Transportation Payment Benchmark Study: A Step Forward - INTTRA

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In partnership with

Transportation Payment Benchmark Study: A Step Forward Written By: James Blaeser Publisher

Published March 2011

Sponsored by:

Executive Summary American Shipper, in partnership with the Retail Industry Leaders Association (RILA—www.RILA.org), has successfully benchmarked nearly 300 payers and payees on their transportation invoice processing and payment practices and systems. This is the third and final report in a series designed to explore the life cycle of freight transportation spend in three segments—procurement, execution (ITMS) and settlement. Each report separates successful firms—or “winners”—from the average in an attempt to highlight best practices. All reports are made available for download at www.AmericanShipper.com. ii

EXECUTIVE SUMMARY

Still No Winners

American Shipper research studies aim to highlight actionable best practices by comparing top performers—or “winners”—against the average survey respondent. Other research studies show how the best-in-class are managing procurement, compliance and transportation functions among others. Like last year we found that it was not possible to discern winning payment practices that are widely applicable. Two factors are at work in this market, making it unique by comparison to other functions American Shipper has benchmarked. First, large companies with complex networks have considerably more freight invoices to handle, ensuring that their needs are materially different from their smaller counterparts. Best practices for one group do not necessarily apply to any other group. Second, payment remains a group or community-based exercise where companies are only as good as their weakest supply chain partner. It takes at least two parties to settle a transaction; sometimes more. It takes hundreds or thousands of partners operating on the same standards to create a streamlined, efficient payment market.

Transportation Payment | Benchmark Study: 2011

Payments to logistics service providers (LSPs) are moving to electronic means, such as ACH, at a noticeable rate. Considerably more transactions are settled electronically this year as compared to last. Progress in terms of the dollars transacted is a bit slower but evident nonetheless suggesting that some companies are still hesitant to electronically transfer large sums of money. It is difficult to argue that the transportation industry is still behind the curve when it comes to conducting basic online transactions. However, to ensure progress, LSPs and their customers must move payments to an electronic environment. The benefits of e-banking are clear and will become impossible to ignore as the business community at large moves in this direction.

Managing Disputes

Last year’s results exposed dispute resolution as a major point of failure in the invoice processing and payment function. One quarter of study respondents employ a workflow tool to manage disputes. Figures 7 and 8 clearly show payers continue to wrestle with this stubborn, manual process. Consider that the average survey respondent involves at least two departments (2.1 departments to be exact) in the dispute resolution process. It is easy to understand how this can become quite complex particularly for large companies that involve more departments. This year’s survey looked a bit harder at this aspect of the payment process, specifically the availability and use of workflow applications.

Transportation Payment | Benchmark Study: 2011

iii

EXECUTIVE SUMMARY

Progress... But Not Enough

Auditing

Survey results show that the average respondent audits 77 percent of its invoices received from LSPs. Only 48 percent of the respondents review every invoice. The other 52 percent who claim they are auditing are really doing themselves a disservice. An incomplete audit is not an effective audit. Three quarters of respondents claim the invoices they receive from LSPs are accurate 90 percent of the time or more. This could be considered better than what was expected which is a positive, but compared against other industries, such as utilities, this is very poor. Consider for example the problems that would arise if your home electric bill was wrong 10 percent of the time or more.

iv

EXECUTIVE SUMMARY

Auditing 100 percent of invoices received is only part of the story. Payers should be auditing all the variables in their bills for inaccuracies. Study results show that payers are very focused on the obvious issues, such as rates, accessorials, duplicate invoices, and fuel surcharge. Less obvious trouble areas, such as Inco terms, taxes, and currency conversions, are overlooked by most payers. The Market for Systems

Large companies, presumably those with complex supply chains, are far more likely to leverage advanced payment systems or outsource the process in part or altogether. Small and medium companies, with lower volumes to manage, tend to get by with a manual process. Large companies see strategic purpose for payment systems. Both visibility of data (85 percent) and costs (70 percent) rank as top drivers to technology adoption. Small and medium-size firms on the other hand use these tactically to automate accounting practices (85 percent) and save costs (85 percent). The scale and complexity of a company’s supply chain will dictate the level and type of benefit it sees from a systems-based approach.

