June 19, 2024 - 7 minutes read
The Data Chain: Linking FAP and Supply Chain Visibility
End-to-end supply chain visibility is no longer a luxury but a determining factor for competitive success. A 2024 survey by Tive revealed that 89% of supply chain executives consider digital transformation a top priority, with real-time visibility at its core. This focus on visibility stems from the growing complexity and volatility of global supply chains. The message is clear: adapt or be left behind. Recent disruptions — including the COVID-19 pandemic, geopolitical tensions, and natural disasters — exposed vulnerabilities, making it clear that businesses need a comprehensive view of their operations to remain resilient and agile.
Freight Audit and Payment (FAP) solutions have long been a standard in supply chain management, providing cost control and financial insight. However, they fail to deliver the real-time, granular visibility necessary to proactively manage today’s complex supply networks. This blog post will explore the capabilities and limitations of FAP solutions, highlighting the need for a more comprehensive approach to achieving accurate supply chain visibility.
What does an FAP solution do?
FAP solutions are designed to streamline and optimize the multifaceted process of transportation spend management. They provide a structured approach to evaluating a company’s shipping procedures and identifying areas for improvement. It goes without saying that automation and centralization bring several key benefits to organizations – so what are the freight audit and payment capabilities?
- Invoice collection and consolidation
FAPs aggregate freight invoices from various carriers, consolidating them into a centralized platform for easier management. This eliminates manual collection and significantly reduces the risk of errors or lost invoices. - Freight audit
FAP systems rigorously scrutinize each invoice, verifying actual charges against anticipated charges, identifying discrepancies, and ensuring compliance with contractual agreements. This includes verifying the correct rates, validating accessorial charges, and ensuring the absence of duplicate billing. After resolving these issues, FAPs can contribute to substantial cost savings for organizations. - Payment processing
FAPs automate the payment process, ensuring timely and accurate payments to carriers. By doing so, they foster productive relationships and improve operational efficiency by reducing the administrative burden associated with manual payment processing. - Spend analysis and reporting
FAPs go well beyond mere invoice processing, providing valuable insights into transportation spend through in-depth reporting and analytics. They allow organizations to analyze spending patterns, identify cost-saving opportunities, evaluate carrier performance, and optimize shipping strategies based on data-driven insights.
Through such audits, businesses can uncover hidden overcharges, duplicate charges, and incorrect billing, ensuring they pay only for legitimate services. This enables companies to make informed decisions about their transportation partners and achieve a more efficient shipping process.
FAPs are invaluable in managing and optimizing freight costs, but their visibility capabilities are, by definition, restricted. This is because they provide a retrospective view of shipment activity, focusing on financial transactions rather than real-time operational insights.
The limitations of FAPs in supply chain visibility
Even though freight invoice audit and payment (FAP) solutions excel at managing transportation spend through invoice verification, payment processing, and cost analysis, they were never designed for achieving the real-time visibility that modern supply chains demand. This means they lack the real-time, granular operational data—like shipment location and status updates—required for proactive decision-making and disruption management. While FAP provides organizations with a clear picture of their spending, helps identify potential cost-saving opportunities, and ensures contractual and regulatory compliance, its focus on post-shipment analysis hinders the ability to address issues as they arise.
As such, organizations are often left to untangle discrepancies long after they occur, hindering a company’s ability to make agile decisions and optimize their supply chains. This retrospective “FAP-driven” view can result in missed opportunities for improvement, increased costs due to delays or disruptions, and, ultimately, a less resilient and responsive supply chain.
The problem: Limited data set
Invoice data, while vital for financial reconciliation, fundamentally differs from shipment and transportation data. Invoices can tell how much a business owes a carrier, but they don’t reveal the actual details of the shipment, such as real-time location, estimated time of arrival (ETA), potential delays, or disruptions.
The disconnect between invoice and shipment data results in the following:
- Limited operational visibility: Financial data lacks real-time shipment details, hindering proactive issue resolution and leading to delays and increased costs.
- Incomplete carrier performance metrics: Invoices do not typically provide insights into carrier performance metrics, making it difficult to evaluate carriers and make informed decisions about future shipments.
