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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 Create and match invoices based on complete events history, actual data, acutal conversion rates and taxes
Happily pay invoice

Set data foundation for invoice: Requested data

Enhance invoice data with events and actual master data / transactional data
Prepare deliveries for shipment

Shipper

Receive customer order Manage order acceptance

Simulate shipment options

Delivery decision Placement of transport requests

Order Acceptance Shipment Proposal

Shipment Placement
Allocation of capacities Confirmation of transport requests

Logistics Operations
Prepare and execute road haulage and rail movement

Shipper Invoicing
Invoice freight to shipper

Carrier

E2E routing proposal for shipper order Delivery proposal

Rail Order and Operations Processes

Planning

Order Management

Execution Planning

Subcontracting

Operations and Control

Real Experience. Real Advantage.

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% 8,00% 6,00% 4,00% 2,00% 9,40% 8,30% 7,80% 9,90%

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 cant 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

Business and Financial Operations area of Freight Transportation Arrangement

Purchasing Agents, Except Wholesale, Retail, and Farm Products Compliance Officers

Cost Estimators

1%

1% 6% 1% 6% 4%

8% 20% 1%

5%

1% 8%

Arts, Design, Entertainment, Sports, and Media Occupations Arts, Design, Entertainment, Sports, and Media Occupations Protective Service Occupations 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

Human Resources, Training, and Labor Relations Specialists, All Other* Logisticians

31%

14%

Management Analysts

57%

4% 28% 1% 3%

Training and Development Specialists Market Research Analysts and Marketing Specialists* Business Operations Specialists, All Other* Accountants and Auditors

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

Financial Analysts

Financial Specialists, All Other

Real Experience. Real Advantage.

[ 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 organizations 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 dont 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 contractors 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 Quote/Contract High complexity Different source of influencing master data

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

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 Its 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 No clear status reports - not "one voice Decreasing satisfaction Late cash-flow (liquidity, interest) No partial payments possible No partial dunning locks possible "Incorrect posting in General Ledger (Revenue vs. Doubtful Revenue) Support of multiple channels

on Customer

on Cash-Flow

on System

Real Experience. Real Advantage.

[ 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

Customer Proximity

Operational Excellence

Customer Exception Excellence

Customer Financial Care

Global Service Product Catalog

Service Configuration

Proactive customer information 360 Customer Information

Standard and Customer Operating Procedures Rules Compliance Multilevel Visibility

Incident Management Exception Solution Knowledge Sharing

Full Invoice Control Dispute Management 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 SLAs 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

Other Legacy Systems
Additional Charges
Other Charges

Covergent Invoicing
Billable Item
Billable Item Billable Item Billable Item Billable Item Finance

Contracting & Charge Management

Contract Customer Order
Charge Calculation
Logistical context
POL: CNSHA, POD: USSPQ Container type: 42GP Container ID: EASU7777779 Commodity: 5270

Order revenue

Draft Invoice to customer

Order Settlement Transfer

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

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.

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[ 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.
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[ 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.

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[ 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.
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[ 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 Quote/Contract High complexity Different source of influencing master data

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

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 Shipper with own Transportation Planning Capabilities Rail Carrier / LSP

SAP ERP

SAP TM

SAP TM

Shipper w/o own Transportation Planning Capabilities

Integration Infrastructure(s) (e.g. Crossgate)

SAP ERP

SAP TM

Real Experience. Real Advantage.

[ 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 SAP ERP
Order Object

Carrier SAP TM

SAP TM
Order-based Transport Request Dlvy-based Transport Request Freight Order

Charge parameterization

Forwarding Order

External Rating Service

Charge 1 Charge 2 Charge 3

Charge 1 Charge 2

Charge 1 Charge 2

Charge Calculation Engine

Charge 3

Charge 3

Rate Matching
Functional extension required

Real Experience. Real Advantage.

[ 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
Carrier SAP TM
Execution updates
Freight Order

Shipper/Customer SAP ERP

Order Object

SAP TM
Order-based Transport Request Dlvy-based Transport Request

Forwarding Order

Charge 1 Charge 2 Charge 3 Charge Calculation Engine

Charge 1 Charge 2 Charge 3

Charge Calculation Engine

Contract Rates Master Data

Contract, Rate & Master Data Synchronization

Contract Rates Master Data

35

Real Experience. Real Advantage.

[ 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

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]
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SESSION CODE: 3613

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