Understanding the Freight Payment Industry

Too often transportation, logistics, and supply chain professionals, along with their internal support staff of purchasing and sourcing staff, will initiate a bid or review with the same mindset by which they select carriers and transportation management solutions.  It’s easy to see why this occurs. They are accustomed to working in an environment where the lowest cost wins the bid. After all, the logistics and variables of getting a package, pallet, or container from point A to point B doesn’t change much . Therefore, a bid for such services makes sense and cost plays heavily into the decision making equation.  Now…enter the world of Freight Bill Auditing and Payment. Just as an apple is not an orange, freight audit and payment providers are built differently and should not be lumped into transportation-buying mindset. No one is built the same. Each freight audit and pay provider has custom processes. They have tools and systems that are all built uniquely around internal business models and profit centers.  Some build pricing around economies of scale and electronic partnerships.  Some outsource.  Some minimize audit checks.  Some price on contingency. Still others price on a per transaction basis. If payment is included, float income plays a roll. Automation, manual intervention, custom programing, reporting, and even customer service tools can all play into the crafting of unique and custom solutions built around the client’s objectives.  The variables that make up the solution are always changing, requiring a constant re-balancing of client-objectives. As such, the biggest challenge for transportation and sourcing specialists is to find a process by which to truly evaluate, measure, and conclude which provider best suits their company’s needs. To summarize, traditional RFPs, where ‘price’ weighs heaviest in the decision making process, can be likened to an attempt to push a round peg through a square hole. Ultimately it might work but something is eventually going to break and a lot of frustration is inevitable.