Transportation Payment | Benchmark Study: 2011

Table of Contents Executive Summary.......................................................................................................................................................... ii Section I: Introduction...................................................................................................................................................... 3 > Methodology............................................................................................................................................................. 3 > Winners..................................................................................................................................................................... 3 > Terminology.............................................................................................................................................................. 4 > Hypotheses............................................................................................................................................................... 4 Section II: Demographics................................................................................................................................................. 5 Section III: The “State” of Freight Payment.................................................................................................................... 8

1

Section IV: Payments...................................................................................................................................................... 12

Section VI: Auditing......................................................................................................................................................... 15 Section VII: Technology.................................................................................................................................................. 18 Section VIII: Payees......................................................................................................................................................... 23 Section IX: Take Aways & Best Practices.................................................................................................................... 26 Appendix A: About Our Sponsors............................................................................................................................... 27 > Freightgate ............................................................................................................................................................. 27 > INTTRA................................................................................................................................................................... 27 > US Bank Transportation Solutions......................................................................................................................... 27 Appendix B: About Our Partner................................................................................................................................... 28 > Retail Industry Leaders Association (RILA) ............................................................................................................ 28

Transportation Payment | Benchmark Study: 2011

TA B L E O F C O N T E N T S

Section V: Dispute Resolution ....................................................................................................................................... 14

Figures F I G U R E 1 : Industry Segments.......................................................................................................................................5 F I G U R E 2 : Company Size..............................................................................................................................................5 F I G U R E 3 : Modes Managed..........................................................................................................................................6 F I G U R E 4 : IT Spend as Percent of Revenue.................................................................................................................6 F I G U R E 5 : Job Titles......................................................................................................................................................7 F I G U R E 6 : Overall Satisfaction—Automated vs. Manual................................................................................................ 8 F I G U R E 7 : International Payment Process...................................................................................................................... 9 2

F I G U R E 8 : Domestic Payment Process........................................................................................................................... 9 F I G U R E 9 : Central vs. Regional Payment Processes.................................................................................................... 10

FIGURES

F I G U R E 1 0 : Invoices Processed per Year, per FTE ..................................................................................................... 11 F I G U R E 1 1 : Payment With Checks—2010 vs. 2011.................................................................................................... 12 F I G U R E 1 2 : Average Timeframe to Pay........................................................................................................................ 13 F I G U R E 1 3 : Does Your Company Employ a Workflow Tool to Manage Dispute Resolutions?....................................... 14 F I G U R E 1 4 : Auditing Practices—2011 vs. 2010.........................................................................................................15 F I G U R E 1 5 : Accuracy of Invoices Based on Audit.....................................................................................................16 F I G U R E 1 6 : What Do You Audit?................................................................................................................................17 F I G U R E 1 7 : Current Delivery Model...........................................................................................................................18 F I G U R E 1 8 : Plans to Buy/Replace/Upgrade—Company Size ..................................................................................19 F I G U R E 1 9 : Inhibitors to Adoption ............................................................................................................................20 F I G U R E 2 0 : Drivers to Adoption.................................................................................................................................21 F I G U R E 2 1 : Future Delivery Model.............................................................................................................................22 F I G U R E 2 2 : Payee Process.......................................................................................................................................... 23 F I G U R E 2 3 : Timeframe to Generate an Invoice..........................................................................................................24 F I G U R E 2 4 : Cost of Generating an Invoice................................................................................................................24 F I G U R E 2 5 : Timeframe to Respond to Disputes........................................................................................................25 F I G U R E 2 6 : Means to Respond to Disputes..............................................................................................................25

Transportation Payment | Benchmark Study: 2011

Section I: Introduction Welcome to American Shipper’s second annual study of transportation payment practices and technologies. These reports are designed to provide readers with a clear picture of the state of the transportation industry, emerging trends and best practices. METHODOLOGY

American Shipper, in partnership with the Retail Industry Leaders Association (RILA), has successfully benchmarked nearly 300 payers and payees on their transportation invoice processing and payment practices and systems. Participants completed a 45-question survey covering all modes of international and domestic freight transportation.

