5 Reasons to Avoid Gain Share Models for Freight Audit & Payment

What is the “gain share model?

In the typical gain share model, a broker or 3PL works with a shipper to discover potential savings in return for a flat fee or percentage of the savings they are said to have obtained.

This brokerage model has received a variety of differing sentiments from the supply chain industry. Some shippers are comfortable with a gain share relationship. Others feel the model lacks credibility and should be avoided for the following reasons:

gain share

  1. Reward goes to the third party. Gain share brokers want to find savings for you in return for a percentage. This means they are incentivized to find errors. However, the downside is that they are most profitable when they discover simple, quick-fix errors, and less incentivized to find the larger, more complex areas of loss. At Trans International, we have seen an invoice where a carrier billed one million dollars for a 500-pound shipment – a simple decimal place error. When operating with a broker under a gain share model, the shipper would have to pay the third party five, ten, or even twenty percent of that million-dollar error. However, any accounts payable department could have caught an error of this size – without requiring a percentage share.
  1. No incentive to fix errors. If the third party is going to keep making money by catching the error, there is no reason for them to notify you or the carrier to fix the error. If they do, their revenue will go down and you will no longer be a profitable client. This means the third party may allow errors in billing to continue so that they can keep profiting from them.
  1. Unsustainable business model. Gain share is thought of as an easy-start engagement, as there is virtually no initial cost to the client. However, at some point, the third party will have found all of the errors and the customer will have worked to resolve them, resulting in future invoices being billed correctly. When this happens, the third party’s gain share model is no longer a sustainable source of revenue, so they will look to convert customers to a different payment process with the hope that the customer will remain loyal, regardless of the new cost.
  1. Skewed data tracking. Everyone reports data differently, and when a broker profits from errors found, they may be tempted to track client savings inconsistently. It’s important to ask a few questions: Does the broker track what you would have spent and earn a percentage from that? Do they track what they found in errors? What about refunds and rejected errors? Data can easily be skewed to increase revenue on a gain share model.
  1. Lack of attention to service. Are gain share brokers looking out for the long-term interests of the client or the short-term gains? Third parties don’t always look deeply into the reasons clients have chosen their carrier partners. But this partnership is important. Ideally, the broker should investigate whether the client’s carrier provides quality service and meets customer expectations for delivery. However, gain share brokers may steer their clients to use a preferred partner to create deeper discounts across the board, without thoroughly considering the individual needs of the client and the potential long-term benefits of using a slightly more expensive, better-qualified carrier.  

Why is the Trans International approach different?

Our model is based on a transaction fee for each shipment, which allows us to provide our clients more in savings each year than the typical gain share model. We also ensure that clients have visibility to their savings through automated reporting, delivered right to their inbox. We focus on providing quality service and correcting issues with freight carriers, rather than promoting the recurrence of issues. What’s more, we realize that carriers are partners to our clients and that they provide a very important service, so we thoroughly investigate and outline long-term implications when suggesting any changes to the relationship. Last year, the savings we found for clients in correcting carrier billing issues, rejecting duplicate invoices, and providing guidance on best shipping practice more than paid for our services.

Interested in learning what savings we can find for your business? Just reach out.

Transportation Payment Trends Part 3: Freight Payment Strategy

Today’s post is the final of our three-part series inspired by American Shipper’s 2014 Transportation Payment Benchmark Study. We discussed payment trends in the first post and auditing practices in the second. Now, we’re digging into the trends around freight payment strategy. 

No two shippers follow the same freight payment strategy. Some are eager to adapt new technology, while others are only comfortable keeping things manual. Some work with vendors while others prefer to stay in-house. Sometimes the finance department pays the freight bills, other times it’s the logistics team. That said, some common trends still emerged.

