While the term “audit” may seem attractive to a microcosm of organizations and professionals (such as those “profiting” from them), many recognize their need to keep organizations and professionals ethical and honest, first and foremost, accurate and organized next. The area of freight and shipping among healthcare provider organizations remains no exception. Healthcare Purchasing News asked seven logistics executives for auditing frequency of inbound and outbound freight and shipping costs. The views were mixed and spanned the spectrum.
“VPL’s philosophy and practice is that every single shipping charge, both managed and unmanaged, should be subjected to audits for legitimacy and pricing. Each managed and unmanaged freight charge is subjected to up to several dozen unique audits to ensure the shipment is appropriate for the customer and is priced according the customer’s relationship with both the carrier and the shipping supplier.
“VPL’s advanced auditing technology allows us to subject each individual shipping charge to a variety of audits, just a few of which include ensuring the appropriate carrier pricing has been applied, auditing against double freight charges, ensuring only acceptable handling fees are added to the order and, most importantly, validating that the supplier is applying the appropriate contract freight terms on each order. For example, if a customer is contractually allowed to receive delivered pricing or ‘free freight’ on standard orders, VPL can audit that charge to ensure it meets the contracted terms. If not, we can block that shipping charge before the customer would see or pay it.”
Don Carroll, Vice President, Business Development, Vantage Point Logistics Inc.
“While a full audit may not be necessary very often, a report of the expenses with a comparison to the previous month should be available monthly in order to measure the effectiveness of the freight program and monitor changes in ordering behavior. The most successful way to manage expenses is to attack it from both sides. First, by working with your shipping/freight partners to ensure that the level of service matches your true need. Second, by monitoring the activities of your team to validate that they are selecting the most appropriate shipping method for the need.”
Jake Crampton, Founder and CEO, MedSpeed LLC
“For best results, the audit process needs to be continuous across all modes of transportation. Ideally, this means audit activities are performed each time a carrier/courier invoice is received. Because of the multiple parties involved in the supply chain that touch freight — employees, suppliers, carriers, etc. — information can constantly be changing. Any time a new location, new supplier, new contract, new shipper is introduced — there is an opportunity for misalignment to occur. Audits are not only important to ensure carrier/courier charges are accurate, but also play a critical role in understanding internal behaviors about the use of transportation options by team members across the organization. The benefit of a perpetual and routine audit allows for any changes, additional charges, or misalignments to be corrected.
“This is where a 3rd party freight management company can help. They can remove the often-manual work from your team and audit all carrier/courier invoices to help ensure accuracy, resolve discrepancies and make recommendations on how to improve.
“Audit savings can drive significant cost control. An unaudited program can realize up to 10 percent of savings on transportation costs and accessorial controls.”
Melissa Laber, Senior Vice President and General Manager, OptiFreight Logistics,
Cardinal Health
“Our best-in-class partners meet quarterly to review recent supply chain performance and discuss suggestions for improving outcomes and reducing costs. Depending on the time of year, different performance indicators may surface as the priority. Ongoing collaboration and open communication with your provider is the key to a successful partnership.”
Daniel Gagnon, Vice President,
Global Healthcare Logistics Strategy, UPS
“Never. I am not a huge fan of audits. A provider should have a shipping solution that constantly provides strategic information about your shipping costs, activity, performance and compliance. This should be updated daily and be used to spot negative trends early, before they become major issues.
“TECSYS recommends our users have a weekly or monthly report that demonstrates the trends of activity, cost, compliance and performance of their transportation network. This shows them how they are doing and how their network is trending over a 6-to-12-month period. The only area that remains is where they are doing well overall, but in a very specific part of the network they are underperforming.This could be in a specific region, a specific service of a specific type of customer. Regardless, the analytics need to be drilled into somewhat to ensure this does not occur.”
Bill Denbigh, Director, Business Development and Marketing, TECSYS
“The frequency of an internal audit by a supply chain team really depends on how they are managing their freight [spending]. If the system is aligned with a reputable freight management provider who is handling shipments outside of the distribution network their freight management partner should be completing quarterly reviews of system spend and shipping patterns with supply chain. Similarly, health systems should expect the same level of review commitment from their distribution partner which further helps in providing an overall view of the freight spend of the system. A reputable freight company reviews/audits carrier spending to ensure accuracy for the healthcare system. The overall spending information is reviewed quarterly with the system.”
Gerry Romanelli, Chief Commercial Officer, TRIOSE Inc.
“It’s critical for shippers to have visibility to their costs close to real time to enable and establish a cadence for network cost monitoring. Examples vary.
Daily: Actively manage the supply chain to mitigate unnecessary costs.
Weekly: Review trends to drive week over week decision making on incremental improvements to service and cost.
Monthly: Robust actual (executed) versus budget performance metrics.
Quarterly/Bi-Annually: Market benchmarking to surgically refine carrier solution.
Annually: Defined RFP strategies tied to understanding of market conditions.”
Norman Brouillette, Vice President & General Manager of Technology and Healthcare,
Ryder System Inc.
Rick Dana Barlow | Senior Editor
Rick Dana Barlow is Senior Editor for Healthcare Purchasing News, an Endeavor Business Media publication. He can be reached at [email protected].
