[
3613, The perfect Invoice - a vision on how to improve
invoice accuracy between rail carriers and shippers
Hanna Gradzka, Solution Manager Transportation & Logistics, SAP AG
Bernd Lauterbach, Senior Solution Architect, Transportation & Logistics, SAP AG
[ 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 from
forwarder/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
Real Experience. Real Advantage.
[ Shipper-Carrier Interaction and Invoice Accuracy
Shippers Customer
Shipper
Set data foundation
for invoice:
Requested data
 Receive customer
order
 Manage order
acceptance
 Simulate shipment
options
Carrier
Order Acceptance Shipment Proposal
 E2E routing proposal
for shipper order
 Delivery proposal
 Delivery decision
 Placement of
transport requests
Shipment
Placement
 Allocation of
capacities
 Confirmation of
transport requests
Enhance invoice data
with events and
actual master data /
transactional data
 Prepare deliveries
for shipment
Logistics
Operations
 Prepare and execute
road haulage and rail
movement
Create and match
invoices based on
complete events
history, actual data,
acutal conversion
rates and taxes
 Happily pay invoice
Shipper Invoicing
 Invoice freight to
shipper
Rail Order and
Operations Processes
Planning
Real Experience. Real Advantage.
Order
Management
Execution
Planning
Subcontracting
Operations
and Control
[
ISSUES AROUND FREIGHT
INVOICES AND PAYMENT
Real Experience. Real Advantage.
4
[ General Info – North American Logistics (USA)
•
•
Business logistics costs $1.21T in 2010, 10.4% increase from 2009
Logistics as percentage of GDP
12,00%
10,00%
9,40%
8,30%
8,00%
9,90%
7,80%
6,00%
4,00%
2,00%
•
Transport Modes
0,00%
2010
2009
2008
2007
• Trucking – revenue rose 5.7%, not enough to reverse losses; 16% capacity removed;
when demand rebounds may not be able to respond
• Rail – revenue 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 good
shape on capacity
• Ocean – Revenue rose 14.1%; suffering from overcapacity; spot rates dropped 40-50%
over Q4 2010
• Air – revenue rose 11.2%; air cargo capacity however has shrunk 12%
Source: 22nd Annual State of Logistics Report
Real Experience. Real Advantage.
[ 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 errors – wrong 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 can’t do that because every carrier has its own rates.
• Historically, 4% to 6% of freight services went unbilled. Transactions fell through the cracks or
problems dragged on unresolved because of inaccurate or incomplete information.
Source: http://www.inboundlogistics.com/cms/article/freight-payment-outsourcing-getting-finances -in-ship-shape
Real Experience. Real Advantage.
[Jobs in Freight Transportation Arrangement (USA)
Management Occupations
All Jobs in Freight
Transportation
Arrangement
Business and Financial
Operations Occupations
Computer and Mathematical
Occupations
Architecture and Engineering
Occupations
Legal Occupations
8%
20%
5%
1%
8%
1%
57%
Arts, Design, Entertainment,
Sports, and Media Occupations
Arts, Design, Entertainment,
Sports, and Media Occupations
Protective Service Occupations
Compliance Officers
Cost Estimators
1%
1%
6%
1%
6%
31%
14%
1%
3%
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!
Source: U.S. Bureau of Labor Statistics 2010 NAICS 488500 - Freight Transportation Arrangement; http://www.bls.gov/oes/current/naics4_488500.htm
Real Experience. Real Advantage.
Management Analysts
Training and Development
Specialists
4%
28%
Human Resources, Training,
and Labor Relations
Specialists, All Other*
Logisticians
4%
Building and Grounds Cleaning
and Maintenance Occupations
Personal Care and Service
Occupations
Sales and Related Occupations
Office and Administrative
Support Occupations
Installation, Maintenance, and
Repair Occupations
Transportation and Material
Moving Occupations
Purchasing Agents, Except
Wholesale, Retail, and Farm
Products
Business and Financial
Operations area of Freight
Transportation Arrangement
Market Research Analysts
and Marketing Specialists*
Business Operations
Specialists, All Other*
Accountants and Auditors
Financial Analysts
Financial Specialists, All
Other
[ 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 organization’s 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 usually
each 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-dated Recipe for dispute
• Freight rate calculations – complex and error-prone
• Freight audit – tedious process; done either in-house or outsourced to 3rd party
Real Experience. Real Advantage.