WINNERS

American Shipper research studies aim to highlight actionable best practices by comparing top performers—or “winners”—against the average survey respondent. Other research studies show how the best-in-class are managing procurement, compliance and transportation functions among others. Like last year we found that it was not possible to discern winning payment practices that are widely applicable. Two factors are at work in this market, making it unique by comparison to other functions American Shipper has benchmarked. First, large companies with complex networks have considerably more freight invoices to handle, ensuring that their needs are materially different from their smaller counterparts. Best practices for one group do not necessarily apply to any other group. Second, payment remains a group or community-based exercise where companies are only as good as their weakest supply chain partner. It takes at least two parties to settle a transaction; sometimes more. It takes hundreds or thousands of partners operating on the same standards to create a streamlined, efficient payment market.

Transportation Payment | Benchmark Study: 2011

3

S ection I : I ntroduction

This is the third and final report in a series designed to explore the life cycle of freight transportation spend in three segments—procurement, execution (ITMS) and settlement. Each report separates successful firms—or “winners”—from the average in an attempt to highlight best practices. All reports are made available for download at www.AmericanShipper.com.

TERMINOLOGY

Payer/Payee In the context of this study payers are shippers and intermediaries who pay for transportation services. Payees (also known as billers) are carriers or intermediaries who collect money for their services. LSP/3PL Logistics service providers are companies that charge a fee for supply chain services including but not limited to transportation, distribution, warehousing, customs services. A third party logistics provider (3PL) is a non asset-based logistics service provider (LSP). Automated/Manual

S ection I : I ntroduction

4

Many of the data points illustrated within these pages break down the differences between companies that “automate” international transportation management versus those that manually handle this process. In this context, “automated” companies employ at least one application to support their transportation invoice processing and payment function. “Automated” does not mean human interaction has been entirely eliminated. Likewise, “manual” does not mean these firms do not use e-mail, fax and other technologies. There is an assumption that basic computing power is ubiquitous in the logistics management field. HYPOTHESES

Each American Shipper study works against a set of assumptions that we seek to prove or disprove through the benchmarking process. For the most part these study results were in line with expectations. Assumption 1—The gap (some call it a chasm ) between the level of sophistication of international and domestic transportation payment would remain unchanged. Reality—Figures 7 and 8 illustrate a story similar to last year’s report. Domestic transportation is on the whole more automated and streamlined. Assumption 2—Study results will show progress towards improving the payment process, particularly as it pertains to electronic banking. Reality: Readers are reporting (see figure 11) a shift from hard copy checks to ACH and other forms of electronic banking. Assumption 3—Auditing processes are prevalent but not thorough. Reality—Nearly everyone claims to audit invoices at some point or another (see figure 15), but less than half audit every invoice and the review is generally incomplete (see figure 17).

Transportation Payment | Benchmark Study: 2011

Section II: Demographics Data points illustrated in this study are the aggregate of responses from close to 300 qualified participants. This includes 3PLs, carriers, and shippers of all kinds. Retail/wholesale (31 percent), 3PLs (22 percent) and manufacturing (process 17 percent, discrete 13 percent) make up a the majority of survey participants. Nearly half of the companies participating in this survey are greater than $1 billion in annual sales. Many of the data points in the study compare these large firms against the remaining small and medium-size businesses with less than $1 billion in annual sales. 5

Industry Segments

3%

3% 1% Retail/Wholesale

9%

3PL/Intermediary (includes Forwarders, NVOCC, OTI, Brokers) 31%

Process manufacturing

13%

Discrete manufacturing International Carrier (includes Ocean, Air, Cross-border) Raw materials/Commodities

17%

22%

Domestic Carrier (includes TL, LTL, Rail) Engineering/Construction 286 total respondents

FIGURE 2:

Company Size 59%

60%

Less than $100 million 49%

49%

50%

$100 million to $1 billion Greater than $1billion

40% 32% 26%

30% 20%

29% 22%

19% 15%

10% 0%

Average

Automated

Manual

172 total respondents

Transportation Payment | Benchmark Study: 2011

S ection I I : D emograp h ics

FIGURE 1:

American Shipper readers manage multiple—in some cases, all—modes of international and domestic transportation. Therein lays the biggest challenge in effectively managing the freight payment function. Each mode has distinctly different payment standards and protocols. Roughly three quarters of survey respondents spend between 1 percent and 5 percent of annual revenue on information technology. Eleven percent is particularly aggressive spending more than 5 percent.

