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Transportation Payment Benchmark Study: Making Dollars and Sense James Blaeser, Publisher American Shipper Eric Johnson, Research Director American Shipper
Published March 2013 Sponsored by:
Executive Summary American Shipper, in partnership with the Council of Supply Chain Management Professionals (CSCMP) and the Retail Industry Leaders Association (RILA), has benchmarked more than 250 payers (shippers and third party logistics providers) and payees (3PLs and carriers) on their domestic and international transportation invoice and payment practices for all modes. This report is the final in our series that explores the lifecycle of freight transportation spending. This year’s report ventured in new directions from previous reports in an attempt to ascertain the role of the finance department in the freight payment process, and the usefulness of freight payment data. However, the nuts and bolts of freight payment, particularly the auditing process, remain a central part of this research.
Executive Summary
ii
Functions, costs and payment timeframe
The core functions that make up domestic and international freight payment changed little from 2011 to 2012, as did the cost for shippers to pay invoices. So did the means by which companies pay their bills. What did change this year is that shippers, particularly larger shippers, are paying their bills later than in years prior. The number of respondents paying their invoices 30 to 45 days after invoice date increased by roughly half, while the number of those who pay in less than 30 days slipped noticeably. This year’s report asked shippers about the constituent costs that make up their freight invoice costs and found that those who handled the process in-house largely included the cost of labor associated with the accounts payable process, while those who outsource tend to look strictly at the cost they pay their service provider per invoice. Large shippers remain more eager to buy a new freight payment system or upgrade their current system than smaller shippers—that makes sense since many of the benefits of freight payment are predicated on scale, with the larger vendors aiming their solutions more squarely at shippers with big volumes.
Transportation Payment | Benchmark Study 2013
Auditing practices
More shippers and 3PLs have gotten the message that this report has trumpeted the past three years—that effective auditing includes multiple layers of audits. Yet there remains room for improvement in terms of auditing for 15 crucial elements in each invoice. Only half of the market actually reviews each invoice in some capacity, while even fewer review non-obvious aspects, such as rates, assessorial costs, and fuel surcharges. Large shippers, as one would expect, tend to review the more international components of an invoice during the auditing process. That’s not surprising given the global nature of most major shippers’ supply chains.
Payment data and the role of finance
This year’s report focuses not just on how shippers pay and audit their freight bills, but also whether they use that payment data to feed back into the procurement and optimization processes. Large shippers were more likely to use that data, and they were also more likely to use outside systems or third party vendors to help generate reports using that data. This research also looks at the interplay between the logistics operations and finance departments and how that affects the freight pay process. The results clearly show the finance department is well entrenched in today’s logistics group. Less than 20 percent of survey participants report they have no overlap between these departments, yet the logistics side still tends to have a larger say in what freight payment system is adopted. There was no consensus about whether it was important that a freight pay vendor is a bank, while larger shippers are slightly more amenable to situations where their vendor can stretch their payables, or allow their vendor to hold their cash. This report also found that while global shippers have broader international payment requirements, their domestic processes still tend to be much more sophisticated than their international processes.
Transportation Payment | Benchmark Study 2013
iii
Executive Summary
Somewhat discouraging is that a large proportion of respondents failed to see consistent improvement in their auditing processes. Many saw initial improvement that leveled off after a year, while fewer are seeing continual improvement.
