Background:
One of our customers, a mid-sized manufacturing company, was facing significant logistical and financial inefficiencies. The company struggled with overcharges in freight costs and discrepancies in their freight auditing processes.

Their existing audit processes were fraught with errors and inconsistencies, leading to inflated expenses and operational inefficiencies. Recognizing the need for a more reliable and precise auditing process, they sought a solution that could help them achieve error free audit process and also reduce their audit tolerance. Their audit tolerance was $40.00 per invoice.

Almost all freight audit process has certain tolerance value and its quite difficult to reduce the tolerance level. And for our customer, this tolerance value was really high due to the inefficiency of their audit process. If we combine all the invoice variances that was getting approved due to the tolerance level was itself a very big amount.

Challenges:

• Freight Overcharges: The company was consistently overcharged on shipping rates due to incorrect billing practices and lack of effective freight audit management.
• Audit Discrepancies: Their internal audit processes were time-consuming and prone to errors, leading to financial discrepancies and loses.
• Lack of knowledge: Their existing auditors were lacking in freight audit & pricing knowledge which resulted in high level of inefficiency. They in many cases were not able to assist the carriers with their queries and this had led to dissatisfaction from the carrier side.
• Billing issues: Freight audit and billing process with several flaws created total chaos in their billing process.
• High tolerance value: To compensate their Freight audit inefficiency they had set high tolerance level. Now this high tolerance value was itself resulting in financial losses.

Solution Provided by Srinath Transpiration Solution:

To address these issues, Srinath Transportation Solutions partnered with our client to overhaul their freight audit processes. We began with a thorough assessment of their current systems to pinpoint areas of weakness and sources of error. Our team designed a tailored solution that integrated advanced freight auditing techniques with their existing TMS (Transportation Management System). This solution focused on real-time data accuracy, automated exception handling, and stringent cost verification mechanisms. We engaged quality auditors having more than a decade of Freight audit experience. We established a proper freight audit process which includes…

• “Bill to” check: This ensured that our customer only pay the bills which they owe. In many cases, carrier send wrong bills which needs to be identified and declined.
• Duplicate billing check: This process ensured that our client don’t pay the same bills twice. This process completely eroded duplicate payments.
• Freight cost validation: To make sure carrier is billing the right freight for that shipment by reviewing the pricing contract and or getting Gross freight from SMC3 rate base.
• Discount check: This ensures that our customer was billed using the right discount from the Pricing contract.
• Fuel check: This process validates the fuel calculation and makes sure that the fuel amount charged in the invoice is correct.
• Other Accessorial validation: This process ensures that the additional accessorial charged by carrier is correct. For example, there are many instances where carrier bill the limited access charge in their billing but when audited and verified properly, we found that the area was not qualifying for limited access.
• Weight check: This makes sure that carrier use the correct weight. If weight do not match then we ask for supporting documents.
• Correct Class and FAK: This process ensures that carrier used the correct Class and Fak for their billing. If not, then we ask for supporting document to prove the changes.
• Dimension Validation: We made sure that all invoices having dimension dispute are checked properly and then validate the charges based on findings.
• Regular Reviews: Established a regular review schedule to ensure ongoing accuracy and compliance, minimizing the risk of future discrepancies.

Tolerance Value Reduction:
Once the process was streamlined and achieved a stable condition, we started monitoring the invoice counts that was getting approved due to tolerance value of $40.00.

We found that there were huge number of invoices falling in that tolerance criteria and the total dollar amount of those invoices were also quite significant. We then started reducing the tolerance value and this increased the dispute invoice counts.

However, our well-trained auditors were more than capable of handing the volume and then gradually we managed to reduce the tolerance amount from 40 to 0. This whole changes in the process took us just 3 months and after that there was 0 tolerance in manual audit process which resulted in high savings for our customer.

Results:

Cost Savings:

• Our customer noticed significant reduction in their overall carrier payment cost. Saving approximately $50,000 annually.
• Our customer managed to get lots of credits due to the post audit performed by our Auditors.
• Dismantling their own Freight audit structure saved thousands of dollars and time and effort.
• Reduction in tolerance value annually saved $30,000 for our customer.
• Our customer noticed great improvement if their overall Accounts Payables.
• This changed process also resulted in better carrier payment and improved relationship with all the carriers.

Improved Accuracy:

• Error Reduction: Our audit process led to a 40% reduction in errors in both freight billing and audit processes.
• Increased Compliance: Enhanced audit procedures improved compliance and financial accuracy, ensuring that the company met all regulatory requirements.

Conclusion :Through Srinath Transpiration Solution's expertise in freight audit services, the company achieved substantial cost savings and operational improvements. The strategic changes led to a total annual savings of $80,000, showcasing the value of efficient freight management and precise auditing practices.