FIGURE 3:

6

Modes Managed

LTL

92%

Truckload

92%

Parcel/package Other

87%

S ection I I : D emograp h ics

Airfreight

86%

FCL Ocean

83%

LCL Ocean

75%

Rail/intermodal

65%

Ocean transport (other, non-containerized)

41%

0%

20%

40%

60%

80%

100% 139 total respondents

FIGURE 4:

IT Spend as Percent of Revenue 2% 11%

14%

None Less than 1 percent 1 to 3 percent 3 to 5 percent

33% 40%

More than 5 percent

139 total respondents

Transportation Payment | Benchmark Study: 2011

More than 70 percent of survey respondents represent middle management—30 percent directors and 42 percent manager level. This benchmarking exercise offered a parallel questionnaire for those respondents who are responsible for issuing invoices and collecting payments. This group of “payees” includes all carriers and those 3PLs who qualified. This segment of the survey has 103 total participants. Section 8 of this document outlines those results.

Job Titles 1% 3% 9%

C-Level (CEO,CIO,CFO, etc)

14%

7

Executive (SVP, VP, GM, etc.) Director Manager 42%

30%

Staff Other, please specify

155 total respondents

Transportation Payment | Benchmark Study: 2011

S ection I I : D emograp h ics

FIGURE 5:

Section III: The “State” of Freight Payment Overall the state of freight payment in 2011 is not all that different from 2010, but there are a few key areas where the market has progressed. Satisfaction levels remain roughly the same as 2010. Respondents, particularly those with an automated or systems-based approach, feel confident in their ability to process and pay freight invoices efficiently.

FIGURE 6:

Overall Satisfaction—Automated vs. Manual 48%

50%

8

Automated Manual

39%

40%

33%

31%

S ection I I I : T h e " S tate " of F reig h t P ayment

30%

20%

10%

20%

18%

8% 2%

0%

Excellent

Good

Fair

Poor

0%

Very poor

The gap between international and domestic processes remains, but again it is not as profound as one would assume. Historically, the domestic market was faster to adopt an electronic settlement environment, because it is less complex than international. Domestic shipments are executed between parties using the same language and currency system eliminating major variables. In addition, domestic transportation fee structures, particularly surcharges, are simpler than those used by ocean carriers. The domestic market is ahead in terms of automating basic functionality like invoice receipt and validation. Dispute resolution remains a sticking point for both markets.

Transportation Payment | Benchmark Study: 2011

2% 189 total respondents

Compared to 2010 results, the overall blend of automated, manual and outsourced activities is remarkably similar, with the exception of the international freight payment segment. It appears the market is moving away from manual payment processing in favor of electronic means, such as ACH.

FIGURE 7:

International Payment Process

100% 17%

29%

25%

12%

10%

11%

29%

19%

Outsourced Automated

49%

77%

20%

22%

Manual

9

60% 55%

60%

56%

58%

40% 32% 20%

0% Invoice Receipt

FIGURE 8:

100%

80%

Validation

Dispute Resolution

Approval

Payment

Audit

14%

14%

20%

23%

17%

38%

Domestic Payment Process

19%

45%

20%

Automated 52%

37%

Outsourced

Manual 29%

69% 60% 48%

48%

43%

40% 36%

28% 20%

0%

Invoice Receipt

Validation

Dispute Resolution

Approval

Payment

Audit

Transportation Payment | Benchmark Study: 2011

S ection I I I : T h e " S tate " of F reig h t P ayment

80%

19%

Time and again centralization of processes proves to be an effective practice allowing companies to leverage their scale. While it’s remarkable that the majority of companies subscribe to this best practice across their payment process, it does raise questions about the other 30 percent.

