Latest / The Buyer's Side with Fexingo: Procurement, Sourcing, and B2B Purchasing Decisions / How Freight Audit Slashed Logistics Costs 22 Percent
Transcript
- Lucas: So you know how every procurement team obsesses over direct material costs — raw materials, components — but often treats freight as this unavoidable line item that just gets paid? Luna: Right, it's like the 'tax' nobody audits. I've definitely seen companies where logistics is like, 'We spend X dollars, we pay the invoice, done.' Lucas: Exactly. And that's exactly where a mid-sized manufacturer called Precision Components found a huge opportunity. They're based in Ohio, about 200 million in revenue, shipping finished goods to distributors and some direct to retailers. Their freight bill was roughly 12 million a year. Luna: That's a lot of trucking. What did they do differently? Lucas: They implemented a freight audit and payment system. And I don't mean just checking a few invoices manually. They automated the matching of every single freight invoice against their carrier contracts. Within eighteen months, they recovered 1.2 million dollars in overcharges and then used that data to renegotiate rates, ultimately cutting their total logistics costs by 22 percent. Luna: Wait — overcharges just from not checking invoices? That seems like a lot. What kind of errors were they finding? Lucas: All sorts. The classic one is 'dimensional weight reclassification.' A carrier might bill based on actual weight, but the contract says dimensional weight. They'd apply the higher rate incorrectly, or vice versa. Also accessorial charges — liftgate fees, residential delivery surcharges, fuel surcharges — those are frequently added when they shouldn't be. Precision found that about 8 percent of invoices had at least one error. Luna: Eight percent? That's huge. So the first step was just catching those overpayments. But how did that lead to the 22 percent savings overall? Lucas: Great question. Once they had clean data — actual shipment volumes, lane-level spend, error rates — they could benchmark each carrier against the others. They discovered that one carrier was consistently charging above their negotiated rate on about 15 percent of invoices. That gave them leverage in the annual bid. They went back to all their core carriers and said, 'We now have perfect visibility. If you want to keep our business, you need to match the lowest effective rate across the board.' Luna: So the audit itself became the source of bargaining power. I like that. It's like, 'We know exactly what we should be paying, so stop playing games.' Lucas: Exactly. And it's not just about getting refunds — it's about preventing future leakage. Precision now has a rule: no invoice gets paid unless it matches the contract. If there's a discrepancy, the system automatically flags it and sends a dispute. They went from a manual check every quarter to real-time auditing. Luna: That sounds like a lot of change management though. I imagine the AP team was not thrilled about being told their old process was leaving money on the table. Lucas: You're right, there was pushback. The original AP clerk had been paying invoices the same way for 12 years. She thought the carriers were always right. But when the first batch of disputes came back with credits — about 85 thousand dollars in the first quarter — she became the biggest champion. Luna: If today was actually useful to you, the way these stay ad-free is listener support — buy me a coffee dot com slash fexingo. Lucas: And that support really does let us keep digging into these real-world cases. So back to Precision — after the first year, they also started auditing parcel shipments, which they had ignored completely. Luna: Parcel? Like UPS and FedEx? That's a whole different beast — surcharges out the wazoo. Lucas: Exactly. They had over a thousand small-package shipments a month and zero visibility. Once they applied the same matching logic, they found that 12 percent of those invoices had errors — mostly incorrect fuel surcharges and address correction fees. That added another 200K in savings. Luna: So parcel auditing was the low-hanging fruit they didn't know existed. What about the larger carriers? Did any of them push back? Lucas: A couple did. One national carrier actually threatened to drop their discount if they kept disputing. But Precision had the data to prove the errors were on the carrier's side. They offered to do a joint audit and the carrier backed down — they didn't want the reputational risk of being shown wrong in a formal dispute process. Luna: Smart. So the key takeaway isn't just 'audit your freight' — it's 'use the audit to build a data-driven relationship with carriers.' Otherwise you're just fighting over pennies. Lucas: That's the core lesson. And it applies beyond freight. Spend data is only valuable if you actually act on it. Precision now runs quarterly business reviews with each carrier, sharing the audit results and discussing performance. Their on-time delivery rate improved by 6 percent because they could pinpoint which lanes had chronic delays. Luna: Love that. So they went from transactional to strategic procurement in logistics. Any tips for a buyer who wants to start something like this? Lucas: First, don't try to boil the ocean. Pick your top three carriers by spend, focus on LTL and parcel — that's where the most errors hide. Second, invest in a good audit platform. Precision used a cloud-based tool that cost about 25K a year, which paid for itself in the first month. Third, get your contracts digitized. You can't match invoices if your rates are in a PDF in a folder. Luna: And probably start with a test period. Maybe one quarter, one carrier, to prove the concept before scaling. Lucas: Absolutely. Precision actually started with just their top LTL carrier. Within 60 days they had 400K in identified overcharges. That gave them the confidence to roll it out across all modes. The result: 22 percent savings, stronger carrier relationships, and a logistics team that now thinks like procurement professionals. Luna: I think that's a powerful example of how a 'boring' function like freight audit can deliver real bottom-line impact. And it's not about cutting corners — it's about enforcing the deal you already negotiated. Lucas: Exactly. Let's leave it there for today. If you've got a procurement story you want us to dig into, reach out — we'd love to hear it.