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Puzzling – FAP and Freight Claims
FAP (Freight Bill Audit & Payment) and Freight Claims are two transportation industry processes and software solutions that are often overlooked. Some shippers tend to discount these software solutions because their main focus is on procuring common carrier agreements, managing their carrier base, securing carrier capacity, and executing the shipping (if applicable, via a TMS). Yes, these are integral to your transportation operations but let us not lose sight of both the FAP and Freight Claims software’s benefits. All the pieces fit together like a jigsaw puzzle—procurement & contracting, carrier management, shipment execution, FAP, and freight claims.
What do these two have in common? The major four commonalities on which I’ll focus are:
Your relationship with the common freight carrier
You or your customer’s warehouse’s or facility’s space effectiveness
Your employee’s productivity
Your customer’s satisfaction
How do FAP and Freight Claims fit into the puzzle? Consider the below scenario where your FAP and Freight Claims processes are not established, followed, and managed using a software solution. Do any of these sound like your operations?
You ship a load with the product in pristine condition.
When the load is delivered and/received by the customer, the product is damaged.
The customer emails or calls to notify you, and you:
Advise the customer to hold it until the damaged material can be dispositioned (if it is not properly dispositioned, the carrier can deny the freight claim). The customer is not happy because they have to wait for another shipment AND this is taking up their valuable dock space. (Imagine other tangents where instead, they decide to ship it back to you or they trash it. Both require more work from your resources.)
Are frustrated because this is a common occurrence with this carrier but only on this lane (origin-destination pair)
You instruct the customer to email the pictures and completed paperwork to you.
You submit a claim via the carrier’s website which can take months to resolve. This includes manually following-up with phone calls and emails.
You notify your FAP team to not pay the carrier invoice. And they write the reminder on a sticky-note and put on their desk or monitor.
Your procurement team engages their strategic carrier contact to resolve the overall issue.
At this point, this scenario has negatively impacted all four bullets at the start of this entry.
Imagine another layer of complexity if the carrier, after weeks of research, responds that per their packaging expert, it is your faulty packaging. That is another tangent that would tie up your operational resources!
When manually reviewing every carrier’s paper invoices for completeness and accuracy (Is it our bill? Are the payment terms correct? Is the carrier rate correct? Etc.) your FAP team reviews all the sticky-note exceptions before approving or rejecting them. Once approved, see the below manual steps vs. utilizing an integration with a FAP software
FAP emails the Excel file to your Accounting team for their review
Accounting will code and manually enter data into the financial system
The carrier is not happy because they are not getting paid, so they stop accepting ALL your tenders and cease the relationship. This is extreme but can happen in a carrier’s market.
Your teams start scrambling to find a carrier(s) to
Cover existing and near-term transactional shipments – Transportation Operations
Service all contracted lanes in question – Procurement
Where does this scenario leave you?
Your customer has damaged product on their dock.
Your freight claim is still in process and you manually have to manage it.
Your FAP team is manually reviewing invoices.
Your carrier relationship no longer exists. Your customers on these lanes may experience shipment delays.
Your Transportation organization is frantically working to secure carrier capacity, which may result in higher transportation costs.
There are more scenarios including but not limited to the governing laws and other facets such as
Loss or damage on the inbound load, within your facility, and outside/on your property
Contesting denied claims
Obtaining and applying reimbursement /claims payments
Manually matching invoices to actual shipment activity
Multiple parties involved in invoice review & approval; operations, procurement, FAP team, the carrier
Manually managing the initiation of the payment schedule, which becomes more cumbersome if your carriers have different financial payment terms
Do you see how intertwined all these processes are? Hopefully this gives you an understanding of how important and far reaching the impacts FAP and Freight Claims are. FAP and Freight Claims software solutions target automating the manual steps, eliminating duplicate tasks, and empowering your processes. In turn, this can reduce resolution time, improve your company’s productivity, and preserve your customer & carrier relationships. So, are you missing these software puzzle pieces?
Stay tuned for more blogs that continue to explore the transportation industry’s systems.