About half a century ago, the transportation marketplace was heavily regulated. Motor carrier bills had to be paid within seven days and rail within five days. Seeing an opportunity for new business, many banks began to offer freight payment services. Chemical shippers contracted these services to ensure prompt invoice processing.
After the deregulation of the transportation industry in 1980, using bank freight payment services to meet tight deadlines was no longer necessary. Services also became obsolete as web-based freight audit and payment services became available to chemical shippers. However, many companies continue to use bank freight payment services out of habit, not for valid economic reasons.
The Banking Freight Payment Process
The bank’s approach to handling and processing freight payment has not changed in over half a century. Formulas remain: “If A equals B, pay. If not, reject and return back to the company.” Many banks have even shamelessly bullied carriers to accept a discounted value for receiving payments on time.
In a banking model, all payments are the same. For example, cable, telephone and credit card payments are all handled much the same way. Processing freight invoices for chemicals, however, requires a higher degree of specialization. Sometimes, it is not just about carrier rates but whether a carrier is qualified to handle chemicals.
3PLs, such as ChemLogix, hold industry certifications that give us the specialized knowledge to understand that when auditing a freight bill, we must not only verify rates but also if the material is being handled according to manufacturer’s specifications and if the carrier has been certified to transport the material.
3PLs Offer Paperless Processing
Supported by world class transportation management systems (TMS), 3PLs also can offer best-in-class freight audit and payment services in a truly paperless environment where documents and data can be transmitted to carriers in a variety of formats (EDI, XML, etc.). Unlike banks where general ledger code information is limited, TMS capabilities give 3PLs the technology to work in an automated, always current environment that provides customers and carriers with relevant information on a real-time basis from many devices including mobile device applications such as Iphones®. Banks typically offer limited access to information.
Companies that use banks to handle their freight audit and payment are finding that they are still heavily involved in the process. And in most cases, shippers are not achieving expected savings. As banks use similar tactics when processing bills for different industries, they do not have industry data to handle exceptions on their own. As a result, exception rates run as high as 20 percent, with chemical shippers having to get involved with resolving most of these exceptions while paying for additional handling fees by banks.
3PLs, like ChemLogix, have access to advanced, multi-relational databases that include information such as fuel surcharge tables, freight rates and accessorial costs that help resolve many exceptions without going to the customer. ChemLogix’ customers experience less than five percent exceptions, with most handled by our experienced logistics team without getting the customer involved with problem resolution. For those times when exceptions cannot be readily resolved, a collaborative exception resolution capability via network interface affords real-time electronic communications to customers instead of faxes and emails.
Taking the time to compare bank vs. 3PL services related to freight audit and payment can save a chemical shipper substantial processing time and money while improving relationships with carriers. Even if your current process seems to be working well, it is worth taking the time to evaluate the benefits of new processing options for freight audit and payment.