Table of Contents Section I: Introduction..........................................................................................................................................................4 > Methodology.................................................................................................................................................................4 > Terminology...................................................................................................................................................................4 > Hypothesis.....................................................................................................................................................................5 Section 3: State of Freight Payment....................................................................................................................................7 Section 4: Auditing Practices.............................................................................................................................................10 Section 5: Freight Payment Services, Systems and Data................................................................................................14 2
Section 6: Finance’s Role in Freight Payment..................................................................................................................18 Section 7: International Payments .....................................................................................................................................22
Ta b l e o f C o n t e n t s
Section 8: Takeaways & Best Practices.............................................................................................................................23 Appendix A: About Our Partners.......................................................................................................................................24 > Council of Supply Chain Management Professionals.................................................................................................24 > Retail Industry Leaders Association (RILA) ................................................................................................................24 Appendix B: About Our Sponsors......................................................................................................................................25 > BravoSolution..............................................................................................................................................................25 > INTTRA........................................................................................................................................................................25 > SAP..............................................................................................................................................................................26 > U.S. Bank Transportation Solutions............................................................................................................................26 Appendix C: About American Shipper Research.............................................................................................................27
Transportation Payment | Benchmark Study 2013
Figures Section I: Introduction..........................................................................................................................................................4 Methodology.....................................................................................................................................................................4 Terminology......................................................................................................................................................................4 Hypothesis........................................................................................................................................................................5 Section 3: State of Freight Payment....................................................................................................................................7 Section 4: Auditing Practices.............................................................................................................................................10 Section 5: Freight Payment Services, Systems and Data...............................................................................................................................................................14
3
Section 6: Finance’s Role in Freight Payment..................................................................................................................18
Section 8: Takeaways & Best Practices.............................................................................................................................23 Appendix A: About Our Partners.......................................................................................................................................24 Council of Supply Chain Management Professionals..................................................................................................................................................................24 Retail Industry Leaders Association (RILA) ....................................................................................................................24 Appendix B: About Our Sponsors......................................................................................................................................25 BravoSolution.................................................................................................................................................................25 INTTRA...........................................................................................................................................................................25 Appendix B: About Our Sponsors......................................................................................................................................26 SAP.................................................................................................................................................................................26 U.S. Bank Transportation Solutions...............................................................................................................................26 Appendix C: About American Shipper Research...............................................................................................................27
Transportation Payment | Benchmark Study 2013
F i g u r es
Section 7: International Payments .....................................................................................................................................22
Section I: Introduction Welcome to American Shipper’s fourth annual study of transportation payment processes, policies, practices and technology. These reports are designed to provide readers with a clear picture of the state of the transportation industry, emerging trends, and best practices.
4
Avid readers will notice that this year’s report is a little different than what we have published in previous years. There are many key themes and questions that remain a central part of this research, such as auditing practices. However, some mainstay segments of our previous studies were cut in favor of emerging—and potentially more interesting—subjects such as the role of the finance department in the freight payment process, and the usefulness of freight payment data. Further, in the interest of providing a concise and focused resource, this year’s report addresses the payer community exclusively.
Section I: Introduction
M E T H ODOLOGY
American Shipper, in partnership with the Council of Supply Chain Management Professionals (CSCMP) and Retail Industry Leaders Association (RILA), has successfully benchmarked more than 250 payers (shippers and 3PLs) on their transportation invoice processing and payment practices and systems. Participants completed a 28-question survey covering all modes of international and domestic freight transportation. This is the final report in a series designed to explore the lifecycle of freight transportation spend in three segments—procurement, execution (ITMS), and settlement. Each report seeks to highlight best practices that readers can apply to their own businesses. All reports are made available for download at www.AmericanShipper.com/Research. T E RMINOLOGY
The following report includes many important terms that readers need to be familiar with in order to fully grasp the concepts and suggestions. These include: Payer/Payee
In the context of this study, payers are shippers and intermediaries who pay for transportation services, while payees (also known as billers) are carriers or intermediaries who collect money for their services. LSP/3PL
Logistics service providers (LSPs) are companies that charge a fee for supply chain services, including but not limited to transportation, distribution, warehousing, and customs services. A third party logistics provider (3PL) is a non-asset-based LSP. Transportation Payment | Benchmark Study 2013
Automated/Manual
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 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. Solution
H Y P OT H E S I S
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—Shippers will increase their reliance on technology and outsourced services to process and pay freight invoices. Reality—In general terms the market looks the same as previous years. Little has changed in terms of use of freight pay systems and services. Assumption 2—Shippers will audit their freight invoices more often and more completely. Reality—This was true in part. There is a movement towards auditing before and after payment as opposed to just once. However, most audits remain incomplete. Assumption 3—Most shippers will make decisions about their freight payment strategy independent of the finance department. Freight payment will be predominantly a logistics concern. Reality—In fact, many shippers have a close relationship with finance. For roughly half of the shippers polled, the purchase of their freight payment solution was made jointly with finance.
Transportation Payment | Benchmark Study 2013
5
Section I: Introduction
The mix or combination of technology, in-house processes and outsourced services used to improve the efficiency and effectiveness of a particular business function. In the case of this report, solutions will refer to freight payment processes that leverage a mix of systems, services, and manual processes to complete the task.
Section 2: Demographics Findings illustrated in this study are aggregated responses from more than 250 qualified participants. This includes 3PLs and shippers of all kinds. Demographics are generally consistent with previous studies. For the purposes of this report, shippers identified as “large shippers” are those with annual sales of more than $1 billion, while “medium-sized shippers” are those with $100 million to $1 billion and “small shippers” are those with less than $100 million.
