Parcel Audit Not Needed? Not So Fast…
We recently completed a parcel audit for a client and what we found lies at the heart of the carrier rate audit discussion. Transportation Management Systems (TMS) enables a shipper to view all their carrier rating options on one screen by enabling the loading of the carrier pricing schedule directly into the TMS. This creates a duplicate contract that is loaded into the carrier’s system and the TMS, offering duplicity and verification of any rate discrepancies. The duplicity of loading the carrier contract in a TMS and within the carrier’s system identifies any rate loading errors that may have been present allowing for the shipper, carrier and freight audit provider to identify the issue when a carrier invoice did not match the TMS carrier rate loaded by the shipper or their Logistics Service Provider.
Fast forward to today’s enhanced capabilities that deliver direct Application Programming Interface (API) connections from the TMS to the carrier’s system that allow for real-time carrier rate access without the need to load a carrier contract within the TMS. As parcel and LTL pricing contracts have increased in complexity with carriers opting to contract lane-specific pricing, API connections have become a mainstay for parcel and LTL rating. The resulting challenge has become verification of the API connected rate being accurately loaded by the carrier. In the audit of our Client’s parcel rates, this was not the case.
An issue for our Client was the lack of the earned discount being applied within the carrier rate structure loaded in the parcel carrier’s system. The result is higher rates. The key to keeping what you negotiated: verify the carrier’s rates upon the effective date and on regularly scheduled intervals. The reason for the continued validation is the lack of control you have over changes being made to your negotiated carrier rates internally loaded within the carrier’s system. One change to your pricing schedule and you may see increased costs with an API connection due to a carrier issue. The potential result is increased cost and potential loss of volume for the carrier if the routings are booked through a TMS.
As an example, for tracking number #xxxxxxxxxxxx, the total discount for this shipment was $12.95 which represents an 18% discount. The contract however states that for that shipment they should get the 18% Base Discount plus a 30% Earned Discount, for an effective discount of 48% off the freight cost. That would bring the total discount to $34.54.
For further discovery on how we can support the audit of your carrier rate structures please reach out to a Rockfarm Representative today.
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By Brad Stewart
Brad’s journey into logistics began as a Marine Officer and transitioned from the LTL docks to the non-asset side within the logistics service provider arena. As a co-founder of Rockfarm, Brad drives our business development efforts and delivery of our promise. An Arizona native, Brad enjoys spending time outdoors in his home state with his wife and family.
“Our approach to the market allowed us an opportunity to push forward in 2008 and enable our mission, “lower the cost to serve” to stand as a cornerstone to our company today.”