PRODUCTS & SERVICES


• Standard contract language — It is important to review supplier contracts and incorporate lan- guage on desired freight terms, specific to product requirements. It is important to then continuously audit the supplier’s shipping habits to ensure they are complying with these terms.


Bill Denbigh, TECSYS


• In addition to the ones mentioned earlier, I would add “Shipping as a percentage of costs of goods sold.” This data is generally available from the ERP system — how much did the item land for and how much is the pro-rated shipping? It certainly is a core aspect of the TECSYS DMS system.


Gerry Romanelli, TRIOSE, Inc.


• There are many factors to consider when reviewing a supplier’s freight expense, ultimately it comes down to ordering practices and the type of prod- uct the hospital is sourcing.


• One of the biggest drivers of freight expense is physician preference items that are ordered


outside of the normal procurement process. Freight Management companies like TRIOSE focus on a few key areas. We are referring to items that are ordered off-contact or rush order, which requires expedited shipping.


• Cost per shipment and service level are good indicators to manage visible supply chain cost but routing compliance, vendor shipping require- ments and “free freight’ are ultimate drivers of hidden expense which impact hospitals trans- portation costs.


Daniel Gagnon, UPS


• The healthcare sector overall is confronting a wave of disruptive trends. A few that come to mind include pressure to demonstrate positive patient outcomes, declining reimbursement from payers, and an empowered patient with more options. To modernize operations, industry leaders are evaluating new supply chain strate- gies and equipment.


• Traditional KPIs include total transportation charges, cost per shipment, service level uti-


Freight-shipping audit frequency tips


While the term “audit” may seem attractive to a microcosm of organizations and professionals (such as those “profiting” from them), many recog- nize their need to keep organizations and professionals ethical and honest, first and foremost, accurate and organized next. The area of freight and shipping among healthcare provider organizations remains no exception. Healthcare Purchasing News asked seven logistics executives for auditing frequency of inbound and outbound freight and shipping costs. The views were mixed and spanned the spectrum.


“VPL’s philosophy and practice is that every single shipping charge, both managed and unmanaged, should be subjected to audits for legitimacy and pricing. Each managed and unmanaged freight charge is subjected to up to several dozen unique audits to ensure the shipment is appropriate for the customer and is priced according the customer’s relationship with both the carrier and the shipping supplier. “VPL’s advanced auditing technology allows


us to subject each individual shipping charge to a variety of audits, just a few of which include ensuring the appropriate carrier pricing has been applied, auditing against double freight charges, ensuring only acceptable handling fees are added to the order and, most importantly, validating that the supplier is applying the appropriate con- tract freight terms on each order. For example, if a customer is contractually allowed to receive delivered pricing or ‘free freight’ on standard orders, VPL can audit that charge to ensure it meets the contracted terms. If not, we can block that shipping charge before the customer would see or pay it.” Don Carroll, Vantage Point Logistics, Inc.


“While a full audit may not be necessary very


often, a report of the expenses with a compari- son to the previous month should be available monthly in order to measure the effectiveness of the freight program and monitor changes in ordering behavior. The most successful way to manage expenses is to attack it from both sides.


First, by working with your shipping/freight partners to ensure that the level of service matches your true need. Second, by monitoring the activities of your team to validate that they are selecting the most appropriate shipping method for the need.” Jake Crampton, MedSpeed, LLC


“For best results, the audit process needs to be


continuous across all modes of transportation. Ideally, this means audit activities are performed each time a carrier/courier invoice is received. Be- cause of the multiple parties involved in the supply chain that touch freight — employees, suppliers, carriers, etc. — information can constantly be changing. Any time a new location, new supplier, new contract, new shipper is introduced — there is an opportunity for misalignment to occur. Audits are not only important to ensure carrier/courier charges are accurate, but also play a critical role in understanding internal behaviors about the use of transportation options by team members across the organization. The benefit of a perpetual and routine audit allows for any changes, additional charges, or misalignments to be corrected. “This is where a 3rd party freight management company can help. They can remove the often- manual work from your team and audit all carrier/ courier invoices to help ensure accuracy, resolve discrepancies and make recommendations on how to improve. “Audit savings can drive significant cost con- trol. An unaudited program can realize up to 10


percent of savings on transportation costs and accessorial controls.”


Melissa Laber, Cardinal Health “Our best-in-class partners meet quarterly to


review recent supply chain performance and discuss suggestions for improving outcomes and reducing costs. Depending on the time of year, different performance indicators may surface as the priority. Ongoing collaboration and open communication with your provider is the key to a successful partnership.”


Daniel Gagnon, UPS “Never. I am not a huge fan of audits. A


provider should have a shipping solution that constantly provides strategic information about your shipping costs, activity, performance and compliance. This should be updated daily and be used to spot negative trends early, before they become major issues. “TECSYS recommends our users have a weekly


or monthly report that demonstrates the trends of activity, cost, compliance and performance of their transportation network. This shows them how they are doing and how their network is trending over a 6-to-12-month period. The only area that remains is where they are doing well overall, but in a very specific part of the network they are underperforming.This could be in a specific region, a specific service of a specific type of customer. Regardless, the analytics need


lization and on-time delivery performance. However, leaders in supply chain are seeking data-driven insights to help improve inventory management, data collection and their regula- tory compliance to reduce expense.


Don Carroll, Vantage Point Logistics, Inc.


• Suppliers have been remarkably consistent in their shipping preferences and methodology. The most significant changes impacting pric- ing have been occurring on the carrier side. Both FedEx and UPS have been adjusting their non-freight costs; specifically, by alter- ing their dimensional weight calculations and adding to, or changing, their accessorial fee calculations.


• When reviewing total freight costs by supplier we generally look beyond just the delivery service level and weight. We pay particular attention to the size of the boxes being used to ship the product and any additional charges the carriers might be charging that could easily be avoidable by either the buyer or supplier.


Page 52 hpnonline.com • HEALTHCARE PURCHASING NEWS • August 2018 51


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