Industry Segments Surveyed
F IGUR E 1 :
6
9%
F IGUR E 2 :
Company Sizes Surveyed
3%
25%
S e c t i o n 2 : De m o g r a ph i c s
37%
40%
23%
35%
28%
Manufacturers
Less than $100 million
3PL/Intermediary
$100 million to $1 billion
Retailers
Greater than $1 billion
Other shippers
186 total respondents
Government 254 total respondents
F IGUR E 3 :
Transportation Modes Managed
91%
Truckload
88%
LTL Airfreight
86%
Parcel/package Other
86%
FCL Ocean
83%
LCL Ocean
78%
Rail/intermodal Ocean transport (other, non-containerized)
0%
62% 51% 20%
Transportation Payment | Benchmark Study 2013
40%
60%
80%
100%
Section 3: State of Freight Payment Overall, the state of freight payment remains largely unchanged from last year. Domestic transportation payment processes receive more sophisticated resources, while international invoices are more commonly managed by hand. Automated freight payment platforms are more plentiful and mature in the domestic space versus international. In this instance, survey responses bear out what is available in the market versus what shippers may actually want. From a process viewpoint, the six key functions demand varying degrees of support from automation, outsourced services, or manual labor. The majority of shippers automates, or outsources, the receipt and validation of invoices while dispute resolution remains a challenging, highly manual task for most. Domestic Payment Process
100%
80%
26%
26%
41%
40%
27% Invoice Receipt
F IGUR E 5 :
Electronic/ Automated Manual
53%
45%
33%
Validation
29%
45% 25%
Dispute Resolution
Approval
Payment
Audit
18%
11%
172 total respondents
International Payment Process
100% 20%
19%
12%
11%
11%
80%
27% 33%
28%
20%
Outsourced Electronic/ Automated Manual
46% 77%
40%
0%
Outsourced 26%
67%
20%
20%
22%
42% 46%
60%
13%
17%
60%
0%
17%
7
47%
Invoice Receipt
Validation
60%
62%
52%
37%
Dispute Resolution
Approval
Payment
Audit
163 total respondents
Transportation Payment | Benchmark Study 2013
S e c t i o n 3 : S tat e o f F r e i g h t Pay m e n t
F IGUR E 4 :
In general, survey respondents (both 3PLs and shippers) are paying their freight bills later this year than they have in previous years. The number of respondents paying their invoices 30 to 45 days after invoice date increased by roughly half, while the number of those who pay in less than 30 days slipped noticeably. Not surprisingly, large shippers tend to pay their bills later than their small and midsized counterparts. Nearly one quarter of large shippers pay bills after 45 days or more, compared to only 4 percent of small and midsized shippers.
F IGUR E 6 :
8
Average Time Frame to Pay—2011–2013
70%
2011
60%
2012
50%
46% 46% 38%
40% S e c t i o n 3 : S tat e o f F r e i g h t Pay m e n t
2013
28%
30% 20%
37%
15%
17%
24%
13%
8%
10% 0%
Less than 15 days
15–30 days
30–45 days
45–60 days
3%
60 days or more
145 total respondents
Large Shippers
46%
40%
Small & Medium Shippers
38% 29%
30%
30%
19%
20%
0%
Average Time Frame to Pay—Large vs. Small and Medium Shippers
50%
18%
9% 4%
0%
9% 2%
F IGUR E 7 :
10%
13%
Less than 15 days
15–30 days
30–45 days
Transportation Payment | Benchmark Study 2013
45–60 days
6% 0% 60–90 days
143 total respondents
The costs associated with processing and paying invoices remained nearly identical to results from our 2012 study. Survey respondents were asked to define what cost elements they included in their calculations, and the results show those elements varied based on how the shippers were paying their bills. Those who handled the process in-house largely included the cost of labor associated with the accounts payable process, any systems employed, and other basic overhead. Those who outsource the payment process tend to look strictly at the cost they pay their service provider per invoice. Very few respondents list other costs that take into consideration the larger financial picture, such as cost of capital. In short, few companies have a holistic view of their total freight payment costs.
F IGUR E 8 :
Cost to Process and Pay an Invoice
Domestic
International
Outsourced
$3.33
$6.24
In-house Systems
$5.23
$7.89
In-house Manual
$11.05
$15.18
Transportation Payment | Benchmark Study 2013
9
S e c t i o n 3 : S tat e o f F r e i g h t Pay m e n t
On the surface, these results would suggest a significant cost advantage for the outsourced means of paying freight bills. However, there are deeper considerations that many shippers take into account when weighing the merits of their process. Cost, while extremely important, should not be the only means to determine the correct solution.
