Freight costs: how to use centralized data to boost profitability

Transportation managers who handle freight shipping lack reliable methods to get a complete and accurate picture of their spend.

They often have to collect freight data through reviewing ad-hoc documents or sifting through multiple dashboards, emerging with only a handful of data points.

Avoidable back-of-house expenses and invoice mistakes slip through the cracks. Legacy service providers and banks try to provide insight into freight spend but they rely on rigid systems and manual processes. As a result, they struggle to keep up with a dynamic industry.

Intelligent software like Loop entered the scene to help resolve these issues. It generates an accurate picture of your freight costs by unlocking premium data that historically has been hard to access. With it, you get the valued bird’s-eye view to easily spot opportunities to boost profits.

Here, we’ll break down freight cost factors, how they impact your bottom line, and how you can use high-quality data to save money. Let’s get started.

What are freight costs?

Freight costs are incurred while shipping your goods from your facility to the final destination. Each line-item, whether an expected fuel-surcharge or unexpected accessorial, should be documented to validate the expense.

Here are the most common items you can expect to see on invoices:

• Shipment origin and destination
• Transit time
• Shipper
• Consignee
• Invoice date
• Commodity
• Freight class
• Fuel costs

Transportation managers know that numerous industry nuances and accessorials can impact your freight costs – not just those listed above. Depending on your shipment, additional factors may influence your final invoiced amount.  

Rates:

• Are you using a flat rate or rate-per-mile (RPM) for each truckload (TL) linehaul?
• Which mileage plan are you using? Based on the destination and commodity, should you ship city-to-city, zip-to-zip, or zip-to-city?
• What are the going rates for fuel surcharges?
• Are you using public tariffs or linehaul base rates? Most shippers sending large freight opt for a customized base rate purchased from SMC3. Smaller shippers or one-off shipments might get more value from using public tariffs.

Accessorials:

• Would you rather pay a generic fee for accessorials or state in your contract that the carrier will waive some accessorial charges based on your shipment needs?
• Have you accurately accounted for liability coverage?

Shipment details:

• Does your contract reference a freight of all kinds (FAK) classification? For example, have you negotiated a deal that states all goods between freight classifications 50 and 100 will be charged at the rate for freight class 50?
• Are you dealing with additional fees for interline shipments? Do you need to account for customs clearance and potential storage fees?
• Are you shipping hazardous materials that require additional handling fees or a specific mileage plan that increases freight shipping rates?

These are the factors in a simple invoice. While accounting for these details on one or two shipments seems easy, imagine manually handling the costs for hundreds.

You’re juggling several different numbers, contract conditions, industry tariff standards, and more – all while trying to keep up with ever-shifting supply and demand. Anyone would get a headache trying to crunch these numbers or rely on old, rigid systems.

Luckily, freight shipment generates a lot of data. Each one of those list items above is a piece of data you can use to help calculate freight costs and inform the decisions you make to save money behind the scenes. To do so, you must collect, standardize, and centralize the data in a reliable system.

Why is managing freight costs hard?

Freight costs are complex. There are a lot of moving parts that can vary depending on unique contract terms or individual carrier operations. Managing all these costs at high volumes is highly inefficient by hand. However, it’s where software thrives.

Data crucial for you to gain a comprehensive understanding of your costs is trapped in complex contracts, countless documents, and various systems. Intelligent software pulls this data from documents and centralizes it.

Too often, transportation managers have to make important decisions based on incomplete data or bad data. A lack of high-quality data increases the chances of invoice errors slipping through the cracks, resulting in overpayments.

If you don’t have insight into freight costs down to the line-item, saving money is unlikely.

Software that leverages logistics AI to extract and store data transforms a few data points into a comprehensive set of high-quality data.

How can you use high-quality data to save on freight costs?

Create a central repository for data to improve decision quality

The rigid systems of legacy data collection (OCR, manual key entry, etc.) capture only a handful of data points and are error prone. These systems provide a glimpse into your freight costs but don’t give you the full picture.

Logistic AI is a more accurate and efficient way to get a complete view. It’s flexible enough to gather all the data points relevant to your network, leaving no stone unturned. It seamlessly extracts data and centralizes it. Loop is built on industry AI. Here’s how it ensures data accuracy:

• It centralizes shipment and invoice data by digitizing documents. Loop works with data from any source or format – CSV, JSON, JPG, JPEG, PDF, PNG, or from EDI, API, and email. It extracts relevant data.
• It cleans and standardizes messy data so you can make accurate data-driven decisions from across your network.
• It links all data from a shipment, with or without unique IDs based on shipment info.
• It enables granular cost analysis across shipment, lane, carriers, accessorials, & products.