[ Freight Audit Trends
• Outsourced Freight Audit
Some companies don’t have the resources to do the freight audit hence outsource to 3 rd 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 contractor’s 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. The
customers 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.
Real Experience. Real Advantage.
[ Dispute causes
Waybill
 Missing data has been defined /
completed by carrier
 Different source of events
Master Data
 Different master data
used as base for
calculation
Accessorials
 Freight transportation
rates
 Demurrage
 Switching Charges
 Fuel Surcharges
 Domestic Reposition
 Weighing
 Storage Charges
 Handling Charges
Real Experience. Real Advantage.
Touch Points and
Dispute Causes
between
Shippers and
Carriers
Quote/Contract
 High complexity
 Different source of influencing
master data
Invoice
 Wrong rates calculated/expected
 Distance between O/D –
different base
 Unclear accessorial charges
 Rate Effective Date varied
 Exchange Rate Date
 Wrong events as base for
calculation
 Missing transparency
[ Dispute Impacts
Impacts
…on Process Efficiency
Complexity Factors
 Different communication
channels
 Many parties and opinions
involved
 Lots of information to gather and
take into account
 Complex to evaluate the "real"
reason
 It‘s a money issue







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 relevant
information
…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

Real Experience. Real Advantage.
Support of multiple channels
[ Disputed Invoices – Pain 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
 …
Real Experience. Real Advantage.
[
SAP Components
BETTER INVOICES AND BILL
PRESENTMENT
Real Experience. Real Advantage.
13
[ 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
Real Experience. Real Advantage.
14
[ Customer-Centric Transportation Solution with SAP
Customer Focus
Product
Standardization
Global Service
Product Catalog
Service
Configuration
Customer
Proximity
Operational
Excellence
Proactive customer
information
Standard
and Customer
Operating
Procedures
360° Customer
Information
Rules Compliance
Customer Exception
Excellence
Customer
Financial Care
Incident
Management
Full Invoice Control
Exception Solution
Knowledge Sharing
Dispute
Management
Multilevel Visibility
Interaction History
Solution Excellence delivered through component activation, extension, and integration
SAP Standard Transportation Solution Platform
CRM
Real Experience. Real Advantage.
TM
EM
ECC / CI
[ Convergent Invoicing – Billing 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 SLA’s of a customer
Real Experience. Real Advantage.
[ Convergent Invoicing – Billing 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
Real Experience. Real Advantage.
[ Charge Calculation to Cash
Covergent
Invoicing
Other Legacy Systems
Additional
Charges
Other
Charges
Contracting &
Charge Management
Contract
Order revenue
Customer
Order
Billable Item
Billable Item
Billable Item
Draft Invoice
to customer
Billable Item
Billable Item
Order
Settlement Transfer
Charge
Calculation
Logistical context
Finance
Draft Invoice Data
1) Basic Sea Freight
1253,00 USD
2) BAF
221,20 USD
3) CAF
163,88 USD
4) Terminal Handling
189,70 USD
5) Demurrage
211,30 USD
POL: CNSHA, POD: USSPQ
Container type: 42GP
Container ID: EASU7777779
Commodity: 5270
Charges
1) Basic Sea Freight
2) BAF
3) CAF
4) Terminal Handling
1253,00 USD
221,20 USD
163,88 USD
189,70 USD
Accessorial
Charges
Real Experience. Real Advantage.
Invoice 1
31.03.2011
Invoice 2
14.04.2011
Invoice 3
30.04.2011
[ Draft Invoice in SAP TM
Charge calculation in TM
Charge item details for long haul charges
Real Experience. Real Advantage.