Section 4: Auditing Practices Auditing practices, processes, and technology remain staples of our report. The importance of auditing efficiently and effectively cannot be overstated. This year’s report includes some updates on themes around auditing we’ve covered for years, in addition to some new areas of investigation. In previous years, this report series and other industry analysts have highlighted those shippers who conduct pre- and post-payment audit as best in class. It appears the market has gotten that message, as the number of respondents who conduct both audits has increased in 2013 after waning in previous years.
S e c t i o n 4 : A u d i t i n g P r a c t i c es
10
Discrepancies in auditing practices exist between industry segments. Retailers and 3PLs appear to be at odds over whether it is preferable to audit before payment or both before and after. This is odd, because American Shipper’s research generally shows retailers and 3PLs subscribe to the same business practices. Perhaps 3PLs feel more confident in their systems (which might include a freight pay module or linkup to another vendor), whereas retailers may feel more compelled to have the double check. It is clear, however, that those companies who only audit after making payments are in the minority.
F IGUR E 9 :
Auditing Practices 2010–2013
70% 2010
59%
60% 52%
53%
2011 47%
50% 42%
2012
38%
37%
40%
2013
29%
30% 20% 9% 7% 8%
10%
9% 4%
2%
4%
0% Prior to payment
Post payment
Transportation Payment | Benchmark Study 2013
Both
None
1% 189 total respondents
F IGUR E 1 0 :
Auditing Practices—Industry Segment
80%
70%
70% 60%
Manufacturing
3PLs
50% 40%
Retailers
55%
52% 40%
36%
30% 20% 8%
10% 0%
7%
18%
12%
0% Prior to payment
Post payment
Both
2% None
0% 139 total respondents
Conducting an audit is the first step, but as has been discussed at length in previous reports, the quality of the audit is just as meaningful, if not more. This year’s survey took a deeper look at the 15 elements of each invoice that should be audited each and every time. Based on previous research studies we are assuming that only about half of the market actually reviews each invoice in some capacity. Even fewer review all the critical elements of each invoice beyond the obvious aspects, such as rates, assessorial costs, and fuel surcharges.
Transportation Payment | Benchmark Study 2013
S e c t i o n 4 : A u d i t i n g P r a c t i c es
11
It is particularly interesting to see where auditing practices between large shippers and their smaller counterparts differ. Large shippers are considerably more likely to audit elements pertaining to international shipping, such as currency conversion and Incoterms. This makes sense, since on the whole larger shippers tend to be more involved in international transportation activities. Smaller shippers, however, appear to be more interested in some of the more detailed aspects of a shipment, such as damage. This makes sense since—in general, shippers with less freight tend to care more about each shipment.
F IGUR E 1 1 :
12
Elements of Invoices that are Audited 92% 95%
Transportation rates Accessorials (rate, validity, etc)
96% 93%
S e c t i o n 4 : A u d i t i n g P r a c t i c es
Fuel surcharge
76%
36%
Taxes/Duties 30%
Incentives (volume-tiered discounts and rebates) Origin
36% 32%
Delivery address
32%
Currency conversion
Valid trading partner
0%
39% 39%
24% 22%
17% 14%
20%
49% 49%
25% 15%
51% 49%
Incoterms
Transit completion
91%
56% 51%
Volume, weight and/or dimensions of shipments
Manifested not shipped
Small & Medium Shippers
83% 80%
Duplicate invoices
Damage
Large Shippers
38%
27% 38%
40%
Transportation Payment | Benchmark Study 2013
60%
80%
100%
172 total respondents
It is encouraging to see that more than half of survey respondents see continual improvements from their auditing process. Last year’s study showed there was a lot of room for improvement, with only 80 percent of respondents claiming they incorrectly paid less than once every 20 times. What’s concerning is a fairly large pool of respondents also said they have seen stagnation in the improvement of their freight pay process, particularly manufacturers, almost half of whom said the improvements largely stopped after the first year. It’s a challenge for shippers and vendors to get beyond the initial, noticeable improvements that come from an initial investment in freight payment to make those improvements consistent.
Audit Improvement
100% 17%
20%
9% 18%
80% 60%
13
42%
23% 43%
40% 20% 0%
40% 25% 16%
18%
Manufacturers
Retailers
30% 3PLs
Never saw improvement Significant improvement in the first year, but improvement has tapered off Our rate of catching errors improves moderately year-on-year Our rate of catching errors improves significantly year-on-year 127 total respondents
Transportation Payment | Benchmark Study 2013
S e c t i o n 4 : A u d i t i n g P r a c t i c es
F IGUR E 1 2 :
Section 5: Freight Payment Services, Systems and Data The means by which shippers and 3PLs process and pay their freight bills remains widely varied. There simply is no method of choice and the disparity gets even greater when comparing domestic and international freight payments. But this isn’t new. The results from this year’s survey closely resemble those collected in previous years.
