Big Impacts of Small Data Errors
At AMTR, we view millions of freight bills every year. Given our 35+ year history, there is probably no billing mistake that we have not seen. Every section of a freight bill can contain incorrect data, and no carrier is immune to making such mistakes. As an example, we recently audited a Class I railroad bill with a waybill date of December 2016. That’s right—a bill from the future! In this case, all the error generated was a chuckle, but that is rarely the case.
Small errors can generate a big impact. Examples include wrong dates or cities generating wrong rates, and missing decimals for CWT rates leading to miscalculations. Such data errors are easily overlooked by accounting departments that simply do not know what to look for or by transportation departments that are just trying to keep a product moving.
AMTR freight auditors assume every bill has a mistake, so we scour each one to find them and recover the overcharges that result.
Surprise, Surprise, Surprise!
Shippers spend a significant portion of their time planning for and projecting freight costs. Rate engines will predict accruals; however, despite detailed planning on the front end, accessorial charges often creep in at the back end and create a surprising increase to overall freight spend. Some common examples of unpredictable accessorial charges include miscellaneous switching, diversions, demurrage, weighing and empty car moves for rail shipments. Charges for reconsignment, weight or description inspections, liftgate delivery, re-palletizing, capacity load and density minimum charge are some examples of accessorials commonly seen with motor carrier movements. Finally, accessorial charges for detention at the rail yard, repositioning and reweighing are possible for intermodal shipments. Even more disconcerting is the fact that invoices for such charges often bypass the normal TMS systems and get paid manually.
Unfortunately, there is rarely anything that can be done about such charges unless you have transportation experts like AMTR working on your behalf. We will not only verify the charges, but also offer suggestions how to avoid them in the future.
About More Than Just Recovering Money
As companies work hard to achieve supply chain efficiencies, they don’t always recognize the idea of a freight cost audit as a valuable part of a broader solution mix. Of course, one of the primary outcomes of a freight cost audit is the recovery of freight overcharges for the client. Yes, getting “money back” is exciting in its own right for a client, but AMTR suggests that true benefits only begin there.
At AMTR, we work hard to provide reports and analyses to customers that they can use to jumpstart new or integrate with existing process improvement or cost optimization efforts—it is a key component of our company’s “educate” strategy. Furthermore, because our work is driven by human expert auditors, we collaborate one-on-one with clients to tailor offerings to specific reporting or analysis needs. For instance, analysis on accounts can identify tactical problems such as repetitive inaccurate surcharges or unnecessary accessorial charges, as well as offer broader strategic insight as to lane usage, carrier selection, and route optimization.
So, the next time you think about the value of a freight cost audit, think beyond freight spend returns to how you might use the information and knowledge gained from that audit to optimize and improve your transportation/supply chain operations. AMTR has 35+ years of experience in the business; call us to discuss all the ways a freight cost audit can benefit your company.
Last year during a Senate Appropriations transportation subcommittee hearing, Transportation Secretary Anthony Foxx stated a rule proposal requiring that heavy duty trucks be equipped with speed limiters would be forthcoming in Fall of 2015. Given recent concern about the delay in this rulemaking, Secretary Foxx has now stated that the rule proposal is scheduled to be completed NLT April 22.
This proposed rule is the result of a collaborative effort between the DOT’s National Highway Traffic Safety Administration (NHTSA) and Federal Motor Carrier Safety Administration (FMCSA). Its purpose is to limit the speed of heavy duty trucks in hopes of reducing highway fatalities. According to the DOT, this rule would require speed limiting equipment to be installed on all trucks weighing over 27,000 pounds. The proposal has been stalled as the NHTSA and FMCSA have been working on aspects of the rule with the White House’s Office of Management and Budget (OMB) since May of last year.
Once the rule is approved by the OMB, it will be published in the Federal Register and will be open for public comment for 60 days. After that, the two DOT agencies that created the rule will draft a Final Rule which will go through the same review process without a public comment period. This rule would more than likely go into effect in two years. Given the positive safety implications, many are hoping for rule publication in the very near future.
Verbiage contained within the spending bill signed by President Obama in December may render the current hours of service law invalid. The bill was supposed to merely reverse the earlier provision that overnight drivers take at least two half-hour breaks between the hours of 1 a.m. and 5 p.m. However, the spending bill’s Section 133 failed to specifically state that the old hours of service restart rules would continue to apply if studies by the Virginia Tech Transportation Institute fail to indicate that a lack of driver breaks impacts safety.
Lobbyists worry that the bill’s verbiage could potentially spell the end of the hours of service law. Furthermore, the American Trucking Associations (ATA) fears that the new law could end up forcing work limits back to 60 hours per seven-day week and 70 hours in an eight-day consecutive span. According to logisticsmgmt.com, the ATA has tried to address this problem by inserting “corrective” language in must-pass legislation that authorizes short-term funding for the Federal Aviation Administration. The DOT has also promised assistance as required. Fortunately, other pieces of legislation are under consideration to address the problem as well. Trucking lobbyists say they will back whichever one has the best chance of passage.
