Accounts payable processes in logistics may seem simple, but the paper trail associated with them can quickly turn into a tsunami.
by Danny Schaarmann, CEO & President, xSuite North America
Compared to many things, accounts payable (AP) processes in the logistics industry are relatively easy to explain. In the simplest terms, they involve shipping something from Point A to Point B, and sometimes via Point C.
Regardless of what that something is that needs to be delivered — a massive machine or thousands of face masks — the process is essentially the same. Typically, one company picks up the goods via truck, another company transports the goods over a long distance by ship or plane, and finally, a third company sees that the goods are safely delivered to their final destination.
To ensure this all goes as smoothly and efficiently as possible, many organizations choose to hire a logistics company to manage the process.
Let’s say an organization needs to ship goods from North America to Europe. To make that happen, the logistics company first contracts with a local company to pick up the organization’s goods and deliver them to a shipping port in Los Angeles. Another contract is then arranged for a shipping company to transfer a 40-foot container to a via point in Hamburg, Germany. And for the final step, the logistics provider contracts a transport company in Hamburg to pick up and deliver the goods to its final destination in Vienna, Austria.
A relatively simple process, right? While it may seem that way, the paper trail associated with it can quickly turn into a tsunami. Just think about the types of documents that need to be generated in the above scenario. For starters, there’s a customer order for shipment, three to four different purchase orders for various service providers, and a bill of lading for customs in the USA, Germany and Austria.
It doesn’t stop there. That shipping container? To optimize the cost of shipping, it was also filled with goods from several other customers, all of which of course are going to different places. To manage that process, the logistics provider must contract a warehouse in Germany to split the freight for all the various destinations. This creates the need for a whole other set of critical documents, such as customs documents and purchase orders.
But we’re not done yet. There’s still the matter of all the service providers involved. Understandably, they want to get paid for their services on time and they want to be able to quickly submit billing documents with their invoices. This is usually handled as a collective invoice for several shipments, and (assuming there were no other problems along the way) it’s one last headache the logistics provider must handle as part of the financial settlement process.
With all of that in mind, it’s easy to see how a simple transfer of goods can make AP departments feel as if they are literally drowning in documents. Indeed, they need someone to throw them a life preserver.
Automation to the rescue
The simple fact of the matter is that without scanning and workflow technologies, the only way to manage these processes is by throwing more and more people at the problem. In other words, massive staffing and massive costs.
But here’s the thing. Take a close look at most customer and supplier documents. What you will find is that the shipping number, unlike most other industries, is one of the most important references there is. It is the key to how logistics companies organize and reference their orders.
This is precisely what keeps many logistics companies from embracing AP automation. Their orders are organized and referenced in a unique way, and they are afraid the system simply won’t be able to handle the process accurately, which could lead to all sorts of chaos for their business and their customers.
But what they don’t realize is that automation technology has come a long way. Today’s intelligent software systems are able to establish a relationship between all relevant positions on documents. Essentially, they perform a three-way match to ensure purchase orders, goods receipts and invoices are linked and checked for any errors or discrepancies. Through customization, this standard process in accounts payable can be adapted to the specific requirements of the logistics industry and the documents can be matched based on the shipping number as a reference.
AP automation solutions can help logistics providers optimize all steps required for data capture and data storage, while intelligent workflows automatically route complete documents and divert any erroneous documents for clarification. These types of solutions also provide integrated archiving of data and documents, meaning all information can be found quickly and easily.
In other words, with automation, paper archiving — and the abundance of paper in general — can become a thing of the past. And logistics providers can breathe easier.