F IGUR E 1 3 :
14
Domestic Payment Delivery Model
Outsourced to another service provider
14%
S e c t i o n 5 : F r e i g h t P a y m e n t S e r v i c es , S y s t e m s a n d D a t a
A mix or hybrid of all of these
5%
7% 3%
22%
10%
4%
Outsourced to 3PLs
16%
5% 2%
Standalone non-bankbased system None of these
13%
7%
16%
ERP-based system
0%
0%
4%
3%
5%
3PLs
24%
7%
Manual/Spreadsheet-based
Small & Medium Shippers
15%
6%
Standalone bankbased system
Large Shippers
22%
15% 14%
TMS-based system
29%
17%
13%
6%
10%
Transportation Payment | Benchmark Study 2013
15%
20%
25%
30%
240 total respondents
International Payment Delivery Model 23%
12% 13%
Outsourced to another service provider
10%
A mix or hybrid of all of these
18%
32%
18%
ERP-based system
2% 9% 6%
Outsourced to 3PLs
3% 2%
Standalone non-bankbased system
12%
8%
3%
TMS-based system
18%
15
5% 6%
4%
0%
11% 7%
0%
3PLs
14% 15%
Standalone bankbased system
F IGUR E 1 5 :
Small & Medium Shippers
16%
Manual/Spreadsheet-based
None of these
Large Shippers
23%
5%
14%
10%
15%
20%
25%
30%
35%
242 total respondents
Shipper’s Delivery Model—Domestic vs. International
Outsourced to another service provider
19%
4%
4%
13%
9% 9% 10%
Standalone bankbased system
0%
10% 9%
ERP-based system
Standalone non-bankbased system
International
31%
18% 17%
A mix or hybrid of all of these
Outsourced to 3PLs
Domestic
19%
Manual/Spreadsheetbased/None
TMS-based system
24%
3% 3%
5%
10%
15%
20%
25%
30%
35%
134 total respondents
Transportation Payment | Benchmark Study 2013
S e c t i o n 5 : F r e i g h t P a y m e n t S e r v i c es , S y s t e m s a n d D a t a
F IGUR E 1 4 :
Large shippers remain more active in the market for new or upgraded systems and services to support the freight payment process. Roughly one quarter of the large shippers surveyed in this report said they will buy a system or service in the next two years. That figure is comparable to what previous reports have found. Small and midsized shippers remain less active in this market, which is not all that surprising. Many of the benefits to addressing freight payment via systems or outsourced services are predicated on scale. If your company does not have a large freight volume—and invoices to go with them—it is more difficult to justify the investment. Likewise, vendors with the most sophisticated solutions tend to target larger shippers who stand to gain the most.
16
F IGUR E 1 6 :
80% S e c t i o n 5 : F r e i g h t P a y m e n t S e r v i c es , S y s t e m s a n d D a t a
70% 60%
Plans to Buy, Upgrade or Replace Payment Systems or Services Large Shippers
70%
Small & Medium Shippers
58%
50% 40% 30%
20%
20%
13%
10% 0%
No plans to buy or replace
Budgeted within the next 12 months
17% 6%
5%
Budgeted within the next 12–24 months
On our company’s 5-year plan
The payment process is increasingly more than just ensuring bills are paid accurately and on time. The information generated from the process is valuable in and of itself. Fewer than 10 percent of survey respondents report they do not collect or use payment data.
Transportation Payment | Benchmark Study 2013
12%
134 total respondents
Perhaps more interesting is the varying degrees to which shippers actually use the payment data. Most shippers track their spending, but fewer are able to put that data to use for network optimization and procurement purposes. This is where the rubber meets the road when it comes to closed-loop transportation management—a best practice American Shipper research has advocated for many years.
F IGUR E 1 7 :
What Systems are Used to Process Payment Data? 60%
59%
60%
Large Shippers
54%
50%
47%
40%
32%
32%
30%
Small & Medium Shippers
44%
17
32%
10%
10% 0%
s ur lly lly lly ort na na na eo rep ter tem ter sses ter tem sid data n n n t s i i i s s u e e y y s s s c o our ort nt s ort roc ort P s du rty rep yme rep ual p rep r ER pa alyze pro r e e e d t t t o r o an pa ra ra man ra hi nd MS ne ht ne ne a t to Ve Ge freig Ge sing Ge g a T se ndor U u in ve ing us us
F IGUR E 1 8 :
100% 80% 60% 40%
How is Payment Process Data Used?
