistakes being made increases in proportion to the number of invoices or complexity of routes. Because of this, manual audits are usually only recommended for companies that do not ship in high frequency or volume.
  2. Freight Invoice Audit System – Another option at a shipper’s disposal is to buy a license for auditing software that will help your in-house team manage invoices. This software allows your team to easily audit bills, track payments and gather data on your processes. On the surface, this is more expensive route to take than manual audits, since you have to license the freight system and train your staff in its use. However, the cost savings in the long run is more than worth it, especially if you are a medium sized shipper.
  3. Third-Party Auditors – 3PLs and freight brokers allow shippers to focus on what they do well – the creation and sale of products – and not on data analytics. For such shippers, a third-party firm will be brought in to handle invoices review, logistical analysis, and recouping costs. Outsourcing this function allows a company to optimize and not spend money on internal audit teams, freight audit systems, or staff training.  Third-Party Audits are ideal for medium to large sized companies.

Regardless of which option you select, the actions taken during the audit are relatively similar.

Step 1: Collect Invoices  

If, in the unlikely case that you have never performed a freight audit, it would be wise to collect all invoices from the past year. (Note: you can only go back 180 days for claims). Ideally, invoices should be logged and uploaded online the moment they are received. Doing so, allows you the ability to pull them up at a moment’s notice. So, if you want to see a bill you made six months ago, instead of sifting through a pile of papers, you should be able to sort by date, company or any other factor in order to examine that information.

Step 2: Categorize Expenses

After logging your information, you should group invoices by vendor and range according to date from oldest to newest. This gives you an easy method of comparing old charges with new charges and analyzing whether you are paying more or less for your shipping. If sloppily arranged, the amount of time lost searching for documents could cost you more in the long run than the error correction is worth.

Step 3: Determine Benchmarks

Once you have all your information logged and categorized, you can begin the data analysis portion of an audit. By establishing benchmarks, you can see where and how you are spending money. This allows you to examine the numbers and set corresponding usage or reduction goals according to the benchmarks.

Step 4: Look for Overcharges or Errors

This is what most people think of when they hear the phrase freight audit. There are a variety of ways you may be being overcharged or mistakenly charged, and you should be aware of all of them. When reviewing your documents, look for the following:

  • Accessorials – Freight carriers regularly charge for additional (accessorial) services. While it is hard to analyze accessorials, especially since they are charged after the fact, verify that you are not being charged wrongly for additional services or for services that were reduced or waived in your freight contract.
  • Discounts – Shippers will often negotiate for shipping discounts, so, if you have settled upon discounts with the carrier, be sure to validate they are being applied and deducted from your freight invoice.
  • Duplicate Invoices – A duplicate charge can occur for a variety of reasons, including improper controls when it comes to accounts payable, unethical carriers who want to take advantage of shippers, the carrier accidentally counts one shipment as multiple shipments, multiple options for receipt and invoice payments. To prevent duplicate invoices from going unnoticed look for invoices with: closely matching invoice numbers, matching vendor numbers that have been paid from different accounts and matching dollar amounts.
  • Freight Classification – Products are classified into one of 18 classes. Such classes are determined by a freight’s density, stowability, liability, and handling. Certain classes are easier to ship or less expensive for carriers to handle and so the shipper is required to pay less. If your goods have been categorized in the wrong class by the carrier, you may be charged too much for the service provided. Many shippers negotiate their class to a freight of all kind status, where their shipments are rated at a different class from the actual class of the product.  So, if you have FAK clause in your freight contract, be sure to check and see that it is being properly applied.
  • Late Delivery – While this depends on your freight contract/carrier, a late delivery can either mean a voided shipment charge or a reduced rate. Odds are, you will experience a late delivery at one time or another. When it does happen, be sure to make a note of it and immediately alert the carrier of the issue.
  • Taxes – Taxes and tax laws can drastically vary from state to state, and this is especially true if you regularly ship internationally. Be sure that the proper taxes and regulations are being applied to your goods.

Step 5: Review Current Rate of Service  

After checking all of these possible error spots, add up the cots to confirm that you are being billed at the right rate and that all discounts are being applied.

Step 6: Consider Autopay

Some carriers reward customers for pre-payments or on-time payments.

