3613 the Perfect Invoice - A Vision on How to Improve Invoice Accuraccy Between Rail Carriers and...

7/29/2019 3613 the Perfect Invoice - A Vision on How to Improve Invoice Accuraccy Between Rail Carriers and Shippers

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3613, The perfect Invoice - a vision on how to improveinvoice accuracy between rail carriers and shippers

Hanna Gradzka, Solution Manager Transportation & Logistics, SAP AG

Bernd Lauterbach, Senior Solution Architect, Transportation & Logistics, SAP AG

[


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Real Experience. Real Advantage.

[ Learning Points

What are the actual problems that railways and the payment

parties of their shippers / customers are facing in terms of

correct and comprehensive invoices

SAP solutions to prepare and present invoices fromforwarder/carrier to customer and how this can be a first step

towards better invoices and settlement

Visions on utilizing SAP TM to bring invoice creation, and bill

presentment at carrier side into sync with settlement and

matching at customer side to head towards a perfect invoice


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[ Shipper-Carrier Interaction and Invoice Accuracy

Order Acceptance Shipment ProposalShipment

Placement

Logistics

OperationsShipper Invoicing

Order

Manage-

ment

Execution

Planning

Subcon-

tracting

Operations

and Control

Rail Order and

Operations Processes

Receive customerorder

Manage orderacceptance

Simulate shipmentoptions

E2E routing proposalfor shipper order

Delivery proposal

Delivery decision

Placement oftransport requests

Allocation ofcapacities

Confirmation oftransport requests

Prepare deliveriesfor shipment

Prepare and executeroad haulage and railmovement

Invoice freight toshipper

Planning

Carrier

Shipper

Shippers Customer

Happily pay invoice

Set data foundation

for invoice:

Requested data

Enhance invoice data

with events and

actual master data /

transactional data

Create and matchinvoices based on

complete events

history, actual data,

acutal conversion

rates and taxes


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[

ISSUES AROUND FREIGHTINVOICES AND PAYMENT

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[ General InfoNorth American Logistics (USA)

Business logistics costs $1.21T in 2010, 10.4% increase from 2009 Logistics as percentage of GDP

Transport Modes

Truckingrevenue rose 5.7%, not enough to reverse losses; 16% capacity removed;

when demand rebounds may not be able to respond

Railrevenue posted 21.8% gain due to success in raising rates; carloads increase

7.5%, intermodal volume increase 14.2%; sector is in very strong and in very goodshape on capacity

OceanRevenue rose 14.1%; suffering from overcapacity; spot rates dropped 40-50%

over Q4 2010

Airrevenue rose 11.2%; air cargo capacity however has shrunk 12%

Source: 22ndAnnual State of Logistics Report

8,30%7,80%

9,40%9,90%

0,00%

2,00%

4,00%

6,00%

8,00%

10,00%

12,00%

2010 2009 2008 2007


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[ Freight Bill Payment & Audit Issues

Freight Bill Payment Issues: Cost to process freight bills internally (due to administrative overhead , dispute settlement, etc):

$4 to $12 dollars per freight invoice, average $8 per freight invoice

It used to be common for carriers not to be paid for 45 days because of manual processing delays.That put tremendous financial stress on carriers.

If problems go unresolved for months, the carrier is effectively lending the shipper money.

Trend: to outsource Freight Bill Payment and Audit to 3rd Party Cost savings offered by outsourcing to freight auditing companies is about 2-5% of total freight bill

derived from

invoice errorswrong rate authorities used, duplicate invoices, etc

Carriers service level infringements

Rate & Service Visibility Years ago, shippers could go to a tariff system and see the cost of shipping from point A to point

B. Today they cant do that because every carrier has its own rates.

Historically, 4% to 6% of freight services went unbilled. Transactions fell through the cracks orproblems dragged on unresolved because of inaccurate or incomplete information.

Source: http://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-finances -in-ship-shape
http://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-financeshttp://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-financeshttp://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-financeshttp://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-financeshttp://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-financeshttp://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-financeshttp://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-financeshttp://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-financeshttp://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-financeshttp://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-financeshttp://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-financeshttp://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-financeshttp://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-financeshttp://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-financeshttp://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-financeshttp://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-finances


7/39Real Experience. Real Advantage.