FIGURE 9:

100%

Central vs. Regional Payment Processes

5%

5%

5%

4%

13%

11%

12%

12%

14%

16%

17%

4% 5% 12%

80%

10

13%

79%

69%

71%

Invoice Receipt

Validation

S ection I I I : T h e " S tate " of F reig h t P ayment

60%

68%

67%

Dispute Resolution

Approval

7% 11%

Regional

69%

Central

20%

0%

Transportation Payment | Benchmark Study: 2011

Mix

13%

40%

Payment

N/A

Audit

The gap between large companies (more than $1 billion in sales per annum) and their small and medium-size counterparts (less than $1 billion in sales) is astounding when measured by the number of freight invoices processed per full-time equivalent employee (FTE) per year. However, the enormous gap in productivity levels is a product of the size and complexity of the company’s supply chain and the number of invoices it generates. Large companies need to automate just to keep up with the deluge of bills and, as a result, see considerably higher productivity levels among other benefits. Small and medium-size companies can get their hands around their operation with less sophisticated means.

FIGURE 10:

Invoices Processed per Year, per FTE 11

725

International Invoices 18,560

Study Average

4,968

71,205 Large Cos

6,780 0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000 158 total respondents

Transportation Payment | Benchmark Study: 2011

S ection I I I : T h e " S tate " of F reig h t P ayment

Domestic Invoices

3,622

Medium & Small cos

Section IV: Payments Payments to logistics service providers (LSPs) are moving to electronic means, such as ACH, at a noticeable rate. Considerably more transactions are settled electronically this year as compared to last. Progress in terms of the dollars transacted is a bit slower but evident nonetheless suggesting that some companies are still hesitant to electronically transfer large sums of money.

S ection I V : P ayments

12

It is difficult to argue that the transportation industry is still behind the curve when it comes to conducting basic online transactions. However, to ensure progress, LSPs and their customers must move payments to an electronic environment. The benefits of e-banking are clear and will become impossible to ignore as the business community at large moves in this direction.

FIGURE 11:

Payment With Checks—2010 vs. 2011

In terms of total dollars transacted

In terms of total transactions

100% 36%

41%

31%

45%

ACH/Other Checks

80%

60%

69% 64% 59%

55%

40%

20%

0% 2010

2011

Transportation Payment | Benchmark Study: 2011

2010

2011

The terms around the timeframe to remit payment to LSPs remain roughly the same as 2010. Like last year, retailers and 3PLs are paying their bills noticeably faster than manufacturers. Payment timeframes are specified by contract, but that does not mean those terms are always followed. In an environment where “cash is king,” it is surprising to see that payment timeframes have not been pushed further out.

FIGURE 12:

Average Timeframe to Pay

60%

Retailers 51%

50%

50%

Manufacturing

40%

35%

35%

30%

3PL/Intermediary

36%

25%

22%

0%

8% 9%

Less than 15 days

5% 15 - 30 days

30 - 45 days

4%

0%

1%

45 - 60 days

60 - 90 days

0%

185 total respondents

Transportation Payment | Benchmark Study: 2011

S ection I V : P ayments

17%

20% 10%

13

Section V: Dispute Resolution Last year’s results exposed dispute resolution as a major point of failure in the invoice processing and payment function. Figures 7 and 8 clearly show payers continue to wrestle with this stubborn, manual process. Consider that the average survey respondent involves at least two departments (2.1 departments to be exact) in the dispute resolution process. It is easy to understand how this can become quite complex particularly for large companies that involve more departments.

S ection V : D ispute R esolution

14

This year’s survey looked a bit harder at this aspect of the payment process, specifically the availability and use of workflow applications. These applications manage tasks such as “automatic routing, partially automated processing and integration between different functional software applications and hardware systems that contribute to the value-addition process underlying the workflow.”1

1 Source: www.wikipedia.org, Article: Workflow applications.

One quarter of study respondents employ a workflow tool to manage disputes. 3PLs are the most likely to have such technology which makes sense. 3PLs tend to have more supply chain technology in general.

FIGURE 13:

Does Your Company Employ a Workflow Tool to Manage Dispute Resolutions?