- Obstacles to general ledger (GL) automation: Missing data attributes (e.g., reference types, cost centers, or business units) in invoices prevent an automated reconciliation process between freight invoices and the general ledger, requiring manual effort and increasing the risk of errors.
The absence of a unified data set that combines financial and operational information creates significant blind spots for organizations relying solely on FAP solutions.
The problem: Data integrity
Even in 2024, achieving smooth data integration remains a challenge for many organizations. The lack of standardized formats and protocols across carriers and systems causes data integrity issues, including inconsistencies, errors, and missing information. Therefore, it requires time-consuming manual intervention to clean and consolidate data, delaying analysis and decision-making.
Freight bills are a prime example of this challenge. Although freight bills provide a breakdown of costs (including base rates, fuel surcharges, and accessorial fees) and are essential for verifying payments, they also contribute to data integrity issues. The lack of standardized formatting and potential for errors within freight bills can make it difficult to analyze transportation spend accurately and identify cost-saving opportunities.
In addition, when organizations don’t adopt a unified FAP strategy, data silos become a major obstacle. With each provider leveraging its own platform, data is scattered across multiple sources, resulting in fragmented information and limited visibility. This makes it nearly impossible to gain a comprehensive view of transportation costs, carrier performance, and overall supply chain efficiency.
The problem: Data timeliness
Invoices are often issued days or even weeks after shipments are completed, creating a significant information lag. Prolonged time delays limit the ability to proactively address issues, optimize routes in real-time, or forecast future costs accurately.
This is particularly problematic when unexpected accessorial charges drive up transportation costs. Teams then must spend time and resources tracking down explanations and supporting documentation for these additions.
To overcome these challenges, a comprehensive approach to data management is needed, one that goes beyond the capabilities of traditional FAP solutions. A solution that can integrate real-time shipment data with financial information to ensure accuracy and timeliness is essential for effective supply chain management.
Agistix: Comprehensive supply chain & transportation management with end-to-end visibility
Agistix acknowledges the shortcomings of traditional Freight Audit and Payment (FAP) solutions, surpassing mere cost management to offer a robust platform that equips businesses with unparalleled end-to-end supply chain visibility and control. By seamlessly integrating freight audit and payment with real-time visibility, Agistix transforms supply chain data into a strategic asset, driving efficiency, resilience, and growth.
With a holistic approach to visibility, Agistix helps cover four key pillars that provide a complete overview of your supply chain operations:
- Financial visibility: Accurately forecast freight spend, measure routing guide compliance, and easily compare estimated payments to invoices. Automate the order-to-cash lifecycle for streamlined financial management and identify cost-saving opportunities through detailed analysis.
- In-transit visibility: Track every shipment, regardless of its origin or mode of transportation, with Agistix’s real-time tracking capabilities. Monitor the progress of inbound, outbound, and third-party shipments, receive proactive alerts for potential delays, and make informed decisions to ensure on-time delivery.
- Transactional visibility: Gain a unified view of your entire order-to-cash lifecycle, from purchase order creation to final delivery. Agistix consolidates data from various sources, allowing you to uncover hidden costs, detect potential savings, and streamline operations across the entire supply chain.
- Data ownership: Take full control of your supply chain data with Agistix’s centralized platform. Empower stakeholders to access and add relevant information to any shipment record throughout its lifecycle. Leverage this data to improve internal reporting, enhance collaboration, and drive strategic decision-making.
Unlike traditional FAP solutions that offer a limited, retrospective view, Agistix provides real-time, actionable intelligence that enables proactive decision-making and optimization. By integrating visibility and TMS capabilities, Agistix empowers businesses to navigate complex supply chain challenges with agility.
Final thoughts
In the context of today’s volatility, a reactive approach to supply chain management is no longer sustainable. Traditional FAP solutions, while valuable for cost management, lack the comprehensive visibility required for proactive decision-making and risk mitigation.
Agistix offers a transformative solution that unifies freight audit and payment capabilities with real-time visibility. Our platform bridges the gap between financial and operational data, empowering organizations to track shipments accurately, monitor every transaction, forecast freight spend, and maintain complete control over data.
Want to experience the power of end-to-end visibility? Request a demo from our supply chain experts now.
