The Freight Invoicing Ecosystem
When I first started working on a shipping dock in 1996, everything — pickup & delivery manifests, invoices, etc. — was recorded on paper. Multiple copies were usually made to ensure that everybody had the same information, using a system called ‘Carbon Copying’. (Yes, that little cc on an email stands for Carbon Copy). A sheet of carbon would be placed between two sheets of identical (if not different colored) papers, so that when you recorded information on the top paper, it would be copied exactly to the second one.
The nice thing about this paper process was that everybody received the exact same data. We all had a copy of the same piece of paper. The problem was, well, it was paper.
Now, more than 20 years later, almost all paper has been converted to electronic data. And if it hasn’t yet, it will be soon.
A supply chain that goes paperless is cleaner, more organized, and has amazing analytical capabilities. The only problem with an all-electronic supply chain is that there is no standard system or format for the data to be passed from one party to another.
For instance, look at the last stage of a logistics move — the invoice. Before, when a billing clerk sat down to create an invoice, they would use all the paper documents as a reference. The person in payables at the recipient would have their own copy, and if a match was confirmed, the invoice was paid.
As different parts of the supply chain become more sophisticated and electronic, buyers and sellers both have to resort to electronic “translation” in order to get data from various systems to conform and format into the right ‘language’ for payment.
The complexity of the translation required and the inability to consistently get it correct across all customers results in frustrated shippers who want to pay for invoices, but can’t. — mainly because their logistics providers can’t present them an invoice with data in the right format and language.
This need in the market has given rise to third-party Freight Audit companies. These companies used early technology to build rate-and-data validation tools to remedy inaccurate logistic service provider invoices. Freight Audit Companies have helped shippers justify the purchase through the value of “catching over-charges.”
But over-charges aren’t the problem. They are a symptom. The problem is the data; the inability of logistics service providers to provide all the data in the specific format required to get paid. The addition of third party auditors (who add their own data requirements) just added friction to the process.
The only way to solve the problem is to convert the source data to the right format and language at the source. Friction will be reduced if this were able to be done before the invoice is sent to the customer or their third-party. But it must be done by someone who understands how to take the data and present it in the the preferred format of both the shipper and the Freight payment companies. Prevention and preparation, rather than reacting and readjusting. Seems easy enough. Maybe we will get it right in the next 20 years. Once we do, I’ll cc you in on the email.