Freight Payment 2021: Data analysis for everyone

The burgeoning freight bill payment industry has evolved over the years from the green eyeshade-wearing legal eagles who reviewed your grandfather’s freight bills to the big data-driven analytical firms of today that offer everything from “soup to nuts” on the bill-paying menu.

Indeed, over the years the industry has gravitated from mom-and-pop operators to gigantic multinational banks and financial service companies. While there are still scores of solid, family-run freight bill payment service companies, they’re being squeezed by the big boys. Gone are the days, as one industry insider put it, “of doing deals with your brother-in-law.”

Today, shippers have a menu of services from which to choose. There are single-source options for both carriers and shippers offering the latest, data-driven solutions. However, experts say that the real savings occur not from spotting the occasional error in a freight bill, but rather from leveraging time-sensitive data—from which carrier to choose to geographic lane and other customer-centric tools for streamlining freight moves.

Nearly every freight bill company can process invoices accurately and efficiently, but experts and industry officials contend that even more streamlining comes from examining how to enhance working capital while providing carriers timely, predictable payments. A good freight bill payment analysis can help shippers improve decision making with tools and services that can turn raw data into valuable insights about their shipments.

Market players also contend that the key for shippers is helping them find new efficiencies at every mile of their supply chains while using collaborative, web-based tools to reduce errors and resolve exceptions quickly.

“The state of the market is optimistic heading into 2021,” says Jeff Pape, senior vice president of product and marketing at U.S. Bank Freight Payment, which processes more than $24.5 billion in freight payments annually for corporate and federal government clients. “And while the market is good, it has a lot of challenges. The pandemic has certainly tightened capacity and rates are going up.”

By the end of last year, most freight payment indexes were showing total shipments and spending increasing commensurately. “With improvements in the economy, this freight market will rebound and be strong,” adds Pape.

However, others in the industry describe a “code red” situation due to the rapidly changing boom-and-bust business cycles brought on by the pandemic. It’s no longer survival of the fittest, they say. It’s merely survival.

So, let’s take a deeper dive into the state of the freight bill payment services market. We’ll examine how the industry reacted to the pandemic as shippers learned to work remotely and safely, and we’ll identify some best practices in freight payment as we roll into 2021.

The COVID effect

Like most businesses in general, and freight transport specifically, the worldwide coronavirus pandemic sent practitioners scrambling to keep supply chains moving and their workers and customers safe—all while simply trying to stay in business.

“COVID-19 has made an impact on all businesses, but especially suppliers,” says Daniel Brachfeld, vice president and general manager of supply chain solutions at American Express, a considerable player in the freight bill payment sector.

According to Brachfeld, over the past six months, Amex heard from many buyers, including shipping and freight companies, who were seeking ways to support current vendors, find new ones, and keep their business on track. “All of these challenges are placing pressure on suppliers’ cash flow and liquidity, creating an even greater need for early payment from the large freight companies they do business with,” he says.

Mike Regan, chief of relationship development and co-founder at TranzAct, a family-owned technology services and freight bill payment company, says that it’s either “feast or famine” for his customers at this point.

“It’s a tale of two cities,” says Regan. “Some are thriving, while others are really struggling. We had five years of business cycles in five months during 2020. We’ve been seeing things we’ve never seen before—it’s code red.”

According to Pape at U.S. Bank, early in the pandemic, many customers were requesting greater visibility into their operations to preserve cash. “So, we added some additional capabilities for managing their cash flow with increased flexibility by putting more decisions in their hands. The goal is maintaining that balance through recovery.”

Digitization on the way

Another major trend that experts say will blossom in 2021 is digitalization and the greater use of analytics, as big data will increasingly enable shippers to make smarter decisions in their use of freight.

“The biggest emerging trend is quality of data,” says Regan. However, he adds that the trick for shippers is to begin looking at their operations “strategically, not transactionally.” Some do, he says, but most don’t.

“There are shippers that are focused only on the lowest rate and are going to the mat over finding 20 cents per bill on 120,000 shipments a month,” says Regan. “Shippers must end that type of transactional thinking. The way you manage freight spending is from the inside out. The COVID world has really highlighted the value of a strategic process, and if you’re focused on controlling your transportation spend by watching for the cheapest rates and accessorials you’re getting slaughtered right now.”

Regan says that a better way to manage freight is to look at the processes inside your company that make an impact on the consumption of freight. “The 3PLs are trying to get there,” he says. “But in order to get there, you need to have good data. This isn’t new, but it’s becoming increasingly important.”

The consensus remains that the best freight bill payment companies are emphasizing the need for accurate data and ability to aggregate ancillary data. “If I look at the tech-based companies, they’re creating additional data elements associated with the transaction,” adds Regan. “I can do tracking and tracing throughout the entire life of that shipment. Now I can aggregate that into my database. Now I have data on the time it was picked up and delivered. Analyzing that data is where the savings are.”

Along those lines, American Express, which has been supporting the freight industry in one form or another for the past 60 years, recently enhanced its “Early Pay” supply chain payment solution to give large companies—and their suppliers—the ability to pay and get paid when they want through an easy-to-use digital platform.

Brachfeld explains that the idea was to help buyers have greater control of their accounts payable process for their B2B payments, generate extra cash from early payment discounts, and finance their payments should they need the working capital. He adds that businesses are more focused on digital transformation than ever before, with 84% of U.S. business decision makers saying that they feel positive about transitioning to a digital payments system, according to American Express research.

And it’s paying off. American Express estimates that it’s realized some $8.84 billion in savings from freight discounts through adoption and automation of its payment discount functionality.

Follow the data

However, don’t get the impression that giants like Amex and U.S. Bank dominate the freight bill payments sector, though they own sizable presence in the market. There’s still plenty of room for expert analytics provided by smaller operators as well.

“You don’t need to be a large provider to deliver huge value proposition to your clients,” says Alan Miner, president of 98-year-old CT Logistics in Cleveland, a company that got into the freight bill payment business in 1984.

Demonstrating the flexibility of the smaller guys, Miner says his company recently made a six-figure investment in a business intelligence function call “QLIK.” It puts all client data into a huge database that analyzes their shipments and offers insight into modal choices, packaging, dimensioning and other minutiae that amounts to huge savings.

“Our core competency is freight traffic expertise,” says Miner. “Our analysis of freight bill auditing is huge compared to someone who just pays your bills.”

According to Ross Harris, CEO of A3 Freight Payment, the sector is changing so rapidly that his company is in the process of reinventing and redefining its service offerings. “The term ‘freight payment’ is getting outdated,” he says. “What shippers are looking for is transportation spend management and tools associated with that. We’ve always had reporting and visibility. Now the expectation of shippers is to have data within a couple clicks.”

This level of data availability was formerly the domain of 3PLs and others who had an office full of data analysis technicians. Now, with the help of the right freight bill payments partner, every shipper can access its actual source of transport data.