Optimizing Freight Accruals, Vendor Chargebacks, and Green Supply Chains

Freight accruals track transportation costs not yet billed, impacting financial ledgers and requiring constant oversight for accurate accounting.

### Sustainable Strategies for Modern Supply Chains
* 🌱 Green logistics is becoming a vital aspect of supply chain management as companies aim to **reduce environmental impact, fuel costs, and distribution methods**.
* 🚗 Design decisions play a crucial role in green practices, such as creating products with **sustainable materials and life cycles**.
* 🏭 Building **efficient, modern, and sustainable factories** helps reduce **energy consumption, waste**, and provide **safer workspaces**.
* 🚚 Distribution strategies, like **shipping consolidations and shipment optimization**, can significantly **lower shipping costs and carbon footprints**.
* ♻ Product recovery has gained importance, with consumers wanting to know **how to dispose of products sustainably**. Companies like Reebok and SodaStream have integrated **eco-friendly practices** into their business models.
* 📉 Chargebacks are a common challenge faced by suppliers, with fees accounting for **up to 13% of a retailer's revenue**. Implementing best practices and leveraging technology, such as a Transportation Management System (TMS), can help **reduce chargebacks**.
* 💸 Accurate accounting for freight accruals is essential, as it involves recognizing transportation costs when incurred, not necessarily when paid. However, using **fixed percentages based on averages** can expose businesses to **financial risks**.
* 🎤 "Transtech 2020," a supply chain vision and innovation conference presented by Aborn and Company, will feature discussions on **AI, automation, blockchain, and future-proofing the supply chain**. The event will bring together speakers from the logistics and technology sectors to explore the **evolving needs of the supply chain**.

[Music] You're listening to Consulting Logistics presented by a born and company. I am your host, Tim Duner. Thank you for joining us today. Did you all have a wonderful Thanksgiving? Did you travel with my family? We rotate every year between my parents' place and my in-laws. This year, we had Thanksgiving right down the road in Boston at my parents' place, and it was a wonderful time. In fact, I think I ate more this Thanksgiving than I have in any other previous Thanksgiving, quite a testament to my mom's cooking. Fantastic stuff. Thank you, Mom. You know what? Fortunately, it wasn't a long ride home as I was diagnosed with a legit food coma and prescribed my loosest pair of Adidas workout pants, which irony of ironies are both the best pants to work out in as well as the best pants to do absolutely nothing in. Speaking of stuffed, our mailbag. I'm loosening up the belt on that. We've got questions this week about freight accruals, vendor chargebacks, and green supply chains. But first, an announcement.

and I'm excited to bring this one to you because on October 10th, 2019, a born and company presents Transtech 2020, a supply chain vision and innovation conference. This event is the first of its kind in Boston. Join our panel of speakers from the worlds of logistics and technology as we discuss the modern needs of the supply chain and the merger between the physical and digital footprint that Freight creates. We'll be talking about AI, automation, and autonomous vehicles, blockchain, data purity, and capture, future-proofing the supply chain, market conditions, transportation management systems, and so much more. Head on over to transtech2020.com for registrants and sponsor details. You can also email me directly at t.dinner@abornandco.com. I'm organizing the event, I'd be happy to hear from you and give you details as they come through. All right, let's get right to it, let's get to the letters and learn something new. Right now, our first inquiry comes in from Brian C. in Wareham.

Massachusetts where him called the Gateway to the Cape. Brian, I have a question for you first though. Where does the Cape officially begin? Is it once you get across the bridge? And I ask you this because I was in Orleans a few years ago at the salty dog and I almost saw a couple of guys get into blows over whether or not Wareham is officially considered part of the Cape. So maybe you can write me back and settle that one once and for all. Anyway, Brian writes, Hi Tim, huge fan of the podcast. It's really helped me get through some things. Well, okay, I've been looking online for info about freight accruals but Google hasn't been much help. Can you walk me through accruals? Well, Brian, first off, glad I could help you get past whatever it was that you needed to get past. And accruals, sure, I can riff on accruals. And just a heads up, if you're jogging, driving, getting jacked at the gym, put the pencils down. All of these answers.