  • The Finding: This year, 45% of large shippers said that buying decisions for freight payment systems were handled jointly by the finance and logistics departments, and 43% said those decisions were left solely to the logistics department – compared to last year when more than 50% said it was only the logistics department’s decision.
  • What It Means: More companies are seeing the importance of involving finance in this decision – one which has the potential to cause systems conflicts if not agreed upon.
    Figure from American Shipper’s 2014 Transportation Payment Benchmark Study by Eric Johnson

    Figure from American Shipper’s 2014 Transportation Payment Benchmark Study by Eric Johnson

  • The Finding: About one in 10 large shippers and one in 20 small/medium shippers plan to invest in freight payment technology over the next year, meanwhile about 25% of shippers still handle payment manually.
  • What It Means: One conclusion is that many shippers do not have the available funds or are not willing to upgrade their shipping payment method – an investment that could save them both time and money. An alternative inference is that, since many of the respondents are international shippers, they have not yet found a technology that can service their international freight payment 
  • The Finding: About 30% of respondents have funds available to invest in a freight payment system.
  • What It Means: Regardless of desire to purchase or upgrade freight payment systems, the majority of shippers don’t have the financial backing to invest in the technology.

In summary, many shippers are missing out on the efficiency-creating, money-saving benefits of automated freight payment systems – in large part, due to lack of funds devoted to process technology.

A key way to improve these numbers (saving shippers money in the long run) is through awareness and education. The logistics and finance departments at these companies need to be informed of the money- and time-saving benefits of automated freight payment, as well as the current technology offerings. 

That’s something we can help with. At Trans International, we service both domestic and international shippers with software for freight payment, auditing, reporting and more.

We can fulfill the needs of shippers who’ve been waiting for international options. And for those who are ready to invest but need assistance presenting a case to their internal team in order to receive funding, we have the numbers and research to help.

Just contact us directly and we’ll do whatever we can to provide the system you’re looking for, with an explanation of the advantages it can provide for your company. 

In the meantime, we’d love to know how your company fits into the current freight payment trends. Tell us in a comment below.

Why Should Freight Audit Be On Your Radar?

Paying a freight invoice without auditing it is a lot like blindly reaching into your wallet and handing a cashier everything you have in there without counting it.  Now, you wouldn’t do that would you?  No, you wouldn’t; that is why freight audit should be on your radar. Including freight bill auditing in your business model can recover anywhere from 10-12% of your annual transportation spend initially and 3-5% for long-term annual savings.

There are, of course, options for freight audit providers. Some businesses choose to audit their freight bills themselves, either manually or by using an electronic system. Others see the benefit of outsourcing their freight bills, cutting costs and saving time.

To help visual the cost differences of each auditing choice, here are the costs of processing bills as of 2012, according to American Shipper:

Domestic International
Average Shipper $6.97 $7.44
Outsourced $3.38 $4.39
In-house Systems $5.07 $6.47
In-house Manual $14.17 $15.26

As shown by the data above, the lowest cost option, for both Domestic and International invoices, is to outsource your freight payment process to companies that make Freight Audit their business. By outsourcing your freight bills you will be cutting head counts and spending substantially less while gaining a lighter workload.

TI offers multiple payment models, so that clients can choose the option best suited for their business.  We offer a “no float” option for the less risk tolerant but have maintained our float pricing option for clients looking to keep costs down.  With 6 different types of processing structures, the client has the opportunity to completely tailor their experience to fit their business model.  Trans International makes it our business to save your business time and money while still giving the process a customized feel.  When you pass off your freight bills, your business is still a part of the auditing process, sans the responsibility of doing the actual auditing.  We don’t want to leave you in the dust, we want to take you along for the ride, keeping you informed every step of the way.

Not only do our Freight Audit and Information Reporting (FAIR) services save you time and money, we also use the data from your freight invoices to create robust, ERP compatible reports so you can track and optimize your freight spend.  Your data is immediately available throughout our entire audit process.  Transparency is as important to us as it is to you.

Here are a few points to summarize why freight audit/Trans International should be on your radar:

  • Pre-audit saves you from issues with overcharges and duplicate payments, an audit will ensure you pay only what you owe.
  • We also recommend going further than just freight audit, we recommend outsourcing your freight bill processing to Trans International.  We have zero ulterior motives when handling your data and money.  Our goals are to save you money, time, and to keep you informed.
  • Using the services provided by Trans International, your company can expect a 3% to 5% recovery of your total transportation spend annually.  That’s cash back in the bank that you would not have had you not partnered with us.
  • In the last year, we saved our clients a combined $15.5 million.

