Our last article discussed supply chain inefficiencies and data standards challenges and combated this. This second article will discuss optimization possibilities utilizing the power of a seemingly exhausting administrative activity, the Freight Audit & Payment, and the future of digital solutions within finished vehicle logistics.
Outbound Vehicle Logistics – Transparency needed?
There are examples from recent years, having end-to-end visibility could create significant optimization possibilities in outbound logistics. Aggregating all VIN event data to a “single source of truth” allows reduction of transit time up to 32%, resulting in millions of EUR logistics cost savings. Having all this data together with sufficient algorithms generates an adequate basis to predict vehicle arrivals with an ETA accuracy of even more than 90%, providing transparency, building trust, and increasing customer satisfaction. With this information available at any time, there is no more need for e-mails and phone calls asking about the status of a vehicle in the distribution process.
In addition to the mentioned tangible benefits of having an end-to-end visibility platform, the full transparency from customer order to final delivery, and even beyond with invoicing and payment-related data, cash-flow control is also crucial. Fair to say, most of the parties in finished vehicle logistics focus more on delivering the service, having maybe less attention, what happens afterward. Getting the cars to the dealers and/or to final customers is the essence of outbound logistics; still, all parties should oversee the massive task of processing, organizing, auditing, and paying invoices.
Vehicle Invoice Auditing: In-house or External Services
According to a recent study, approximately 25-30% of freight invoices contain errors, and these errors can lead to shippers being incorrectly charged by 3-5% on average. Instead of its importance, an astonishing 25% of companies do not utilize technology to pay and manage freight bills, resulting in a lost opportunity for cost savings. Some companies report as much as 1-2% on outbound shipments and 2-4% on inbound shipments being miscalculated. That might seem like a small amount, but the costs and associated efforts add up very quickly if it regularly happens.
There are two options to handle Freight Audit & Payment; one is to do it internally, allocating significant resources to do that, or to outsource to a specialist, having a suitable supporting methodology to perform these activities.
While the in-house solution is time-consuming, it requires dedicated internal staff and could easily miss the opportunity to maximize profit through proper data analysis. An automated, specialist solution uses the information received from the vehicle tracking and visibility platform as a foundation for invoice audit. During the process, numerous audit validations are performed automatically, up to 40-60 different ones, to validate every line item on each invoice. Such a solution creates a complete compliance framework without additional effort or attention. OEMs are secured to pay only for services correctly performed, LSPs are confirmed to get paid on time, both parties are assured to proceed entirely according to agreed terms and conditions.
The essential data is gathered in the system, so it can also provide instant analysis on VIN-level, which adds substantial value in addition to cost-saving measures through detailed interpretation of shipping data and trends. Your company can leverage the data to make sound business decisions with the assurance that the most optimized network is utilized in trade routes, planning freight costs, having data to negotiate rates, terms, and conditions properly. This is hardly available using simple accounting from an internal accounts payable department. Moreover, a proper automated Freight Audit & Payment solution can tie all payments together with the respective invoices. In this way, every invoice gets audited, typically with the reported results and VIN-level analytics within an hour or two from invoice submission, saving a significant amount of time and effort, as well as a substantial amount of money.
Summarizing what we have been talking about, our finished vehicle logistics supply chains are impacted by the ever-growing expectations for faster and more flexible deliveries, real-time track & trace capabilities, and greater customization. We also need to recognize it took a while that end-to-end visibility could gain extraordinary momentum. Still, now it is an essential foundation to all other supply chain functions. In conclusion, moving from old-fashioned manual systems that are mainly paper-based and carry an increased risk of human error to digital logistics, there are significant benefits of providing efficiency, reliability, visibility, and cost savings.
Our next series will detail the Communication Hub concept, ETA calculation / accuracy and the Automated Freight Audit and Payment solution. Stay tuned and contact ICL Europe– your partner in finished vehicle supply chain optimization, for more information on how we can help your logistic reporting needs.
Sándor joined the ICL team in September 2020, intending to define our future within the automotive sector within Europe. Sándor is an expert in logistics process management, process improvement, logistics network planning and optimization, logistics services procurement. He also has a background in production management and logistics, with almost 20 years of work experience in the building and automotive industries.