19
[ Billable Items and Invoice Display in SAP CI
Logistical context data for each billable
item available
Real Experience. Real Advantage.
[ Financial Customer Care
 Financial Customer Care is a composite application (based on
ERP and CRM), which integrates FI-CA processes into the
CRM 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
Real Experience. Real Advantage.
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 icon
Real Experience. Real Advantage.
22
[ 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
Real Experience. Real Advantage.
[Dispute: Example with Adjustment Request on BIT level
Direct adjustment of charges billed to
customer in an invoice can be done
Real Experience. Real Advantage.
24
[ 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 into
their 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 SAP
backend system and the Internet without any data redundancies
Real Experience. Real Advantage.
25
[ 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
Real Experience. Real Advantage.
26
[ Advantages for the Bill Receipient
 Payments
 Simplified and secure processing of electronic payments using
365/24 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 needed
Real Experience. Real Advantage.
27
[ SAP FI-CA– Financial Customer Care / Biller Direct
Real Experience. Real Advantage.
28
[ Added Transparency in Disputes with CI / FCC
Waybill
 Missing data has been defined /
completed by carrier
 Different source of events
Master Data
 Different master data
used as base for
calculation
Accessorials
 Freight transportation
rates
 Demurrage
 Switching Charges
 Fuel Surcharges
 Domestic Reposition
 Weighing
 Storage Charges
 Handling Charges
Real Experience. Real Advantage.
Touch Points and
Dispute Causes
between
Shippers and
Carriers
Quote/Contract
 High complexity
 Different source of influencing
master data
Invoice
 Wrong rates calculated/expected
 Distance between O/D –
different base
 Unclear accessorial charges
 Rate Effective Date varied
 Exchange Rate Date
 Wrong events as base for
calculation
 Missing transparency
[
OPTIONS TO GET CLOSER
TO A PERFECT INVOICE
Real Experience. Real Advantage.
30
[ 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
Real Experience. Real Advantage.
31
[ Integration Options between Shippers and Carriers
Shipper/Customer
1
2
Shipper with
own
Transportation
Planning
Capabilities
Shipper w/o
own
Transportation
Planning
Capabilities
Real Experience. Real Advantage.
SAP
ERP
Rail Carrier / LSP
SAP
TM
SAP
TM
Integration
Infrastructure(s)
(e.g. Crossgate)
SAP
ERP
SAP
TM
[ 1: External Rate Determination by Carrier
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 matching to discover discrepancies or takes over carrier rates
Shipper/Customer
Carrier
SAP ERP
SAP TM
SAP TM
Order
Object
Order-based
Transport
Request
Freight
Order
Charge 1
Charge 1‘
Charge 2
Charge 2‘
Charge 3
Charge 3‘
Rate Matching
Functional extension required
Real Experience. Real Advantage.
Forwarding
Order
External Rating
Service
Dlvy-based
Transport
Request
Charge
parameterization




Charge 1
Charge 2
Charge 3
Charge
Calculation
Engine
[ 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
Real Experience. Real Advantage.
34
[ 2: Synchronized Contract Information



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
Shipper/Customer
Carrier
SAP ERP
SAP TM
Execution
updates
Order
Object
SAP TM
Order-based
Transport
Request
Dlvy-based
Transport
Request
Freight
Order
Forwarding
Order
Charge 1
Charge 2
Charge 1
Charge
Calculation
Engine
Charge 2
Contract
Rates
Master Data
Real Experience. Real Advantage.
Charge 3
Contract, Rate
& Master Data
Synchronization
Charge 3
Charge
Calculation
Engine
Contract
Rates
Master Data
35
[ 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
Real Experience. Real Advantage.
36
[ 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)
Real Experience. Real Advantage.
37
[ 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
Real Experience. Real Advantage.
38
[
]
 Thank you for participating.
Please remember to complete and return your
evaluation form following this session.
For ongoing education on this area of focus, visit the
Year-Round Community page at www.asug.com/yrc
[
Real Experience. Real Advantage.
SESSION CODE: 3613
39