Freight Audit is not a “should”, it is a “must”.  It is a time and money saver.  Freight Audit should be on your radar.

Every Supply Chain Has a Story

Each and every product sitting around you right now has a story. Where was that grown? What is this made of? Who put that together? Where has this been?

As consumers, we may think (without really thinking at all) that Product X has magically made its way, entirely in one piece, to the store around the corner but that just isn’t true. Every product you own has a story and has come together from many parts and those parts come together through the supply chain process.

A supply chain is just that, a chain. It is a process with many steps including logistics, planning, a lot of teamwork, and many different parts working together to form a whole. Every supply chain has a story.

The story begins in the production phase with raw material suppliers. Raw material suppliers provide to the tier 2 suppliers who in turn supply the tier 1 suppliers (a single business may be a tier 1 supplier to one firm and a tier 2 supplier to another, depending on what they supply). Tier 2 suppliers can be defined as the supplier’s supplier where as tier 1 means directly supplying the OEM, or original equipment manufacturer, (the company that produces the final product of the supply chain). Onto the post production side of product flow, we finally see the customers. The product is shipped from the manufacturer to the retailer who in turn sells the product to the consumer.

Your product, whether or not it is massed produced, passes through many hands on its way to yours. Throughout production, each and every product makes various stops along the way, creating the supply chain process. For the most part, every supply chain is unique, with different patterns, inter-weaving webs, third party assisters, and overall production plans.

Trans International is lucky enough to be able to play a role in many different supply chain operations. Our clients hail from a diverse array of industries: from tools to chemical engineering; from car parts to your everyday department store; packaging materials to boilers. We enter your supply chain story with our Freight Audit and Information Reporting (FAIR) services. We understand that profitability is the core of any effective business decision and stand by our commitment to increase profitability and cut costs for freight bill processing. Our clients range from tier 1 suppliers to OEMs, big or small we audit freight bills from companies of all sizes. Additionally, our role in your supply chain story does not stop with our FAIR services. Visit our website to learn more about our secure, customizable services.

Truly, every supply chain has a story. Parts come together from all over the world to create our material reality as we know it. Supply Chains are responsible for making that a reality and with great responsibility comes great costs. This is why Trans International should be a part of your supply chain story.

Supply Chainging: Readying for Supply Chain Evolution

“Supply Chainging” (no, not a typo):

Definition: noun

– the act of evolving your supply chain system to work with the times and industry       improvements.

If your supply chain business is planning on going anywhere other than down in flames, evolution is key. It’s a no-brainer that the supply chains of today are hardly recognizable in comparison to that of the supply chains of 50 years ago. Iinnovation plays a big part in supply chain evolution. In order to be the best of the best, your business must work with evolution to be the most efficient and cost effective, meaning that your processes must constantly evolve to stay ahead of the competition.

So what exactly does Supply Chainge entail? There are many factors to consider. New technology, global expansion, industry competition, and customer needs are all factors that are necessary to consider when evolving your supply chain system. Supply Chain evolution is a frequent topic of conversation as of late, Multichannel Merchant recently published an article about the evolution of the supply chain in the e-commerce age. New technology is a major factor in the changing of our supply chains, from both a business and customer standpoint.

There are certain moves your business can make to help your Supply Chainge go smoothly. Partnering with Trans International is one of them.

As stated on our website “Trans International will help you succeed by analyzing rate agreements and contracts for applicability, clarity and conformity with federal regulations. We research rail and motor classifications for current items applicable to various commodities.” We work to take you to the top of your potential and beyond.

Trans International is well-versed in supply chainging. At our beginnings, we offered post-audit services (evaluating a capital budgeting decision after implementation) but transitioned to pre-audit services (auditing a freight invoice before payment has been made) as the industry called for it. The business itself has evolved and grown as well. We have grown to become a successful Women-Owned Women’s Business Enterprise and the home of Freight Audit & Information Reporting (FAIR) customized solutions. We plan to evolve with the times to stay up to date in order to assist your company in the most effective way possible.

Supply Chainging is an ongoing process and much like Darwin’s Theory of Evolution, only the strongest and most adaptable will survive. Is your business ready for Supply Chainge?