It is important for shippers to stay abreast of changes to this situation, as shortened hours may impact delivery times and cause pickup delays, resulting in unhappy customers and inventory shortages. Furthermore, these delays may result in the need for shippers to schedule more expedited shipments, which can become costly. AMTR’s ‘Smart’ Auditors will keep you updated on freight legislation and ensure that, if these delays occur, they will not affect your freight spend.
Our agricultural clients ship a multitude of commodities produced from the humble corn plant, not the least of which is the fuel additive ethanol. With the growth of the ethanol industry, rail freight traffic of this valuable commodity has increased dramatically over the last few years, accounting for 60 – 70% of all ethanol transport. With markets for ethanol spread from the East Coast to the West Coast, most receive their product via Class I railroads. However, given the rural nature of ethanol production, thousands of carloads of ethanol pass through the hands of smaller short line railroads on their way to the big carriers. When auditing your freight costs, these smaller bills cannot be overlooked. The volume of traffic in this area may surprise you. Billing errors can easily occur when these smaller carriers hand off loads to Class I railroads. Is it a switch? Is it a linehaul? Am I paying twice for the same move? Let our transportation experts examine these short line bills in relation to your other freight bills and put some money back on your books.
Many commodities ship in unit trains of 115 cars or more; however, some smaller rail stations may only be able to handle 65 or 85 car units. Marketing departments use factors such as these to set rates, but generally, the more cars shipped, the lower the rate. As a shipper, if you have a contract with a carrier, it usually includes a minimum car requirement for certain unit sizes to guarantee a set amount of revenue for the carrier. There may be times, however, when you will not be able to meet the minimum car requirement. This may be due to all sorts of scenarios such as bad order cars, miscommunication, or railroad error. What happens then? Depending on the commodity, falling short on an order by one car can sometimes cost over $20,000, as a higher rate is multiplied by the total number of cars. Some carriers offer rules–called “shortfall provisions”–that protect the lower rate for the shipper. Other carriers require notification in order to provide a similar waiver. Our auditors often see that a shipper was offered a lower rate via an email, but when computers got involved the bill was actually rated higher. Shippers need to know that relief is usually available if such an issue is brought to the attention of the appropriate parties, but don’t expect automated computer systems to have a heart. This is the type of situation that AMTR will investigate and get corrected for you. The AMTR difference is the “human in the loop” reviewing your freight to ensure that you never pay more for less.
The word “audit” often gets a bad rap. For many, it has a negative connotation, as it elicits images of a process focused on finding things that have gone wrong rather than right and further extrapolated to imply someone will be in trouble because of it. According to the Merriam-Webster dictionary, however, an audit is “a complete and careful examination of the financial records of a business or person” or “a careful check or review of something.” These definitions capture the positive aspects of an audit. Who would not want a “complete and careful” review, especially of financial records of any sort? At AMTR, the focus of our review is on freight cost invoices. When we “audit” these invoices the only outcomes are good ones! We discover errors, we recover lost freight monies, and then we educate our shipping clients about how the errors occurred in the first place. The business intelligence reports and analyses we deliver to our clients are never focused negatively on any specific individual or process, but are tailored to meet specific client requirements. The reality is that shipper and carrier errors are rarely malicious in nature—it is the complex nature of freight cost calculation that underlies most issues. So don’t think of a freight cost audit as a bad thing—it’s all good! No one gets in trouble and freight money can be added back to the bottom line. Let AMTR experts give your freight costs a complete and careful review and experience all the positives an audit can bring.
In the wake of year-end financial report rollouts for publicly traded trucking companies, an assessment of 2015 was possible. According to truckinginfo.com and John Larkin, managing director of equity research of transportation and logistics at the investment banking and financial services firm Stifel, “2015 was probably characterized as disappointing on the heels of a very strong and robust 2014.” Larkin attributes the downturn to larger economic forces such as the strength of the U.S. dollar against foreign currencies, low energy prices and an inventory glut across supply chains. The good news is that dedicated trucking firms seemed to fare better; shippers see increasing truck regulation in the future that will tighten capacity and want to secure load and cost arrangements ahead of time. As for 2016, Larkin “doesn’t see things improving much.” Without a surge in Spring and early Summer goods movement, the outlook for 2016 may be sluggish.
According to 3PL provider IDS, U.S. railroads are getting more competitive with trucking companies by lowering domestic intermodal spot rates across many of the major lanes. The strategy may be working as several Class I railroads, especially BNSF, have seen strong growth in the first months of 2016. Shelli Austin, president of IDS transportation, tells JOC.com, “Some of the rail lines, not all, are reducing rates to try and increase the volumes during this time that the capacity is so loose.” At the same time, intermodal companies and the truckload market are trying to be competitive with pricing as well, so the railroads will have to remain vigilant. Austin summarizes by stating, “It will be interesting to see how long these [rates] stay low and how many more rail lines will follow.” Watchful shippers stand to benefit from these industry dynamics with lower freight costs.