Step 7: Analyzing the Data

There are a variety of data points you can examine during a freight audit all in the name of increasing efficiency or cutting cost. Such analysis can also aid you in your future decision making. Factors to consider include:

  • Capacity Utilization – Carriers charge by either full truckload or less than truckload by verifying the weight of material in comparison to payment to carriers. By finding means to better utilize capacity, a shipper can reduce the number of required freight runs. There are a variety of standard truck capacities, be sure that your carrier is using the one that optimizes your shipments.
  • Turnaround Time – Turnaround time is the total time taken by a freight company to load and unload your goods. If turnaround times are low, you will pay less since the truck is not sitting there idly. Because of that, your goal should be to do everything in your power to lower turnaround times. This can be done by being prepared for your carrier’s arrival and having your goods ready and properly palletized. If a carrier is slow through no fault of your own, this can be used as leverage in future freight contract negotiations.  
  • Price Hikes – Pricing for shipping can be rather volatile, especially since some costs are often directly tied to the cost of fuel. While there are a variety of reasons for price hikes such as annual rate increases, toll charges, duty increases, seasonal rates, or fuel, any unusual hikes found in an audit should be noted and then discussed. If possible, look for ways to minimize being hit with price hikes.

While freight audits are not exactly the most exciting of affairs, they are hugely important. By regularly and dutifully auditing your invoices, either via internal manual audits, a freight audit system, or a third-party auditor, you can ensure you are paying the correct amount for your shipments and also glean valuable insights into your shipping patterns. By following the steps of this freight audit checklist, you set your company up for future success.

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Why Should You Audit Your Freight Invoices?

By | Invoice Auditing, News

As a business, your first priority is to make sure that the correct product gets to the customer on time, thereby developing trust between your company and consumer. The next priority, then, should be making sure it gets there in the most cost-efficient manner possible to maximize your company’s bottom-line. There are several factors that influence your company’s bottom-line, but one not to be overlooked is the cost of shipping.

Factors That Affect Shipping Rates

Rates in the LTL industry are very complex. They are calculated by a range of factors including mileage, cost of diesel, type of product being shipped, as well as other fees associated with the pickup and delivery of your product. Some of these fees and charges are negotiated with the shipper, but carriers can add new charges or increase existing ones at any time. For this reason, it is very difficult to track a company’s freight bills to ensure that they are accurate.

Making matters more difficult is the fact that a company almost certainly uses more than one carrier, and each carrier’s invoices are presented in different formats. With potentially hundreds of items being shipped each month, the task can become challenging to manage. Errors will occur, and when those errors are undetected, the company’s bottom-line is impacted.

Outsourcing Freight Invoice Auditing

For all of these reasons and more, auditing each and every freight bill is necessary to ensure charges are legitimate and justified. The simplest and most cost-effective way to audit your invoices is to outsource with an experienced provider.

A freight audit company, such as Shipware, is equipped with the tools, expertise, and access needed to monitor all freight invoices and resolve any discrepancies. Not only that, but a good freight audit company utilizes technical data and analytics to interpret the most effective shipping routes, market trends, forecasting outlook, and strategies that will help lead to substantial savings.

Using this intelligence, a company is equipped to make solid business decisions to maximize their transportation tactics. Another benefit of collecting this data is that it becomes a very useful tool when negotiating with carriers – supplying leverage to garner better terms and rates. These are features that are not easily available when handling a freight audit as an accounting procedure. The insight obtained from such pertinent data is crucial in maintaining a competitive edge and anticipating market trends.

In-House Auditing

If a company decides the best course of action is to handle the invoice audit internally, there are several things to consider. For one, a dedicated and well-trained staff will need to focus on handling all the freight invoices with a keen eye for detail and must be able to cross-check every line with the contractual terms of the agreement. Variable and accessorial charges must be deciphered and validated, and data must be gathered and stored for analysis.

Additionally, the bill of lading and the freight bill must be properly filed and advisably consolidated into an electronic system, and any mistakes, overcharges, or errors must be submitted as soon as possible to avoid forfeit (within 180 days according to 49 US Code 13710).

