As we all know, transportation is a game of exceptions. Every planning is confronted with unexpected situations that might lead to additional costs like waiting time, toll, parking, road deviations, detention fees, just to name some.
These are typically small amounts added by the carriers to the invoice, but can quickly add up to a significant amount.
And then you have the choice:
You don’t look at these extra costs and just rely on the carrier
You painstakingly try and figure out if these charges are justified and start discussions with your carriers
Or you put a process in place to approve extra charges early in the process
When asking shippers who successfully streamlined their transportation process: “how do you manage your extra costs?” - this is often one of the tasks they manage separately.
GET A PROCESS IN PLACE
And no, Excel is not a process.
Keeping track of extra costs and introducing an extra cost approval flow needs to be an integral part of your transportation management process, hence your TMS. You don’t want to rely on spreadsheets to manually keep track of these charges (if you even do). A modern TMS supports different types of charges, from flat rates, unit rates to percentage rates. You can apply the percentage to freight costs, goods value, surcharges and so on.
|Type of rate||Example|
When the carrier uses a secure highway parking when transporting your high-value goods, he can add this additional cost as a flat rate.
If costs for waiting hours are 50 euro per hour, the extra charge can be defined as a unit rate, and the carrier only has to enter the number of hours to have the calculated extra cost added as a cost line to the overview of the total cost.
An insurance cost is usually listed as a percentage of goods value, with a minimum - these elements can be captured and have the correct extra cost calculated automatically.
If you’re a Logistics Service Provider (LSP), you might want your TMS to support markup functionality in case you want to pass on this cost to your customer.
The approval flow can be fairly simple and the best approach is to allow several people to add extra costs, either your transportation planner, customer service, your carrier via a carrier portal, or via integration using modern APIs.
The advantage of having this extra cost approval flow is that:
you have an overview of all extra charges and can verify them early in the process, avoiding endless discussions with your carriers leading to credit notes, delayed payments and so on
you only pay for the extra costs you’ve accepted
during pre-billing phase, the carrier will have a detailed overview of what is expected on the invoice, including the approved extra charges
Waiting till the end of the month to recall the exact situation for each extra charge added is like trying to remember what you ate 3 weeks ago for lunch.
However, when it becomes part of the overall process, it’s just a matter of accepting or rejecting the charge at the moment it happens, when all the context is readily available.
Managing extra freight charges should be effortless, so you can focus on what really matters ...