[Jobs in Freight Transportation Arrangement (USA)

Source: U.S. Bureau of Labor Statistics 2010 NAICS 488500 - Freight Transportation Arrangement; http://www.bls.gov/oes/current/naics4_488500.htm

8%

5%1%

8%

57%

1%

20%

Management Occupations

Business and FinancialOperations Occupations

Computer and MathematicalOccupations

Architecture and EngineeringOccupations

Legal Occupations

Arts, Design, Entertainment,Sports, and Media Occupations

Arts, Design, Entertainment,Sports, and Media Occupations

Protective Service Occupations

Building and Grounds Cleaningand Maintenance Occupations

Personal Care and ServiceOccupations

Sales and Related Occupations

Office and AdministrativeSupport Occupations

Installation, Maintenance, andRepair Occupations

Transportation and MaterialMoving Occupations

6%6%

1%

4%

14%

4%

1%3%28%

31%

1% 1%

Purchasing Agents, ExceptWholesale, Retail, and FarmProducts

Compliance Officers

Cost Estimators

Human Resources, Training,and Labor RelationsSpecialists, All Other*

Logisticians

Management Analysts

Training and DevelopmentSpecialists

Market Research Analystsand Marketing Specialists*

Business Operations

Specialists, All Other*

Accountants and Auditors

Financial Analysts

Financial Specialists, AllOther

Still a very labour-intensive and paper-based business: Office and admin support (57%); Transportation and

material movement (20%); Sales related (8%); Mgmt (8%); Business and Financial operations (5%)

Business and Financial Operations (5% of total): Accountants and auditors (31% or 2,580); Business

operations (28% or 2330 ); Logistics (14% or 1220)

Note: there are more accountants and auditors than logistics employees!

All Jobs in Freight

Transportation

Arrangement

Business and Financial

Operations area of Freight

Transportation Arrangement
http://www.bls.gov/oes/current/naics4_488500.htmhttp://www.bls.gov/oes/current/naics4_488500.htm



[ Freight Audit

Freight audit is the process of examining, adjusting, and verifying freight bills for

accuracy Freight costs

Costs incurred by the merchant in moving goods, by whatever means, from one place

under the terms of contract of carriage. In addition to transport costs this may

include such elements as packing, documentation, loading, unloading, and transport

insurance

Complexity of Freight Cost Calculations and Freight Audit Rising freight costs: freight costs can make up 10% of an organizations expenditure;

drivers: volatility in fuel prices, uncertainty of demand, complexity of freight quotes

Freight cost calculations are vulnerable to human and process errors hence requires

proper auditing to ensure that the organization does not overpay for services it did

not incur

Forwarder freight rates are usually maintained in multiple spreadsheets and usuallyeach forwarder has a different freight rate format to the customer. Shippers also try to

maintain their own freight rates tables which may not be up-datedRecipe for dispute

Freight rate calculationscomplex and error-prone

Freight audittedious process; done either in-house or outsourced to 3rd party



[ Freight Audit Trends

Outsourced Freight AuditSome companies dont have the resources to do the freight audit hence outsource to 3rd party

A freight bill payment company receives its clients freight bills directly from the

carriers.

When the bills are received, either via EDI or manually, they are entered into

the contractors system, providing immediate visibility.

Once the bills are entered, they are audited for accuracy. Auditors verify the

bills validity, mileage, duplicate payments, accessorial charges, and use of correct

tariffs.

After auditing, the charges are coded and reconciled, and the bills are paid.

Self-billing

Some companies have gone forward with a process to pay freight bills. Thecustomers calculate their freight cost themselves and instruct the freight

forwarders to invoice using credit notes. This process transfers the

responsibility to correct freight calculation from the customer to the

forwarder.