will be transcribed and posted as articles at a born and koat-dot-com slash blog. Or just click the links in the show notes. And with that brace yourself young Simba, here comes the information. Accounting for Freight accruals is a complicated process that shouldn't be reduced to simple percentages. It doesn't matter what vertical a business is in, if a company procures and transports Freight, there's bound to be uncertainty regarding how to account for cost of goods along with their shipping cost. One way that companies keep track of this is with the aforementioned freight accruals. Quite simply, Freight accruals are used to keep track of the costs associated with the transportation of goods that have yet to be billed by the carrier. A lot of companies will accrue for freight based on a set percentage of cost of goods sold or COGS. This allows accounting teams to deal with a crude Freight cost like an expense account. Following the accrual method of accounting, expenses are recognized when they are incurred, not necessarily when

they are paid. Be aware, though, freight accruals are the opposite of prepaid expenses. While prepaid expenses should represent assets on the balance sheet, accruals or liabilities. Here's how it works: let's say a company considers freight spend to be 10 percent of their cost of goods on a given shipment. 10% of the total COGS would be set aside. On the debit balance, decreases would be noted as credits, while increases would be noted as debts. Since freight costs were almost never stable, and the percentage used to factor them is typically based on averages, many businesses are exposing themselves to financial risk and unnecessary work on the back end of the shipment. Although freight rules may seem complex, they can be handled similar to most other business expenses. The key difference is that accounting for freight accruals requires constant updating and oversight. However, with good practices, companies are rewarded with accurate financial ledgers. There are two main drivers for the lack of transparency in the cycle of a freight shipment. Those would be one

lack of visibility dirty data outdated technology no TMS things like that that are not allowing for departmental visibility especially between accounting and the transportation department. And number two well this kind of falls on you no accounting but it really is a systemic thing. It's just poor billing practices which are things like inconsistent billing cycles lack of internal controls and again insufficient external oversight. So what can we do well the best practices such as using a TMS transportation management system can help your organization work any more effective scale to increase shipment visibility recognize revenue quicker and provide clarity on services that have been performed but not yet billed. Working with a TMS that has EDI API connectivity will help your team understand when your shipments have been received by their customers. At that point you know the title of goods has been transferred and you can safely recognize the revenue. This becomes critically important if your company needs to report financials at scheduled intervals such as monthly quarterly or annually. Furthermore knowing when a shipment has been received by a consignee can help firms

accrue for the freight. So, if a financial team knows when the goods have been delivered, they can proactively reach out to the carrier for an invoice. Knowing your assets' cost is knowing your assets' value. Since freight can account for a substantial portion of the total cost of goods, it should go without saying that freight accruals and their actuals need to be accurate. This means not just knowing the final invoice cost, but making sure those costs are as low as possible before your P.O. is even generated. An optimized freight accounting process can save significant time, money, and help ensure the accuracy of your books. Accruals are another step towards optimization as they reveal the true nature of your cash inflows and outflows. Brian, I hope that helped you out on the hows and whys of accruals. If I missed the mark, email me, let me know, answer that question about Wareham, and I do apologize in advance or in post-advanced or after the fact here or in advance before these next questions because I do have a bit of a cold.

that's coming through on the microphone. My apologies. I am doing my best to power through. Excuse me. Our next question comes in from onus G who hails from Virginia Beach, Virginia. Just mentioned that cold earnest well Virginia Beach that sounds delightful right about now especially after some of the weather we've been having. Full disclosure though I do love being near the beach and being able to see the water but you can the sand not a fan of actually sitting on the beach or laying in the Sun which you know would come to a huge shock if you saw me in person. Anyway earnest asks we're trying to reduce our chargebacks and have historically just looked at them as a cost of doing business. How our chargebacks assessed and what are a few things that we can do to reduce them. Great question ernest. I'll ride this wave and I think I can do a few or more than a few. Here's eight eight ways to reduce chargebacks in your vendor compliance program. If your vendor chargebacks are increasing you're not alone brick-and-mortar

retailers like Walmart and Target, as well as online vendors such as Amazon, continue to increase vendor chargeback fines, something that Ernest is most definitely noticing on his end. I imagine as warehouse management and EDI systems have become more sophisticated, so has the ability for retailers to identify which shipments are arriving that aren't compliant with vendor routing guides and SOPs. We talk about tech all the time and how shippers should be using tech to their advantage. Well, one of the reasons they should is because vendors most certainly are using tech to their advantage. In fact, this growing trend of fee-based chargebacks isn't limited to the Giants of retail anymore. Actually, according to Supply Chain 24/7 (supplychain247.com), these chargebacks are so common they can account for up to thirteen percent of a retailer's revenue and millions in cost to vendors. Chargebacks aren't going away. This profit-draining reality only serves to further reduce your bottom line as additional fees and fines are