96%
Large Shippers 80%
Small & Medium Shippers 62% 49%
47%
43% 33%
20% 0%
131 total respondents
to es ck ns tio rat tra y in ur ctl cess To pend era o e p r i o ro ex ns dd tp ize nd tio fee men oi tim T rta p o o e T ur o p c To ns tra pro e h t
37% 25%
25% 10% 0%
t ier ec arr oll t c data k c ation o c tra ific o n ent To ivers e d aym W p d A— ur N/ se o u or
141 total respondents
Transportation Payment | Benchmark Study 2013
S e c t i o n 5 : F r e i g h t P a y m e n t S e r v i c es , S y s t e m s a n d D a t a
18%
20%
Section 6: Finance’s Role in Freight Payment Over the past decade all facets of the supply chain have come under increasing scrutiny from the chief financial officer’s office. Big impact initiatives, such as reducing inventory levels, took priority and the result of that attention has clearly been seen, as inventory levels have reached historic lows relative to sales. This savings chase into the various components of supply chain and transportation management leads to one conclusion: freight payment is the natural point of interaction between finance and logistics. It is important to reiterate at this point that the vast majority of survey respondents will come from their company’s logistics department. So these results should be viewed through that lens.
S e c t i o n 6 : F i n a n c e ’ s R o l e i n F r e i g h t Pay m e n t
18
Survey results clearly show the finance department is well entrenched in today’s logistics group. Less than 20 percent of survey participants report they have no overlap between these departments. As one would expect, large shippers have more overlap than their smaller counterparts. Respondents across industries agree these two departments are at least somewhat aligned.
F IGUR E 1 9 :
Relationship Between Finance and Logistics
60%
55%
50% 40% 30%
Large Shippers
52%
49% 50%
Small & Medium Shippers
36% 23%
20% 10%
23%
21% 11%
12% 6%
3%
0%
n as as erce ee th th nd s an t etw ents en lities en nces fin men n u tion b m m a i n t t i rt a ib ap artm na ar ar as era ch epa erl ep ons ep s fi t h op ov dep ply ce d s d resp s d istic en ain o n n p o m n su an tio ial tio log ch tw is art c era era to re the ep ply ted fin he op finan op ted na the e d f sup T g s s c i in s ct o tic tic ela an de with gis dire gis s r Fin ding Lo Lo ntive is a am n a e e te st er inc Th n or o s r pe
Transportation Payment | Benchmark Study 2013
I
w
no
't k
n do
134 total respondents
F IGUR E 2 0 :
Are Logistics and Finance Aligned on Freight Payment Strategy? 2%
3%
100%
2%
8%
80% 50%
47%
60%
10% 8%
31%
I don’t know Not aligned at all Somewhat aligned Closely aligned
40% 43%
46%
Manufacturers
Retailers
20% 0%
50%
3PLs
135 total respondents
Despite this overlap and alignment between finance and logistics, freight payment outsourcing and systems decisions clearly rest with the logistics department. Slightly more than half of respondents claim this is solely a logistics decision while roughly 40 percent report this is a joint decision.
F IGUR E 2 1 :
Who Makes the Buying Decision on Freight Payment Systems/Services?
8% Logistics operations Joint decision between finance and logistics 38%
54%
Finance department
129 total respondents
Transportation Payment | Benchmark Study 2013
S e c t i o n 6 : F i n a n c e ’ s R o l e i n F r e i g h t Pay m e n t
19
The ability to stretch payables (hold on to your company’s cash as long as possible by delaying payments to vendors) presents an interesting financial benefit for many shippers. This benefit will be particularly compelling for those with financial influences in the logistics department and the volume of shipments to see a real benefit. Thus large shippers tend to have a more favorable impression of the value of stretching freight related payables. Figure 6 suggests that more shippers may be embracing this strategy in 2013. Similarly, large shippers are considerably more comfortable with the idea of allowing a freight payment vendor to hold their cash, or “float.”
F IGUR E 2 2 : 20
Perceived Value of Stretching Payables
45%
S e c t i o n 6 : F i n a n c e ’ s R o l e i n F r e i g h t Pay m e n t
40%
36%
35% 30%
Small & Medium Shippers
25%
25%
19%
20% 15%
Large Shippers
39%
12%
13%
20% 16%
12%
10%
8%
5% 0% Very high
F IGUR E 2 3 :
High
Moderate
Low
Very Low
120 total respondents
Would Your Company Provide a Float to Payment Vendor?
