One of the major inefficiencies facing companies today is the underutilization of technology. This can occur for a number of reasons. First, because the company does not have the necessary technology it needs to operate more efficiently; two, it does not have the technological expertise on staff to provide the services required; or three, it is so bogged down with IT projects from all areas of the business that many departments get left in the dust. In addition, many companies operate by the seat of their pants because they lack consistent and logical business rules in their everyday business dealings.

Nowhere is this truer than in the area of transportation and logistics. For some reason, the transportation and logistics department is often at the bottom of the ladder when it comes to implementing IT solutions. Don’t ask us why but we have seen it happen over and over again throughout corporate America. Then, when it comes to establishing business rules to protect the companies’ interest, there is often a lack of understanding when it comes to shipping, receiving, claims, routing controls, audit controls, etc. Millions of dollars fall through the cracks each year never to be recovered.

Here are some examples we came across recently in analyzing several different companies’ transportation and logistics operations:

1. Failure to provide suppliers with comprehensive routing instructions – Many companies control the routing of their outbound shipments but fail to control inbound supplier shipments and customer returns. The net result is much higher freight costs. Many companies get hit with shipping and handling charges because they allow their suppliers to invoice the freight charges on a merchandise invoice with no way of discerning the actual cost of the freight versus the shipping and handling charges. This process also depletes revenue from their core carriers that could be used to further drive down their freight costs.

1. Failure to electronically audit freight invoices – Companies that maintain a manual audit process are missing the boat when it comes to performing a comprehensive audit to capture all potential overcharges and duplicate billings. Nowhere is this more prevalent than in the area of auditing parcel carrier invoices. For one thing many companies process these freight bills at the invoice level rather than at the tracking number level because they want to limit the amount of data entry. What they fail to realize is that they have no duplicate payment controls if the parcel carrier sends the same airway bill in on another invoice. It happens more times than you can imagine. For some parcel carriers, the weekly invoice contains summary information so the invoice cannot be audited for accuracy. The only true way is to maintain a comprehensive electronic audit function by a third party that maintains the technology and the expertise to generate significant refunds through the audit process.

1. Understanding Terms of Sales – Many companies sell their goods FOB (Free on Board) their shipping location. In those cases, as soon as the goods are placed on the carrier’s vehicle and the bill of lading is signed by the carrier, title passes from the shipper to the consignee. If the product is lost or damaged in transit, the consignee is legally responsible to file the claim for recovery. While this is the legal definition, many consignees because of their size “force” the claim back on the shipper to file. Note: The freight charges can be prepaid or collect but that does not change the terms of sale. The FOB designation determines ownership of goods. Make sure you understand your company’s sale and purchase terms.