100%

Yes 81%

80%

No

73% 64%

60% 36%

40% 20% 0%

27% 19%

Retail

Manufacturing

Transportation Payment | Benchmark Study: 2011

3PL

186 total respondents

Section VI: Auditing Results from the 2010 benchmark study highlighted auditing as another troublesome issue for payers. This year’s survey included more questions related to the nature and depth of the auditing process. Survey results show that the average respondent audits 77 percent of its invoices received from LSPs. Only 48 percent of the respondents review every invoice. The other 52 percent who claim they are auditing are really doing themselves a disservice. An incomplete audit is not an effective audit. Auditing practices did not change drastically year-over-year. It appears some payers have chosen to audit prior to payment, instead of both before and after. Interestingly payers managing this process in a manual or spreadsheet-based manner were only slightly less likely to conduct an audit in some fashion, with just 6 percent reporting they do not audit at all. Auditing remains ubiquitous among payers, but how effective is it?

Auditing Practices—2011 vs. 2010

60%

2011 50%

47%

50% 42%

2010

39%

40% 30% 20% 8%

10% 0%

8% 3%

Prior to payment

Post payment

Both

None

3% 183 total respondents

Transportation Payment | Benchmark Study: 2011

S ection V I : A uditing

FIGURE 14:

15

Three quarters of respondents claim the invoices they receive from LSPs are accurate 90 percent of the time or more. This could be considered better than what was expected which is a positive, but compared against other industries, such as utilities, this is very poor. Consider for example the problems that would arise if your home electric bill was wrong 10 percent of the time or more. Bear in mind this is a multimodal view of the issue and some modes are worse than others. It is likely that industries with more complex rate schemes (such as ocean transport) are worse while those with more straight forward pricing rate higher in terms of accuracy.

FIGURE 15:

Accuracy of Invoices Based on Audit

16 2%

S ection V I : A uditing

6%

95% or more 90–95%

16% 41%

80–89% 70–79% Less than 70%

34% 74 total respondents

Transportation Payment | Benchmark Study: 2011

Auditing 100 percent of invoices received is only part of the story. Payers should be auditing all the variables in their bills for inaccuracies. Study results show that payers are very focused on the obvious issues, such as rates, accessorials, duplicate invoices, and fuel surcharge. Less obvious trouble areas, such as Inco terms, taxes, and currency conversions, are overlooked by most payers.

What Do You Audit?

FIGURE 16:

90% 93% 99%

Accessorials (rate, validity, etc)

100% 94% 90%

Transportation rates

3PL/Intermediary Manufacturing Retail

17

75% S ection V I : A uditing

88% 89%

Duplicate invoices

80% 85% 82%

Fuel surcharge 35% 34% 31%

Incoterms

25% 33%

Taxes

25% 35% 39%

Currency conversion 24% Other, please specify

0%

10% 6% 7% 20%

40%

60%

80%

100%

175 total respondents

Transportation Payment | Benchmark Study: 2011

Section VII: Technology Large companies, presumably those with complex supply chains, are far more likely to leverage advanced payment systems or outsource the process in part or altogether. Small and medium companies, with lower volumes to manage, get by with a manual process.

FIGURE 17:

Current Delivery Model

Small Companies

6% A mix or hybrid of all of these

S ection V I I : T ec h nology

18

24%

Medium Companies

29%

Large Companies

18%

Outsourced to another service provider

10%

Application Based (including TMS or ERP-based)

10%

25% 12% 22% 65%

Manual

47% 16% 0%

Outsourced to 3PLs

8% 6% 0%

None of these

0% 3%

0%

10%

20%

30%

40%

50%

60%

70%

80% 163 total respondents

Transportation Payment | Benchmark Study: 2011

Overall market activity remains unchanged from 2010, roughly 24 percent of the market has budget to address payment technology in the next 24 months. What’s more interesting is that nearly all of those with budget are large companies. There is a little or no market activity among the small and medium-size company segments.

FIGURE 18:

Plans to Buy/Replace/Upgrade—Company Size

100%

Large Companies

89%

Medium Companies

80%

74% Small Companies

60%

59%

19

25% 20% 4%

6%

9% 10%

7% 0%

12% 6%

0% No plans to buy or replace

Budgeted within Budgeted within On our company’s the next 12 months the next 12–24 months 5-year plan

163 total respondents

Transportation Payment | Benchmark Study: 2011

S ection V I I : T ec h nology

40%

Companies that are not in the market for payment systems cite the status-quo as the largest inhibitor. As was demonstrated in figure 6, these respondents on the whole believe they are doing a good job managing this process. Many small and medium-size companies also pointed to lack of ROI as a key inhibitor, which could make sense for those with low volumes and simple supply chains.