added to your products landed cost, it behooves any supplier to audit their current vendor chargebacks to discover where and when they're getting hit. A properly managed vendor compliance program cannot only help to fight and overturn these chargebacks, it can work towards reducing and eliminating them entirely. So what are the eight? Here we go. Here are eight ways to reduce the chargebacks. The first one, audit. In order to avoid chargebacks, you first need to identify them by auditing your invoices. The five most common chargebacks are: late missing ASN, missing invalid GS-11, 2/8, USC 128 labels, that ticketing, order fill rates, early or late shipments. Come up with a set of internal metrics that will go towards eliminating these problem areas and isolate the most common ones that you're getting hit with. Number two, cost. How much are you being charged? What is your exposure to future fees and fines? And what's an acceptable percentage of chargebacks for your company? Before you can fix the problem, you'll need to quantify it. Work with

accounting to review cost directly related to invoice reductions. Once you know how much trouble you're in or it could potentially be in, you can start forming best practices to gain control of these areas of your supply chain. Number three: team define who is responsible for your vendor compliance program. One issue that many companies have is that there's no direct department for handling charge backs. While logistics, sales, and accounting all have a hand in invoicing at various stages, shippers that have a dedicated vendor chargeback owner perform best against their peers. Ultimately, a true cross-functional team with hands and IT finance logistics distribution transportation merchandising, etc., should be involved. Now may also be a good time to work with or consider working with 3PLs and for piell's with a team of this scope. A program managed by an outside party could help to bridge the communication between departments. Number four or four is the carrier's themselves. The number one reason for charge backs are late or early deliveries. So you, the shipper, it is imperative that you select truckers who can remain in compliance.

with the needs of your retail partners, a great trucking rate may look fantastic at first. But if goods are being delivered at the wrong time, in the wrong order, with the wrong equipment, to the wrong dock, or with labels on the wrong side, you're going to be facing a litany of avoidable chargebacks, therefore killing that great rate you thought you were getting. It's also important to make sure your carriers are following the proper procedures for full truckload and less than truckload shipments. Bad carriers cost you money and ruin retail relationships. Number five, technology vendor compliance programs and the scorecards are graded against are no longer simply about document transfer. Retailers expect their partners to use and be proficient with modern inventory management tools. After early late deliveries, improper ASN (those are advanced shipping notice) violations account for the second-most chargebacks. A properly implemented and administered EDI, which is your electric data interchange program, will automate data transfers both internally and with your customers. This will allow both you and your customers to see and know where

their inventory is at any given time, and when more should be expected. Moving on to vi relationships, while chargebacks may make up 13% of a retailer's profit, most aren't using chargebacks as a profit center. That's because their goal is to increase their own efficiency as well as that of their partners, and to keep their shell stock with hot items. Most suppliers should make the effort to reach out to their retail partners and review their practices and routing guides. Let them know that you are rewriting your SOPs and carrier instructions and want to be compliant with their standards, especially if this is a retailer you're in danger of losing. And the reason why is this opens up the dialogue and creates an opportunity to collaborate and build relationships. You may also want to consider setting up a quarterly conference call to review scorecards and discuss any changes in policy. A little communication can go a long way towards minimizing chargebacks 7 benchmark. Once you have all of your ducks in a row and you're seeing progress in eliminating chargebacks.

obverse your own internal metrics. It is now time to benchmark your program against others. Is your EDI up to snuff? How are your carriers performing versus industry? Do you have proper inventory visibility compliance? In a world filled with strict rules and best practices, a well-conducted benchmark won't just review how closely you're following these rules and if you're keeping to those best practices. It will also see how your entire vendor compliance program is performing against the industry. Our final one number eight challenge. Now that you have a system in place and have viewed your chargebacks, you might start seeing fees that simply don't even belong there. At that point, it may be time to throw the challenge flag. In order to get chargebacks reversed, you're going to have to prove that the documentation you provided was accurate, available, and served to your customer. After you've identified where your charges are coming from, begin documenting the process that results in those fees so you can present a case against them. Since fees are nearly always triggered automatically, it may take slight process correction to avoid.