WBENC Certification: Community and Opportunity

Fresh from attending and participating in the 2013 WBENC National Conference and Business Fair, it is difficult to deny just how proud we are of being a part of the successful Women-Owned Business community.

In many recent online discussions there has been frequent mention that women are a growing part of the supply chain and logistics/transportation industries; we believe this to be true. At Trans International, we believe in progressively diversifying the supply chain management industry to effectively represent the demographic of our supply chain community.

A Women’s Business Enterprise (WBE) is an independent business at least 51% owned and operated by 1 or more women. In our case we are 100% women-owned, a relatively new development. Started in 1975 by Thomas Schmitt, Trans International became a qualified WBE in 2007 when Schmitt’s daughters Jaime Syring and Denise Lawien bought the company from their father. Syring and Lawien began running the company without skipping a beat, stepping in as CEO and COO.

Trans International is a Johnson Controls Mentored Diversity Supplier. Johnson Controls urged TI to begin the process of applying for WBENC Certification with the goal of positioning the business for the next generation of growth and innovation. Since earning certification, TI has worked closely with Shelly Brown, Supplier Diversity Manager, on supply chain and supplier diversity best practices.

Being a WBENC Certified WBE is highly beneficial and advantageous for both the WBE itself and current or prospective clients. According to the official WBENC website certified businesses are able to use their WBENC credentials to “gain access to WBENC Corporate members, as well as a number of federal, state, and local government agencies. In addition, WBENC certified WBEs also gain access to over 10,000 other WBENC certified WBEs in order to purchase products or services and partner on joint venture opportunities”. This certification creates business opportunities and benefits both TI and our clients.

Being a WBENC Certified business also means that business with Trans International can qualify as diversity spend for clients who have government contracts and for companies with diversity spend goals. If your business has diversity spend requirements and you work with us, you can check that off your corporate “To Do” list. As a WBE, we have you covered.

WBENC Certification is a privilege that is much sought after and not easily attained. Be sure to look for the WBENC stamp of approval on the websites of certified businesses to assure authenticity. You can see the WBENC Certification logo in action on our website’s homepage.

Becoming a WBENC Certified WBE has made a huge difference in our business endeavors. We are proud to be a part of the WBE community that WBENC has created and to use those privileges to do great business.

Made in the USA

There is no better time to celebrate our company’s roots than the week of Independence Day. Trans International is proud to declare that all services we provide are performed right here in Menomonee Falls, WI.  We are 100% “Made in the USA”.  Land of the free?  Yes, a land free of overcharges on shipments!

For over three decades TI has proved to our clients that through any perilous fight, through thick and thin, our metaphorical flag will still be there.  We are dedicated to serving our ever growing list of clients.

Trans International is the perfect example of the American dream.  Founded with one client in 1975 by Thomas Schmitt, Trans International has made much progress and has seen many changes since that first invoice passed through the that first office, in a spare back room of a local freight company.  From post auditing paper bills, we have grown to electronically process, audit and pay more than 4 Million invoices per year representing over $1 Billion in freight spend.  TI has stayed in the family, currently owned and operated by Schmitt’s own daughters Jaime Syring and Denise Lawien.

Oh, say can you see what our operation could mean for your business?  We work locally, with global effect.

1.  Rather than exporting our workload, means we do everything all in one place reducing process confusion and communication issues.  We are able to provide 80 full time jobs with benefits to our neighborhood.

2.  Doing all of our business in one place gives your business a customized experience.  We understand that not all businesses function in the same way so we have made ourselves versatile and flexible to meet your needs.  This customized offering will save your business time and money.

3.  We are able to work as efficiently as possible and are completely available to work around our clients’ schedules.

4.  Although we are a southeast Wisconsin business, that doesn’t stop us from working with businesses from around the globe, from small businesses to Fortune 100 companies.  Being centralized and in one location allows for effective, efficient communication with our clients.

The bottom line: our “Made in the USA” stamp not only saves you time and money but does that through a process unique to your business created by you and your personal client services representative.  We do our business locally so that you can expand your business, one shipment at a time.

We are proud to be from the “home of the brave”.

Happy Independence Day, everyone!