FIGURE 19:

Inhibitors to Adoption

60%

Current system meets our needs

S ection V I I : T ec h nology

20

9% 46%

16%

13%

Large Companies

5% 12% 0% 3% 7% 7% 5% 5%

None of these

Available systems do not provide the functionality we require

Medium Companies

24%

Organizational resistance to change We’re in the process of upgrading or replacing our system

Small Companies

7%

We recently upgraded or replaced our system

0% 0% 2% 13%

Lacks return on investment

22% 2%

0%

10%

20%

30%

40%

50%

60% 108 total respondents

Transportation Payment | Benchmark Study: 2011

Large companies see strategic purpose for payment systems. Both visibility of data (85 percent) and costs (70 percent) rank as top drivers to technology adoption. Small and medium-size firms on the other hand use these tactically to automate accounting practices (85 percent) and save costs (85 percent). The scale and complexity of a company’s supply chain will dictate the level and type of benefit it sees from a systems-based approach.

Drivers to Adoption

85% 77% 74%

Improve operational efficiency

Large Companies

21

62%

Visibility to costs

70% 85%

Automate accounting practices

59% 46%

Carrier performance/ compliance enforcement

59% 85%

Cost savings

56% 31%

Integration, with vendors and partners

52% 54%

Integration, internal

41% 38%

Bring systems in line with industry standards

30% 38%

Cash flow benefits

22% 8%

Expand my offerings/Increase operational scale/capacity Other, please specify

Small & Medium Companies

77%

Visibility to data

S ection V I I : T ec h nology

FIGURE 20:

15% 0%

0%

15% 20%

40%

60%

80%

100% 55 total respondents

Transportation Payment | Benchmark Study: 2011

More than 60 percent of those companies in the market for a new or upgraded system will look to an application-based approach (31 percent) or hybrid (31 percent). About 33 percent of respondents will outsource this function to a third-party provider.

FIGURE 21:

Future Delivery Model 0%

6%

4%

Application Based (includes TMS or ERP) 31%

A mix or hybrid of all of these Outsourced to another service provider

29%

None of these

22

Outsourced to 3PL/Intermediary Manual

S ection V I I : T ec h nology

31% 55 total respondents

Transportation Payment | Benchmark Study: 2011

Section VIII: Payees Carriers servicing both U.S. domestic and international markets and 3PLs who qualified were asked a series of questions about their invoicing and collections process. The payee’s process looks very similar to what was reported in 2010. The front end of the process is heavily automated and the dispute resolution segment causes a noticeable disruption. In 2011, payees show an increase in the amount of invoices presented and paid electronically. Dispute resolution has remained an issue, while auditing practices stayed the same.

FIGURE 22:

23

2% 4% 75%

80%

80%

6%

8%

12%

57%

12%

Outsourced

30%

Electronic/ Automated

82%

Manual 60% 58% 40% 35% 20%

22%

18%

0% Invoice Generation

Invoice Presentation/ Delivery

Dispute Resolution

Receipt of Payment

Audit 103 total respondents

Transportation Payment | Benchmark Study: 2011

S ection V I I I : P ayees

100%

Payee Process

Nearly all invoices are generated within five days (a business week) of the completion of transportation services. More than 40 percent of invoices are generated within a day. This is clearly an area where technology is allowing LSPs to cut down their receivables cycle. Almost three-quarters of LSPs spend less than $20 per invoice. Electronic creation and presentation means will help limit these costs and streamline the process.

FIGURE 23:

Timeframe to Generate an Invoice

10%

24

One day

10% 41%

Two days

S ection V I I I : P ayees

Three days 18%

Four days A week or more 22% 103 total respondents

FIGURE 24:

Cost of Generating an Invoice

4% 4%

4%

4%

Less than $10 $10–$20 $20–$30

24%

$30–$40 58%

$40–$50 More than $50

103 total respondents

Transportation Payment | Benchmark Study: 2011

Most LSPs report that it takes them several days to respond to disputes. This does not sound bad, but consider that this is one step of what is often a much larger process. Extra days here and there quickly add up. It is notable that 46 percent of payees have a workflow tool to manage disputes. This is nearly double the amount of payers. The telephone still dominates the dispute resolution process with 82 percent of respondents citing it as a means to respond to disputes.

