Accurately accruing costs for shipments is one of the biggest challenges for shippers of all sizes. To produce accurate accruals, there are a lot of moving parts but VTM’s expertise and tools can help simplify the process and drive better, more accurate results.
In this success story, we explore how VTM:
A national shipper of industrial supplies and materials asked VTM how to get better access and visibility into their expected freight costs before the invoice was received and processed.
Further complicating their challenges, there were many new team members on the shipper’s finance and logistics teams, so a lack of institutional knowledge meant they needed extra flexibility in the design process to ensure it evolved as they learned their business.
In an increasing rate environment, they were facing several critical challenges that more timely and accurate accruals helped address:
Impact on the whole team
Before working with VTM, lack of visibility and insights into shipment costs at the front-end of the process had broad impacts across the entire organization.
Logistics managers found out about a least cost carrier opportunity costs only after invoices were paid, leading to millions in potential savings by simply using the right carrier for the shipment.
Finance managers were constantly surprised with fluctuating demand for cash to pay carriers, often leading to payment delays while the team sorted it out.
Historically, the accounting team’s accruals used a basic average shipment cost multiplied by the number of shipments formula, so naturally it ignored lane-specific rates and the profile of products shipped (ex: multiple LTL FAK classes), leading to major over and under accruals each month.
The Process & Solution
VTM’s unique approach to understanding a shipper’s needs and customizing a solution to address those needs came into play here. Though the shipper was able to mostly leverage our tools out of the box, there were several key elements that needed to be flexible in order to accommodate the shipper’s key stakeholders and business process workflow. The VTM approach to delivering on these customizations include:
The result of this approach was a solution that was highly automated, extremely accurate, and effective at giving the shipper’s stakeholders all the data they need to make decisions and run their business.
Integration with the shipper’s TMS
VTM’s shipment accrual feature was a clear fit for this shipper’s requirements, so the next order of business was getting the necessary data from the shipper’s TMS system on a daily basis. VTM offers several flexible integration plugins, ranging from high sophisticated APIs, to more simple file exchanges (XML, CSV, TXT, Excel) via email or SFTP.
Despite the value case behind the project, like many others shippers, this shipper did not have the IT resources to support a major integration project with the TMS system. To accommodate the shipper, our solution landed on a daily push of shipment activity to VTM in a CSV file.
Rate results were sent back to the client in a spreadsheet by our automated report distribution system, and were also available in a Transware dashboard (more on that later). The shipper was able to use the spreadsheet to upload rates at a shipment level, and use our dashboard to find critical insights like least cost carrier opportunity cost.
The data shared with VTM in this file of shipment activity included things like bill of lading number, ship date, origin point, destination point, product/SKU references, freight class (one or multiple for any given shipment), and other shipper-specific references to be used downstream in the dashboards.
VTM’s Rating system & the process
Once the first iteration’s set of needs were understood and documented, VTM set out to create a Minimum Viable Product (MVP) of the solution. This included mapping the source data file into our system, setting up the global rules for rating and validation, loading all of the shipper’s rate agreements into the rating system, and publishing the Analytics dashboard.
VTM already had most of the shipper’s rate tariffs in our rating system, but the shipper was also building relationships with new carriers at the same time, and VTM worked seamlessly with those carriers to obtain the new tariffs and quickly load into our rating system for immediate use.
VTM used these rate tariffs to rate the shipment activity each day. These rate tariffs were also used to rate invoices and compare during the pre-audit of their invoices to fully validate the carrier’s billed amount. Using the same rating engine and tariffs in both parts of the workflow ensured maximum comparability and eliminates the risk that multiple, disparate systems get out of sync.
Dashboards that deliver insights
This project’s success hinged on the shipper’s stakeholders being able to quickly and easily access and understand the data this process was generating. To do this, the shipper leveraged a combination of Transware’s standard dashboards, and customizations of those dashboards delivered in iterations as their real business users experienced the tools over the course of the first few months. New scenarios and perspectives emerged, and these tools evolved with them.
Part of VTM’s process upstream matched invoice data to shipments, so this dashboard gave the shipper’s finance team access to a real, accurate, open balance at any point in time. This was the first time the team had access to an open balance, let alone an accurate figure.
Because VTM had other data elements from the source file, like ship date, and origin/destination point, the insights did not stop there. The finance team was able to stage the open balance by date and understand how current the accrual’s open balance was.
The logistics team was able to detect least cost carrier opportunity costs earlier in the process, and use interactive drill-throughs to identify the fulfillment centers that were routinely using the wrong carriers for their shipments, generating extra costs – driving them back to the Rating module in Transware to get the LCC before tendering the shipment.