[

Master Data

Different master data

used as base forcalculation

Waybill

Missing data has been defined /completed by carrier

Different source of events

Invoice Wrong rates calculated/expected

Distance between O/Ddifferent base

Unclear accessorial charges

Rate Effective Date varied

Exchange Rate Date Wrong events as base for

calculation

Missing transparency

Touch Points and

Dispute Causesbetween

Shippers and

Carriers

Dispute causes

Quote/Contract

High complexity

Different source of influencingmaster data

Accessorials

Freight transportationrates

Demurrage

Switching Charges

Fuel Surcharges

Domestic Reposition

Weighing

Storage Charges

Handling Charges



[

Complexity Factors

Different communication

channels

Many parties and opinionsinvolved

Lots of information to gather and

take into account

Complex to evaluate the "real"

reason

Its a money issue

Dispute Impacts

Impacts

on Process Efficiency No clear responsibilities

No predefined escalation rules

No monitoring of process and duration

No process control

Long resolution cycles

Progress in resolving not measurable

Not all involved parties have access to all relevantinformation

on Customer

No clear status reports - not "one voice

Decreasing satisfaction

on Cash-Flow

Late cash-flow (liquidity, interest)

No partial payments possible

No partial dunning locks possible

"Incorrect posting in General Ledger (Revenue vs.Doubtful Revenue)

on System

Support of multiple channels



[ Disputed InvoicesPain Points

High DSO (Days Sales Outstanding)

Difficulty in predicting cash flow

High cost of solving disputes

Disputed invoices can indicate issues in the customer

relationship due to Quality problems

Pricing

Account relationship



[

BETTER INVOICES AND BILLPRESENTMENT

SAP Components

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[ SAP Solutions with Improved Invoice Transparency

SAP offers several components which support an enhanced

invoice flexibility and transparency

Convergent Invoicing (invoice creation)

FSCM Biller Direct (bill presentment)

Financial Customer Care (dispute & collection management,

dunning)

Preparation and presentation of invoices in a customer centric

way

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[ Customer-Centric Transportation Solution with SAP

CRMTM

ECC / CIEM

SAP Standard Transportation Solution Platform

Customer Focus

Operational

Excellence

Product

Standardization

Customer Exception

Excellence

Customer

Proximity

Customer

Financial Care

Global Service

Product Catalog

Service

Configuration

Proactive customer

information

360 Customer

Information

Standard

and Customer

Operating

Procedures

Rules Compliance

Multilevel Visibility

Incident

Management

Exception Solution

Knowledge Sharing

Full Invoice Control

Dispute

Management

Interaction History

Solution Excellence delivered through component activation, extension, and integration



[ Convergent InvoicingBilling Functionality

Convergent Invoicing is a Solution for High Volume Billing and

Invoicing

Invoicing consolidates billing streams coming from multiple

systems

Freight-related charges to be billed

Event-based accessorial charges to be billed Any other charges to be billed

Flexible control of the way how billing is done by utilization of

contract accounts

Control of billing cycles and invoice convergence Control of billing forms and communication paths

Control of payment terms

Convergent invoicing allows to create customer invoices that

meet the SLAs of a customer



[ Convergent InvoicingBilling Functionality (2)

Convergent Invoicing is a Solution for High Volume Billing and

Invoicing Business related, pre-configured invoicing functions for:

