About 1%-1.5% of all line haul freight bills are incorrect and 27% of all accessorial fees levied on shipments are wrong. Here’s how companies can use technology to cut these fees off at the pass and save millions in the process.
Running on almost 140,000 route miles, the U.S. freight rail network is widely considered the largest, safest and most cost-efficient freight system in the world. The nearly $80-billion freight rail industry is operated by seven Class I railroads and provides more than 167,000 jobs nationwide.
An efficient way to get domestic shipments from point A to point B, rail transportation comes with its own set of fees, adjustments, demurrage charges and accessorials that shippers aren’t always expecting. Demurrage charges compensate carriers for the expense associated with rail cars being detained beyond a specified period of time during the loading and/or unloading process. And, accessorial charges cover the cost of diverting a shipment while it’s in transit, tendering a railcar to another carrier, releasing a railcar when it’s empty, weighing the railcar and myriad other activities.
Because rail invoices aren’t always straightforward, companies opt to pay them and file them away rather than audit the documents, identify the problems and then dispute them after the fact. Those that do put an effort into auditing their statements post-payment then have to spend weeks or even months disputing the charges and recouping their money. An endless cycle, this can eat up team members’ valuable time that could be spent on more important activities.
“Every freight invoice that’s incorrect requires someone to dispute it, which can take anywhere from a few hours to a couple of days,” says Blake Ezell, Director, Supply Chain Consulting at IntelliTrans. “Then, another invoice has to be issued and/or some type of crediting process has to take place in order to finalize the dispute. It’s a pretty time-consuming process.”
It’s also an expensive process that can add up to substantial costs for a company both in terms of manhours and the money lost on excessive, unwarranted freight charges. By using technology to identify and address the problem early—as soon as the freight bill is received—companies can avoid these losses, maintain good relationships with their carriers and free team members up to work on more important projects.
“Someone basically has to drop everything, review the documents, pinpoint the problem, and then address it with the carrier before the invoice passes its due date,” Ezell says. “Once the dispute is submitted, it begins the lengthy process of getting the invoice adjusted and/or your money back.”
Today, about 1%-1.5% of all line haul freight bills are incorrect and 27% of all accessorial fees levied on shippers are wrong. Multiplied across the 2.1 trillion tonne-kilometers of rail freight moved in the US in 2020, this adds up to a substantial amount of inaccurate fees paid out by shippers to their carriers over a 12-month period.
Consider the $1 billion enterprise that spends about $100 million on rail transport annually. Somewhere between $1 million and $1.5 million of its assessed freight charges are incorrect. With the typical railroad counting accessorial fees as 3% of its revenue, a 27% error equates to about 0.8% of its total bills (or about $800,000 for the shipper we’re talking about here). In total, that shipper could save anywhere from $1.8 million to $2.3 million on its freight bills by vigilantly reviewing and disputing every one of its freight invoices.
Using Tech to Automate Freight Audits
The cost of recruiting, training and retaining a team of employees to pick through invoices and spot mistakes is high, but IntelliTrans’ Freight Audit & Payment platform pays for itself with a 10:1 return on investment (ROI) almost as soon as it’s up and running. For example, one recent customer saved $4.8 million and saved approximately 2% of overall freight spend simply by auditing its invoices.
The system reviews all invoices received and then either automatically matches them to the PO or sets aside those that don’t match up—signaling a potential inaccuracy. With user-friendly dashboards, IntelliTrans manages the complexities of freight bill audits and takes a proactive approach to remediation. So rather than spending time on post-audits and then waiting for refunds, companies can cut the problem off at the pass without ever having to allocate valuable human labor to the issue.
“The system validates that the payment is correct, based upon the rate, movement, and everything else that takes place before payment is even submitted,” Ezell explains. “Instead of waiting for carriers to send the money back six months or a year later, companies know that IntelliTrans is driving millions of dollars back into their pockets.”
It’s Time to Up Your Rail Rate Visibility
IntelliTrans’ Global Control Tower provides high levels of supply chain transparency; aggregates, completes, and enhances data from a variety of sources; offers visibility into and execution of different aspects of the supply chain; and generates data-driven alerts and analytics that ask deeper questions and deliver meaningful insights.
By leveraging tracking information, the Global Control Tower provides analytics that measures key performance indicators (KPIs) like fleet cycle time, origin/destination dwell time, lane and hauler performance, back orders, freight spend, load optimization, and more. With their rate, equipment, lease, tracking, and invoice data in a central repository that’s accessible 24/7, companies can position themselves for success in any market conditions.