90%
81%
80%
No
65%
70%
Yes
60% 50% 40%
35%
30%
19%
20% 10% 0%
Large Shippers
Transportation Payment | Benchmark Study 2013
Small & Medium Shippers
139 total respondents
Survey respondents are split evenly on the perceived importance of their freight pay provider’s (systems, services or both) banking capabilities. Roughly one-third of respondents feel it is important to use a bank for freight payment, while another third believe this is moderately important and the remaining third say it is not important. In other words, it’s a split decision.
Is it Important that your Freight Payment Vendor is a Bank?
16%
22%
Not important at all Slightly important Moderately important
18%
12%
21
Very important Extremely important
32% 137 total respondents
Transportation Payment | Benchmark Study 2013
S e c t i o n 6 : F i n a n c e ’ s R o l e i n F r e i g h t Pay m e n t
F IGUR E 2 4 :
Section 7: International Payments The results of this research clearly document that large shippers see more benefit from investments in a sophisticated freight payment solution. As a result, they show more interest and willingness to make the necessary investments in people, processes, outsourced services and technology. However, our research also suggests they’re overlooking a key element. Large shippers—generally speaking—are more likely to have global or at least international requirements. Yet, these companies clearly address U.S. domestic freight payment in a more sophisticated manner than they do international transportation markets.
F IGUR E 2 5 :
Importance of Freight Pay Vendor’s International Capabilities
22
4%
S e c t i o n 7 : I n t e r n at i o n a l Pay m e n t s
100%
10%
80%
27%
17%
18%
35%
Very low priority Low priority
23%
60%
21%
Moderate priority High priority
21%
40%
22%
20% 0%
80% 60% 40%
24%
14%
25%
21%
20%
Manufacturers
Retailers
3PLs
F IGUR E 2 6 :
100%
Very high priority
135 total respondents
Current International Capabilities of Freight Pay Vendor
7% 13% 25%
2% 14%
32%
4% 11% 30%
Very good Good Fair Poor
43%
30%
33%
23%
22%
Very poor
20% 0%
13% Manufacturers
Retailers
Transportation Payment | Benchmark Study 2013
3PLs
134 total respondents
Section 8: Takeaways & Best Practices Based on a thorough analysis of our survey findings, American Shipper offers the following suggestions for shippers looking to improve upon their freight payment performance: • High-volume shippers—with a similarly high volume of invoices— should seriously consider freight payment systems and outsourced services strictly based on the significant cost savings and efficiency opportunities they present. • Think of your payment solution beyond the price of processing and paying invoices. Consider the availability of useful data, effectiveness of the process from the carrier’s perspective, etc.
• Use your freight payment data to close the transportation management loop. This data—when turned into actionable information—can be invaluable to the procurement and network optimization processes. • Engage with finance on your company’s freight payment strategy and results. Capitalize on this opportunity to explain your transportation management process in terms they can relate to—numbers.
Transportation Payment | Benchmark Study 2013
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S e c t i o n 8 : T a k e a w a y s & Bes t P r a c t i c es
• American Shipper’s research shows, in general, shippers want fewer systems and services providers with more functionality to manage their business processes. If you’re a global shipper, take global freight payment capabilities into consideration when evaluating a solution.
Appendix A: About Our Partners COUNCIL O F S U P P LY C H AIN MANAG E M E NT P RO F E S S IONAL S The World’s Leading Source for the Supply Chain Profession.™
Founded in 1963, the Council of Supply Chain Management Professionals is the leading worldwide professional association dedicated to education, research, and the advancement of the supply chain management profession. With approximately 9,000 members globally, representing business, government, and academia from 63 countries, CSCMP members are the leading practitioners and authorities in the fields of logistics and supply chain management. Please visit www.cscmp.org to learn more.
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Appe n d i x A : A b o u t O u r P a r t n e r s
R E TAIL INDU S TRY L E AD E R S A S S OCIATION ( RILA )
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
Transportation Payment | Benchmark Study 2013
Appendix B: About Our Sponsors BRAVO S OLUTION
Every company’s strategic objectives are different. Supply management executives are uniquely positioned in their organization to provide a deep understanding of what drives their business’ success. To harness this perspective and contribute to these distinctive objectives, sourcing executives need an exceptional solution to maximize their company’s competitive advantage.