Calculation of interest, account maintenance, charges and discounts

Time and event based deferred revenues

Invoice Cycle Management Pre-defined offsetting of credits

Credit Card payments with direct clearing

Collective Bills and Invoice lists

Tax calculation

Bill print out / interface to print systems

Standard interface to FI-CA and FI-GL, CO, CO-PA

Full RM-CA functionality for posted invoices

Extract of billing and invoicing details to BW



[ Charge Calculation to Cash

Contract Order revenue

Draft Invoice

to customer

Order

Settlement

Contracting &

Charge Management

Covergent

Invoicing

Draft Invoice Data

1) Basic Sea Freight2) BAF

3) CAF

4) Terminal Handling

5) Demurrage

1253,00 USD221,20 USD

163,88 USD

189,70 USD

211,30 USD

Billable Item

Billable Item

Billable Item

Billable Item

Customer

Order

Logistical context

POL: CNSHA, POD: USSPQ

Container type: 42GP

Container ID: EASU7777779

Commodity: 5270

Charges1) Basic Sea Freight

2) BAF

3) CAF

4) Terminal Handling

1253,00 USD

221,20 USD

163,88 USD

189,70 USD

Billable Item

Finance

Invoice 1

31.03.2011

Invoice 2

14.04.2011

Invoice 3

30.04.2011

Other Legacy Systems

Transfer

Additional

Charges

Accessorial

Charges

Other

Charges

Charge

Calculation



[ Draft Invoice in SAP TM

19

Charge calculation in TM

Charge item details for long haul charges



[ Billable Items and Invoice Display in SAP CI

Logistical context data for each billable

item available



[ Financial Customer Care

Financial Customer Care is a composite application (based on

ERP and CRM), which integrates FI-CA processes into theCRM Interaction Center Web Client.

The processes are grouped in the following scenarios:

1. Financial Customer Care:

Financial Fact Sheet, Account Balance Overview Dunning History, Payment Search

2. Collection Management:

Triggering of collection process and Collection Fact Sheet

Payment (credit card, debit memo, ...) and Installment Plan

Deferral and Promise2Pay

3. Dispute Management:

Wrong Invoice

Missing Credit Memo

21



[ Dispute in IC WebClient

Dispute can be created on bill, (bill line item level).

Dispute contains:

Customer master data, order/contract data

Disputed objects and their disputed amounts

Related objects attached as information

Correspondence

Status /Priority

Notes

Adjustment Requests

Routing capabilities, action triggers, ad-hoc or automated

correspondence

Creation of adjustment request with relation to the dispute

Disputed bills are marked with an icon22



[ Dispute Management

Functions at a glance Business case: IC agent is empowered to answer a low-value dispute positively

Load and display invoices from (external) billing systems in IC, including invoice

line details

Create adjustment request for a complete invoice, an invoice item, or a single

billable item



[Dispute: Example with Adjustment Request on BIT level

24

Direct adjustment of charges billed to

customer in an invoice can be done


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[ SAP Biller Direct (FSCM)

SAP Biller Direct is part of SAP Financial Supply Chain

Management and provides functions for Electronic Invoice

Presentment and Payment (EIPP)

Using SAP Biller Direct, invoice recipients can see their account

balance with the biller and look at their bills, credits or payments

Invoice recipients can initiate payments or download bills intotheir accounts payable system

Invoice recipients can dispute bills from the Internet and

collaborate with the biller

SAP Biller Direct enables real-time integration between the SAPbackend system and the Internet without any data redundancies

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[ Advantages for the Biller

Billing

Lower cost of billing with no printing and postal charges

Use of open communication and data standards (HTTPS, XML)

Customer participation in electronic business without EDI

Payment Processing Efficient processing of payments and exceptions

More precise cash management and improved liquidity planning

Faster invoice approval and payments by customers

Better explanation of payment deductions

Integration

Data integration with accounts receivable and cash management

Integration with other business processes, e.g. dispute and

collections management

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[ Advantages for the Bill Receipient

Payments

Simplified and secure processing of electronic payments using365/24 access to the Internet

Control over the time of payment and management of the

outgoing cash flow

Favorable payment conditions can be better exploited

Payment details can be easily analyzed

Invoices

Fewer accounting and settlement errors

Comprehensive data analysis is possible

Immediate access to invoice copies (no archiving necessary)

Integration

No changes of existing business processes

Only Web Browser needed27


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[

28

SAP FI-CAFinancial Customer Care / Biller Direct


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[

Master Data

Different master data

used as base forcalculation

Waybill

Missing data has been defined /completed by carrier

Different source of events

Invoice Wrong rates calculated/expected

Distance between O/Ddifferent base

Unclear accessorial charges

Rate Effective Date varied

Exchange Rate Date Wrong events as base for

calculation

Missing transparency

Touch Points and

Dispute Causesbetween

Shippers and

Carriers

Added Transparency in Disputes with CI / FCC

Quote/Contract

High complexity Different source of influencing

master data

Accessorials

Freight transportationrates

Demurrage

Switching Charges Fuel Surcharges

Domestic Reposition

Weighing

Storage Charges

Handling Charges


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[

OPTIONS TO GET CLOSERTO A PERFECT INVOICE

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[ Visions to Get Closer to a Perfect Invoice