FIGURE 25:

Timeframe to Respond to Disputes

13%

25

15% Less than one day

S ection V I I I : P ayees

One day

21%

Two to five days A week or more

51%

103 total respondents

FIGURE 26:

Means to Respond to Disputes

100% 82% 80% 56%

60%

44% 40%

28%

26%

20% 4% 0%

Phone

Electronic message (i.e. EDI)

Mail

Fax

Web-based portal with workflow tools

N/A 103 total respondents

Transportation Payment | Benchmark Study: 2011

Section IX: Take Aways & Best Practices • Freight payment remains a community-based exercise. A lack of universal, multimodal standards creates a large obstacle for payers and payees attempting to streamline the process. • Companies are moving towards an electronic environment. The progress may be slow, late, and at times frustrating, but the good news is that it’s happening. • Number and complexity of transactions dictates the need for technology and the nature of its application—tactical vs. strategic. Large companies, in particular, have much to gain from systemsbased approaches in terms of visibility to costs, dates and cash flow.

S ection I X : T a k e A ways & B est P ractices

26

• Dispute resolution remains problematic for the majority of payers and payees, however workflow tools may offer an opportunity to streamline this process. • On the surface, auditing is ubiquitous, yet most audits lack depth and completeness. Payers should be auditing every invoice, not just a sample. And every invoice should be reviewed for accuracy of both the obvious and mode-subtle details.

Transportation Payment | Benchmark Study: 2011

Appendix A: About Our Sponsors F R E I G H T G AT E

Freightgate & PayCargo deliver the only International Automated ‘e invoice’ Validation & Settlement solution.

INTTRA

INTTRA is a leading global provider of e-commerce solutions to the ocean freight industry. INTTRA professionals work with over 30 leading carriers and their customers, to streamline and standardize their shipping processes worldwide through a network of more than 25,000 corporate locations. Over 400,000 container orders are initiated on the INTTRA platform each week, representing more than 12 percent of global ocean container trade. For further information, visit www.inttra.com.

U S B A N K T R A N S P O R TAT I O N S O L U T I O N S

U.S. Bank, a leader in corporate payments, is the world’s leading freight payment provider. U.S. Bank offers comprehensive global invoice processing and payment via an integrated business-to-business payment network. Integrated supply chain finance allows carriers to get paid sooner, while shippers pay later. Robust pre-pay audits on 100% of invoices ensure accuracy. On-line, real-time, collaborative exception resolution further reduces cost and waste. The resulting data provides unmatched visibility to cost and performance to optimize your supply chain and manage your business. Improve cash flow, eliminate paper invoices and checks, and streamline your process today. For more information, visit: www.usbpayment.com

Transportation Payment | Benchmark Study: 2011

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A ppendix A : A bout O ur S ponsors

Freightgate is an industry leading, internet based SCM solution provider for global shippers, 3PL’s, forwarders and carriers. Our solutions enable effective management of our customers’ worldwide supply chains, are low cost and easy to deploy on a global basis. Using our secure cloud based Software-as-a-Service (SaaS), we host our partners’ confidential supply chain data. The trust our customers have shown in Freightgate permits them to concentrate on their core business competency while our solutions increase the effectiveness of Transportation Procurement, Rate Management, Execution, Visibility and Settlement. To learn more, visit www.freightgate.com.

Appendix B: About Our Partner R E TA I L I N D U S T R Y L E A D E R S A S S O C I AT I O N ( R I L A )

RILA is the trade association of the world’s largest and most innovative retail companies. RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs and operate more than 100,000 stores, manufacturing facilities and distribution centers domestically and abroad. For additional information visit www.rila.org

A ppendix B : A bout O ur P artner

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Transportation Payment | Benchmark Study: 2011

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Transportation Payment | Benchmark Study: 2011