Top analysts have found that the right blend of skills, process, and technology improves a company’s financial performance by 30 cents on every dollar spent. BravoSolution works with supply management to address each business’s unique processes, stakeholders and goals to deliver tailored solutions across the entire supply management cycle. INTTRA
INTTRA is the world’s largest, multi-carrier e-commerce network for the ocean shipping industry. INTTRA professionals work with 40 leading carriers and NVOCCs, 109 software alliance partners, as well as their customers, to streamline and standardize their shipping processes worldwide through a network of more than 200,000 shipping professionals. Over 525,000 container orders are initiated on the INTTRA platform each week, representing more than 18 percent of global ocean container trade.
Transportation Payment | Benchmark Study 2013
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Appe n d i x B : A b o u t O u r S p o n s o r s
With over 60,000 procurement professionals in 40 different countries using BravoSolution’s technology and services, BravoSolution offers leading software, practice innovation and expertise to ensure that supply management is aligned with their company’s strategic objectives to drive business growth.
Appendix B: About Our Sponsors SAP
As market leader in enterprise application software, SAP (NYSE: SAP) helps companies of all sizes and industries run better. From back office to boardroom, warehouse to storefront, desktop to mobile device—SAP empowers people and organizations to work together more efficiently and use business insight more effectively to stay ahead of the competition. SAP applications and services enable more than 172,000 customers (includes customers from the acquisition of Sybase) to operate profitably, adapt continuously, and grow sustainably. For more information, visit www.sap.com.
Appe n d i x B : A b o u t O u r S p o n s o r s
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Transform linear supply chains into a responsive supply network, and quickly adapt to ever-changing markets. SAP supply chain management software can help companies synchronize planning, distribution, transportation, and logistics—for an ‘always on’ 24/7 operation. Recognized by key industry analysts as one of the leading supply chain management (SCM) software solutions, SAP SCM can also help companies maintain relationships with suppliers, customers, and contract manufacturers— facilitating connections and collaboration around the globe. Learn more about SAP solutions for supply chain management.
U . S . BANK TRAN S P ORTATION S OLUTION S
U.S. Bank, a leader in corporate payments, simplifies global freight invoice management and payment processing with U.S. Bank Freight Payment. This powerful internet-based solution automates invoice processing, audit and payment, extends working capital benefits to both shippers and carriers, and provides unmatched visibility to global cost and performance data. U.S. Bank Freight Payment helps trading partners optimize their global invoice management and payment process with improved efficiency and control, at lower cost. To learn how U.S. Bank Freight Payment can help strengthen your physical and financial supply chain, visit usbpayment.com.
Transportation Payment | Benchmark Study 2013
Appendix C: About American Shipper Research BACKGROUND
Since our first edition in May 1974, American Shipper has provided U.S.-based logistics practitioners with accurate, timely and actionable news and analysis. The company is widely recognized as the voice of the international transportation community. In 2008 American Shipper launched its first formal, independent research initiative focused on the state of transportation management systems in the logistics service provider market. Since that time the company has published more than a dozen reports on subjects ranging from regulatory compliance to sustainability. SCOPE
METHODOLOGY
American Shipper benchmark studies are based upon responses from a pool of approximately 30,000 readers accessible by e-mail invitation. Generally each benchmarking project is based on 200-500 qualified responses to a 25-35 question survey depending on the nature and complexity of the topic. American Shipper reports compare readers from key market segments defined by industry vertical, company size, and other variables, in an effort to call out trends and ultimate best practices. Segments created for comparisons always consist of more than 50 responses to keep the potential margin of error to a minimum. LIBRARY
American Shipper’s complete library of research is available on our Website: AmericanShipper.com/Research. Annual studies include: • Global Trade Management
• International Transportation Management
• U.S. Export Compliance
• Transportation Procurement
• U.S. Import Compliance
• Transportation Settlement
CONTACT
Jim Blaeser Publisher American Shipper
[email protected]
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Appe n d i x C : A b o u t A m e r i c a n S h i ppe r Rese a r c h
American Shipper research initiatives typically address international or global supply chain issues from a U.S.-centric point of view. The research will be most relevant to those readers managing large volumes of airfreight, containerized ocean and domestic intermodal freight. American Shipper readers are tasked with managing large volumes of freight moving into and out of the country so the research scope reflects those interests.
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Copyright© 2013 by Howard Publications, Inc. All rights reserved. No part of the contents of this document may be reproduced or transmitted in any form or by any means without the permission of the publisher.
Transportation Payment | Benchmark Study 2013
