Mileage Audit Spots Excess Charges and Saves Money for Shippers

Mileage Audit Spots Excess Charges and Saves Money for Shippers

RSI Logistics audited mileage equalization charges for a shipper and found it was being charged for excess empty miles. Ultimately the 3PL helped the company save more than $50,000.

The Results

RSI Logistics audited a customer’s rail mileage equalization charges and discovered excess empty miles being charged. RSI Logistics resolved the issue, saving more than $50,000 for the customer.

The Challenge

Rail mileage equalization refers to the process of making sure rail shippers are charged fairly for the use of private tank cars, based on the actual empty versus loaded miles they travel. Since tank cars can sometimes move as non-revenue, it maintains fairness in the rail transportation industry if the empty versus loaded mileage is greater than 106%.

This is also supposed to prevent imbalances in the allocation of costs between shippers and car owners. Excess mileage invoices are presented annually for the prior year’s activity; however, sometimes shippers are caught off guard by large invoices and don’t know how to begin to audit the mileage.

One of its customers enlisted RSI Logistics to manage the process of auditing mileage equalization charges from its car owners. In the process of auditing mileage equalization, the RSI Logistics team determined the customer was being overcharged for excess empty miles.

The team analyzed a mileage equalization penalty invoice sent by a car owner and determined that the car owner was allocating excess empty miles for all tank cars that moved on a specific route.

This occurred because the railroad was routing empty cars differently than they were routing loaded cars, resulting in the customers being charged for excess empty miles. The railroad will sometimes route cars differently due to operational efficiencies at their discretion.

The Solution

Railroads provide every car owner with a report of empty and loaded mileage, along with an amount the car owner must pay. The car owners then parse the data and send similar information to each shipper that is leasing a railcar.

RSI Logistics determined that the formula the car owner was using allowed it to collect more empty mileage penalties from its customers than it was paying. The team verified with the railroad and the car owner that the shipper was being charged excess empty miles on the railroad while the car owner was not being charged for excess miles.

It is important to audit these invoices thoroughly and put measures in place to avoid surprise invoices. Measures such as monitoring aggregate loaded/empty miles reported by car owners each month and deciding where to send empty cars based on the miles of the previous loaded move are proactive ways to limit excess empty miles.

RSI Logistics helped build the case for the lessee to approach the car owner and ask for clarification, as well as a correction to the mileage equalization charges. This resulted in the car owner agreeing to the discrepancy and crediting the invoice of more than $50,000 back to the shipper.

Utilizing rail shipment history data from a rail system can help shippers audit mileage equalization charges. The efforts put forth to audit and dispute mileage equalization charges with railcar owners can result in significant reductions and savings.

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