[

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.

[ 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 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

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 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

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
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

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 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

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

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.

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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