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.

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?

The Logistics of Logistics

The Logistics Department at Trans International averages over 29 years of experience in the transportation logistics industry. Without overtly tooting our own horn, one could say that we know what we are talking about when it comes to logistics (alright fine, toot toot!)

So what exactly do our Logistics professionals do?

Logistics is the process of moving goods and products to a place of need or consumption. Logistics professionals must know all aspects of transportation. Here at Trans International our professionals ensure that those goods and products are delivered in the most efficient and cost effective way possible. They develop new supply chain solutions to optimize shipper use of resources for the purpose of reducing cost and improving service and efficiency. Our team, as a third party resource, is in constant contact with carriers to negotiate freight rates and services on the behalf of our clients.

At TI, our Logistics Consulting Services Include:

  • Rate and Discount Negotiations, create or review contracts and agreements for complete coverage and limit of liability
  • Carrier Bid Packages
  • Rate research and studies
  • Benchmarking. Trend Reporting and Analysis
  • Maintenance of rate agreements, contracts, surety bonds, & insurance certificate
  • Review freight descriptions and packaging for freight class optimization
  • Handle motor carrier bankruptcy issues
  • Evaluate and give visibility to accessorial charges
  • Monitor carrier performance to service standards
  • Alert you to important logistics industry information that may affect your operation
  • Loss and Damages Claims Services

The National Motor Freight Classifications, or the logistics “Bible” as some may call it, can be very useful to logistics professionals. It may be used to universalize language and terminology across the globe. A common example is pop vs. soda; some may say pop while some may say soda, in the end they mean the same thing but this must be communicated by our logistics professionals. They universalize the language to minimize confusion and for client and carrier can be guaranteed to be on the same page.

Logistics Consulting is a very important aspect to any supply chain. We are here to save you time and money by making your supply chain as cost-effective and efficient as possible.

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.

Proudly Showing Our Stripes

As of July 5th, 2013, the unemployment rate for veterans returning from deployment is 7.6%.  Trans International believes our veterans deserve a warmer welcome than that.  Trans International supports Clear Channel’s “Show Your Stripes”, an initiative that encourages hiring veterans by connecting unemployed veterans to businesses that are looking for capable, strong job candidates.

The “Show Your Stripes” homepage features many success stories, job postings, and the resumes of veterans who are on the job hunt.

Trans International has a success story of our own:

Andrew Jensen was recently promoted to Project Manager in Client Services at Trans International, LLC in Menomonee Falls, WI.  Andrew will be heading a major new initiative, leading a Trans International team providing FAIRFreight Audit & Information Reporting services to one of our largest clients.

Andrew joined the Marine Corps in July of 2000, because, as he puts it, “someone said I couldn’t do it”.  Within the first 5 minutes of speaking with Andrew, his Marine Corps pride is evident.   In his words, the Marine Corps are the first ones in and the last ones out, laying the groundwork and then staying behind to make sure all efforts are sustained.

Andrew started as a Field Radio Operator in Twenty Nine Palms, California.  He was then stationed in Okinawa, Japan as a part of 7th Communications Battalion.   From Okinawa Andrew went to Marine Security Guard School in Quantico, VA.   After graduating, he was assigned to the American Embassy in Sana’a, Yemen and went on to assignments at American Embassies in Istanbul, Turkey and Tbilisi, Georgia.   Andrew also served on security details for Former Secretary of State Colin Powell in Damascus, Syria in May 2003 and for former President Bush and Secretary Powell in Ankara, Turkey in July 2004.   Andrew had the honor of organizing the Marine Corps Birthday Ball in Tbilisi in November 2004.

Andrew saw and did more in his 5 years of active duty service than many of us will encounter in a lifetime.  Andrew uses the initiative and discipline he learned in the military to drive his work ethic and succeed in the world of business.   We at Trans International could not be more proud to work alongside such a motivated, conscientious veteran.

The main difficulty for veterans in finding jobs, in Andrew’s eyes, is trying to relate their military experience to experience that is relevant to American business. Andrew feels fortunate that he is able to effectively translate the depth of his experience.  For those who need help, the VA offers resume workshops that provide invaluable job search assistance.

After serving, Andrew made use of his GI Bill benefits and enrolled at the University of Wisconsin – Milwaukee (UWM), majoring in International Development, with a concentration in Middle Eastern and African Studies. Andrew’s goal was to work as a Refugee Coordinator for USAID, putting language skills and cultural awareness to use for refugees from the Middle East, South Asia, and East Africa.

As a Project Manager here at Trans International, Andrew puts his extensive language skills to work; Trans International has clients from all over the globe.   Andrew is able to make them feel comfortable and speak with them on their terms.  Andrew is a huge asset to the Trans International team.

While the Armed Services and the average American business may seem to operate in completely different spectrums, Andrew has found a great balance.   He has taken the communications and project management skills that he learned from his military service and used them to great effect here at Trans International.  While we have no intention of giving up one of our most valuable employees, we wish to all that they could see in action just how great it is to “hire smart, hire vets”.

Trans International is a certified Women’s Business Enterprise that specializes in FAIR Freight Audit and Information Reporting services. Our core services include Domestic and International Freight Bill Audit, safe and secure Carrier Payment Options, Digital Freight Bill Imaging and Storage, Logistics Consulting, Business Intelligence Reporting, Data Collection and Mining, and Loss and Damage Claims Handling. Be sure to check out our website for more information.

Trans International could not be happier to have such a dedicated and talented individual and hope to get the chance to celebrate Andrew and what he has done for this country even more so in the future. We wholeheartedly support the efforts of “Show Your Stripes” and employing our nation’s veterans.