Cass Freight Index of Expenditures and Shipments
(Base Month = Jan. 1990)
Payment and audit providers are pioneering the documentation and standardization of international payment processes that too long were left to the unsupervised mercies of suspect foreign agents and agencies, Miner said. As a result, shippers are more frequently listing precisely which services and accessorials they will pay — and which they will not.
2. 5
2.0
1.5
1.0
1/08 2/08 3/08 4/08
Source: Cass Information Systems
product cost,” Timmer said.
The freight payment and audit company helps with carrier management and capacity in a highly fragmented market, one in which the largest for-
Expenditures hire fleet in the world accounts Shipments for only about 1 percent of the
market, said Timmer.
Combining transportation
management systems with
their payment and auditing
technology allows freight
5/08 6/08 7/08 8/08 9/08 payment and audit providers
to align thousands of carri-
ers with millions of shippers
spending billions of transpor-
tation dollars. For a long time,
shippers were mistrustful
of sending out their billing
information or relying on
third-parties to communicate
and store that information
electronically.
“The quality of the technology today is significantly better,” Regan said.
Shippers have also realized that by using a third-party, they can avoid the technical difficulties imposed by trying to match their own electronic data interchange and other online systems with each and every carrier, instead leaving the translation to knowledgeable outsourced providers.
This has raised the technology bar, as systems integrators stitch together the network that increasingly allows a free but secure flow of information.
“The fun of this is that our customers are giving us the opportunity to be a valuable support function, and inviting us to step up to the plate,” Regan said. “They wanted to do it before but their capabilities weren’t caught up to their desires.”
Information is the currency in which freight payment and audit providers traffic.
As in any industry, individual companies will survive based on their technological prowess, analytical proficiency, market connections and sometimes even luck. But their currency will retain its value.
“People are looking for every opportunity to better negotiate with their carriers, to know where they are,” Friedman said. “We see large shippers not achieving the same level of rates as small shippers.
“And you have to ask how that happens,” he said. “If someone is a better negotiator, has better information … most carriers are willing to negotiate with you.”
Carrier management plays a big role in freight payment services and that discipline is growing in importance as financial pressure on service providers grows.
Some 2,000 trucking companies went out of business in the United States in the first half of 2008; trailer registrations in the second quarter were down one-third compared with the same quarter in 2007, leaving capacity tighter than it has been in several years, although experts say capacity still is running ahead of demand.
“It’s really been unfortunate because a lot of these carriers have been highly leveraged,” Miner said. The credit crisis that burst from Wall Street onto Main Street starting in September took down some carriers who suddenly couldn’t get working capital for their otherwise healthy businesses.
As capacity shrinks, more carriers are imposing terms and conditions on schedules and routes that leave shippers scrambling to find reliable transportation, where before they could post loads with a phone call.
“People are just dying to be able to make modal shifts, because if they can do that they can save much more from making modal shifts … than they can by negotiating with their carriers,” Friedman said.
Managing capacity for shippers has become more complex lately as the cycle of expanding and contracting capacity has shortened from five or six years to three or four years, according to Christopher Timmer, vice president of sales and marketing at LeanLogistics.
This wasn’t such a problem three or four years ago when transport costs were still a line item beneath a line item in someone’s operating budget. But as fuel prices spiked and overseas inflation and wages ratcheted up in some of the world’s most popular offshore manufacturing locations, capacity became critical “as the cost of transportation is so much more of the
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