Avoid overpaying on invoices

About 20% of invoices include costly errors. Whether it’s an invoice that doesn’t capture discounted carrier rates or honor credits due to previous overpayments, there’s a good chance you’re overpaying.

A great freight audit has the ability to dig into the granular details of an invoice. You get an in-depth look into each individual line item to ensure you’re not paying more than you should. When you spot an overpayment, it’s easy to locate its origin.

High-quality data and AI-driven audits illuminate these mistakes. It allows you to see if you’re paying the correct rates and accessorial fees that could result in you overpaying on invoices.

Pay invoices at the right time to maximize working capital

By always paying your invoices at term, you can hold onto your working capital longer.

Each carrier has individual payment terms that determine how and when you pay invoices. When you’re managing hundreds of invoices a month, ensuring you pay each at the right time is complicated.

With high-quality centralized data, there is never a question of the amount you should pay, how you should pay it, and when you should pay. It allows you to keep your working capital on hand for as long as possible.

Intelligent software like Loop tracks payment terms for each contract and ties it to an invoice, so you can rest assured that you’re maximizing your working capital.

Loop’s automated payments helps with:

• Managing payment orchestration: Automatically age invoices to due dates and approve payments to be sent via ACH or opt for manual review.
• Ensuring financial compliance: Make sure you’re paying the right amount and reducing your overall risk by avoiding paper checks.
• Avoiding late payments: Find invoice discrepancies and resolve them quickly to minimize the risk of late payment fees.
• Tracking payment status: Track the status of a payment and instantly recognize when a payment doesn’t go through.

Optimize your network for maximum efficiency

Once you have high-quality data and you’ve remedied overpaying on invoices, turn your attention to improving efficiency. Start with network optimization.  

Data invites better transportation insight and planning. Say your aggregate invoice data tells you that spot shipment fees are regularly popping up on your invoices. Now, you can pinpoint the source of those expenses and amend your plans to avoid pricey, one-off shipments.

Use your strong baseline of data to negotiate for better discounts and confidently pick the right carrier for each lane. Do you want to know if you would get more from your spending using a zip-to-zip mileage plan instead of a city-to-city one? Does one plan charge you a few more dollars per mile than another?

With greater network efficiency comes profitability. You’re able to make informed decisions to effectively cut back on spending and stop back-of-house leakage.

Accurately adjust to changes in the market

The cost of shipping freight is largely dependent on supply and demand. During the COVID-19 pandemic, shipping demand – and costs – spiked considerably. More recently, we’ve seen a decline in demand, creating an overcapacity in the market. As a result, freight rates have decreased.

These fluctuations happen relatively quickly and can be unpredictable. Even small-scale incidents like localized inclement weather or major shippers like YRC filing bankruptcy can disrupt the market.

Long-term, comprehensive data helps you accurately plan for supply chain shifts. When you've adequately prepared for such scenarios, you’re equipped to quickly shift gears with minimal disruption to your network.

Accurate data sets help build resilience to market changes and minimize risk.

How does Loop help?

Loop cleans up and centralizes your freight data to give you an accurate view of your spend.

In doing so, it unlocks premium data trapped in your shipping documents and spotlights opportunities for significant cost-savings.

This quality data is the foundation of accurate, big-picture insight into your freight costs, and Loop’s accuracy in automated audits and payments is unmatched.

Here’s how Loop does it:

• Cleans and centralizes data: Loop centralizes all necessary documentation, so you only have to reference one source to prove or disprove an invoice discrepancy. Loop’s robust data management shortens the paper trail.
• Digital payments: Using quick pay, Loop allows you to unlock revenue-driving channels that counteract costs. It automates 90-99% of freight payments.
• Flexible ingestion: Pull in data from PDFs, bills of lading (BOL), electronic data interchange (EDIs), photos, and other documents.
• Invoice mapping: Loop reliably matches unique rates per shipping lane for every leg of your freight’s shipment, even if there are several invoices, each with an individual ID.
• Invoice approval automation: Instantly approve invoices upon receipt to streamline efficiency by avoiding time-consuming manual workflows.

Loop’s flexibility allows it to stand up to the industry’s shifting demands. By providing complete, premium freight data, it’s able to give you a nuanced insight into your freight network.

Centralize data for a holistic view of freight costs

Calculating freight costs is like connecting pieces of a complex puzzle. Before Loop, those pieces of premium data were much harder to assemble.

Loop provides transportation managers with a valuable bird’s-eye view of everything happening across their freight spending, pulling in data from different kinds of documents, standardizing it, and producing key insights.

Contact Loop today and improve spend visibility to control costs and power profit.