External Rating Service of Carriers called by Shippers

Rating with synchronized Contracts

Pain Points:

Master data

Commodities Distances

Services

Shipping conditions

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[ Integration Options between Shippers and Carriers

SAP

ERP

SAP

TM

SAP

ERP

SAP

TM

Integration

Infrastructure(s)

(e.g. Crossgate)

Shipper/Customer Rail Carrier / LSP

Shipper with

own

Transportation

Planning

Capabilities

Shipper w/o

own

TransportationPlanning

Capabilities

SAP

TM1

2


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[ 1: External Rate Determination by Carrier

SAP ERP SAP TM SAP TM

Order-based

Transport

Request

Order

Object

Dlvy-based

Transport

Request

Freight

Order

Forwarding

Order

ChargeCalculation

EngineCharge 1

Charge 2

Charge 3

Shipper/Customer Carrier

Charge 1

Charge 2

Charge 3

Rate Matching

Shipper creates a freight order and calculate charges according to own contract data

Freight order is sent to the carrier

Carrier receives order, calculates expected charges and responds with charge list

Shipper does a rate matchingto discover discrepancies or takes over carrier rates

Charge 1

Charge 2

Charge 3 Charge

parameterizat

ion

ExternalRating

Service

Functional extension required

[


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[ Rate Detemination by Carrier: Benefits and Coverage

Benefits

Master data synchronization can be kept minimal Synchronization of utilized charge elements simplifies rate matching

Rate information of carrier can be received at an early stage

Disputes and payment delays can be avoided by early agreement

on deviating charge elements Coverage

Process to a certain extend supported by TM standard

Freight order transmission and external charge calculation via

external service Missing functionality:

Parallel capture of own and external rates

Rate matching of carriers vs. shippers calculated rates

Preacceptance of carriers rate not available

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[


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[ 2: Synchronized Contract Information

3

SAP ERP SAP TM SAP TM

Order-based

Transport

Request

Order

Object

Dlvy-based

Transport

Request

Freight

Order

Forwarding

Order

Charge

Calculation

Engine

Charge 1

Charge 2

Charge 3

Charge 1

Charge 2

Charge 3

Contract,Rate

&MasterData

Synchronization

Contract

Rates

Master Data

Contract

Rates

Master Data

Charge

Calculation

Engine

Shipper/Customer Carrier

Contract and rating data is synchronized from carrier to shipper

Freight order rating is done using the synchronized contract data

Carrier sends execution updates to stay in sync on events and actuals

Execution

upd

ates

[


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[ Synchronized Contracts: Benefits and Coverage

Benefits

Rate information of shipper and carrier can be kept in sync

Disputes and payment delays can be avoided as both parties use

the same rating process

Full transparency including rate drilldown

Coverage Rating process in TM is covered in standard

Master data synchronization required e.g. for

Commodities, equipments,

Service levels, shipment conditions and accessorials Missing functionality:

Master data synchronization

Contract, rating guideline (TCCS), and rate synchronization

Use of rating templates could ease the synchronization problem

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[


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[ Other Ways Forward

Use of 3rd party invoice matching services Continuous financing of 3rd party service required

Establishing an invoice clearing house with master data and rate

harmonization

Clearing house provides service for master data harmonization,invoice conversion, and dispute management

Rail industry has an organization up and running which provides

such services within the industry (Railinc)

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[

38

Key Learnings

Customer invoice mismatches due to various factors are still a

serious issue in transportation industry

Handling of disputes and outstanding payments are a .

SAP offers various tools to support higher transparency,

customer proximity, and invoice accuracy

Convergent invoicing

Biller direct

Financial customer care

SAP Transportation Management provides a flexible foundation

to create better customer invoices

Furthermore, extensions to SAP TM and extended integration

mechanisms offer the chance to remove most invoice

mismatches between carrier and shipper

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[

[

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3613 the Perfect Invoice - A Vision on How to Improve Invoice Accuraccy Between Rail Carriers and...

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