The cost of a company to process a freight bill audit internally has been estimated to be about $11-$12 per invoice. Therefore, if the audit does not produce adequate savings, the cost of processing the freight bills in-house could work against you.

Freight Bill vs. Bill of Lading: What’s the Difference?

To begin to comprehend the audit process and what to look for, you must first understand the difference between a freight bill (or invoice) and a bill of lading. A bill of lading is a legal document given to the carrier which outlines the specifics of the shipment, including the exact weight of the shipment, the value of the shipment, and a detailed description of the product(s) being shipped.

The bill of lading is a legally-binding document between the company (or provider) and the shipping company. Therefore, it is vital that all the information is accurate and nothing imperative is omitted as it outlines the original service agreement, provides proof that the goods have been loaded and shipped, and can be used as a title of collateral for the buyer. If there are any inaccuracies in the bill of lading, a legal dispute could occur.

A freight invoice is not a legally-binding document, but merely reflects the original accord to provide clarifying information and includes any supplemental charges.

Most freight bills include the following:

  • Names and addresses of both the consignor and the consignee
  • Purchase order or reference number
  • Date of pickup and delivery
  • Origin and destination of shipment
  • Description and quantity of shipped items, including freight class, weight and value of items
  • Shipping rates
  • Accessorial charges
  • Total Charges due, including special instructions
  • The route of each carrier and any transfer points through which the shipment travelled
  • Signatures by the carrier and receiver to confirm the delivery

The freight bill and the bill of lading work together to give all parties a clear understanding of the service agreement between shipper and carrier. Where the bill of lading is focused on the original agreement between the companies, the freight invoice constitutes the financial aspect of the arrangement and details the conditions on which the charges were applied.

Freight Bill Auditing Procedure

The audit begins when the freight invoice arrives either manually, via email, or through EDI (electronic data interchange). When analyzing the freight bill, comparing it to the bill of lading is a good place to start, but it doesn’t give you the entire picture.

Other factors to inspect are:

  • Discount Verification: do your charges reflect any agreed upon discounts?
  • Any math errors made by the carrier.
  • Is this a duplicate invoice and therefore have you been charged twice?
  • Was the wrong party charged?
  • Did the shipment arrive on time? If not, are you guaranteed a refund?
  • Incorrectly charged accessorial fees
  • Correct calculation of taxes and/or tariffs.
  • Correct application of mileage.
  • Description or NMFC freight class classification error.

Overcharges can happen in a number of different ways, and a thorough auditor must know what to look for. Pricing in the LTL industry is complex, and it is easy to make a mistake or neglect prior service arraignments. Your freight bill auditor’s goal is to make sure your company pays only for the charges they owe.

Dispute Procedure

When a mistake is found, immediate action must be taken to recoup the charges. Remember, the US Code states that “A shipper must contest the original (freight) bill or subsequent bill within 180 days of receipt of the bill in order to have the right to contest such charges.” A carrier may opt to pay a claim beyond this period in good will but is not required to do so.

  • Documents for filing a claim include:
  • Original paid invoice
  • Original bill of lading
  • Weight certificate if the claim is based on weight
  • Agreed upon tariff that was not applied to bill
  • Any other information that supports the claim

If you choose to outsource, your auditor will contact the carriers on your behalf and provide the necessary documentation for your claim. The carrier will then issue a corrected invoice.

Because of the complexity of the LTL industry, it is easy for errors to occur. No two shipping bills are the same, even if the same product is shipped from the same city to the exact same destination. A firm strategy for Freight Bill Audit and Payment (FBAP) is necessary for any company to ensure that they are receiving the correct price and are never overcharged.

That is why most companies choose to outsource their FBAP to an experienced vendor. A freight bill and audit company will provide you with peace of mind knowing that your freight charges continue to remain legitimate at a fraction of the cost that it would require to conduct in-house.

Not only will the audit and payment of freight invoices be one less burden your company will need to concern themselves over, but the intelligence a provider includes in their service is invaluable. Detailed analytics specifically created for a company’s shipping patterns will become the basis for a durable transportation strategy – adding a competitive advantage and improving cash flow.

Using data will unlock cost-saving measures, provide leverage in negotiations for better rates, and give you the confidence to make better long-term business decisions.