Best-in-Class Supply Chains Won't Overlook Freight Payment
As a shipping professional, you play an important role in your company's physical supply chain. But did you know your role is just as important to your company's financial supply chain?
In today's global supply chains, encompassing multiple transportation and financial partners, all stakeholders need visibility into transactions, parameters and results of the financial supply chain. This is particularly germane when looking at logistics, freight and freight spend. By delivering faster end-to-end cash flow and seamless transactions, you can improve your organization's working capital, reduce risk, and enhance margins and efficiencies.
Getting a balanced view of overall freight payments can improve two critical supply chain measures: Cash-to-Cash Cycle Time and Perfect Order Fulfilment. They demonstrate how well supply chain goals are met, and how freight payment factors into the equation.
Cash-to-Cash Cycle Time: Internal Measure
The Supply Chain Council (SCC) defines Cash-to-Cash (C2C) Cycle Time as the time it takes for an investment to flow back into the company after it has been spent.
High-performing supply chains minimize the number of days between when suppliers are paid (cash out) and when payment is received from customers (cash in).
The bottom line: The shorter the C2C cycle, the more cash is accessible, and the more net working capital is available for investment. In today's business environment, it is critical to keep working capital healthy and flowing smoothly. This includes transportation spend.
Perfect Order Fulfillment > Customer-Focused Measure
The SCC defines Perfect Order Fulfillment (POF) as the percentage of orders meeting flawless delivery performance and product quality, with complete and accurate documentation and no delivery damage.
POF is a binary decision; it's either perfect or it's not. It is achieved if order fulfillment, delivery, documentation and quality are perfect, period. This perfection inherently extends to all documentation and transactions within the financial supply chain as well: order pricing, order confirmations, invoices, cash application, freight invoices, letters of credit, export documentation, etc.
An important piece of POF—one that has been underappreciated for too long—is making sure the delivery is perfect: on time, shipped with the right carrier, charged at the right amount and paid correctly.
Putting It All Together
C2C and POF measurements show the importance of looking at the supply chain as a whole—physical and financial. An electronic freight payment system provides direct support in improving C2C and POF measurements by organizing and providing clarity to the freight aspects of sourcing and acquisition, as well as distribution.
- Improving C2C. A freight payment program with a trade finance feature lengthens your payment terms with freight carriers, without renegotiating contracts. Trade finance allows carriers to be paid according to their original terms while you pay later. When Net 30 becomes Net 60 or greater, imagine how that positively impacts your C2C cycle.
- Improving POF. An electronic freight payment solution speaks to the delivery portion of the quest for POF, providing granularity into tracking the time and accuracy elements of freight payment, invoicing and cash application steps in the order process.
A best-in-class financial supply chain has best-in-class freight audit and payment to provide the visibility and control needed to meet the complex challenges of managing global freight spend. When you add trade finance to optimize working capital, the result is an end-to-end freight payment solution that strengthens your financial and physical supply chains.
To further explore the impact of transportation costs on critical supply chain measures, download Freight Payment: The Final Link in End-to-End Supply Chain Visibility.