them simple issues like pallets being stacked or unloaded improperly. Labels turned in instead of out or truckers forgetting to log in can all result in these fines. In addition, retailers themselves are not immune to mistakes. Mislabel scans, not logging truckers out, and misplaced inventory are all things that can lead to chargebacks, which are not your responsibility. And the better your system is, the easier it is to win these challenges and see these problem areas. Being vendor compliant is no longer just a headache; it's a necessity for all shippers, suppliers, vendors, and carriers. Improving and optimizing your own supply chain may be a byproduct of a properly managed vendor compliance program. Each retailer has its own standards that shippers need to be compliant with. What's compliant for Target simply may not be compliant for Walmart. Since there is no singular standard for vendor compliance, most vendors require solutions tailored to specific customers. So, there was a bit there earnest as I mentioned. This is again gonna be written out. You can find it at a born and koat-dot-com slash blog.

be a full article with that transcribe for you. With that said, let's move on to one more. This question comes in from Ashley K out of Baltimore, Maryland. Wonder what sides of the Flacco versus Jackson QB controversy Ashley's on. Probably neither as she's not even worried about the Ravens right now. Nope, Ashley wants to save some real birds. Her question is this: Yo Tim, your show is okay. Hmm, okay. Yeah, that's okay. Something I do. She continues on, I've even found it informative in the past. Right. These compliments are coming on. I don't know, rapidly. But you guys don't have much on the environment or the environmental impact of the supply chain. What's up with that? Well, Ashley, you're 100% correct. We've been remiss in our coverage of the environmental impact that the supply chain has. But that's gonna change right now. So let's talk about that. Let's talk about some sustainable supply chain practices. In my research, here's five ways companies are thinking green.

logistics. Prior to the last decade, the discussion about green logistics has often been segmented from traditional supply chain management. As concerns about environmental impact, fuel cost, and distribution methods have come into the purview of the public eye, the way that companies operate their supply chains is starting to change, which is a great thing. I have young kids, and I would love to have a nice, beautiful world for them to grow up in, just like you, Ashley. But let's face it, there is even a bit of a stigma attached to the term 'green supply chain' as if or synonymous with the regulatory clutter, limited options, complicated logistic strategies, and additional costs and delays. Fortunately, the methodology behind green supply chains is being rethought, and the positive impacts are going beyond corporate PR and environmental altruism. The results are finding their way to the bottom of the balance sheet. Thinking green in the context of supply chain optimization means reviewing all aspects of a product's lifecycle. As customers and companies become more conscious of green practices, the planning and management of each link of the supply

chain is open to review those areas that they're reviewing are number one. Design it doesn't matter if you're making cars or software. The drafting table is the best place to start when you're trying to make improvements. An automobile manufacturer deciding on fuel efficiency and hybrid engine systems is fairly obvious. We see any number of Tesla's or Toyota Priuses every day on the road. In October of last year, Tesla announced their short-haul electric semi. And most of these autonomous vehicles that we're talking about are all electric long-haul short-haul trucks. But what we may not always consider are the less obvious decisions, right? So in 2012, American software company and makers of popular products such as Photoshop and Acrobat, Adobe, completely redesigned their packaging to be environmentally sensitive. Gone were excessive plastics and redundant cardboard. The end result is a package that maintained durability and the surface area needed to draw attention to store shelves, while eliminating waste and reducing costs to raw materials and sourcing. Pretty obvious one, right? Green thinking isn't just about how something is made.

but what it's made from and how those resources are acquired. Reebok just launched a line of athletic shoes made entirely out of cotton and corn - materials that grow naturally and can be replenished. Better yet, once these sneakers have worn out, they can then be composted. Then with the palm project, we're hearing the same thing with a lot of palm manufacturers to end rainforest deforestation. They're starting to get blacklisted by companies like Nestle. Another area companies look at is manufacturing efficient, modern, and sustainable factories offer a variety of benefits to importers, from lowering energy consumption through the use of clean technologies to reducing production waste and providing safer workspaces. Companies are looking for ways to operate more efficiently. More so than ever, importers are working with their suppliers to select and oftentimes build their own green factories. For a company like Marks & Spencer, the result has been factories that use 40% less electricity while allowing them to make and market the first carbon-neutral products of their type. Distribution, how

is it going to get here? And then how will it get there? And then what's going to happen to it when the consumer is done with it? As far as green initiatives go, this is often the first place companies will look. You don't have to be Elon Musk to realize that all these mega ships, airliners, and semi-trucks on the waterways, in the air, and on the roads have been burning some major fossil fuels. One of the world's largest container ship lines, Mearsk, signed up 1,500 of its largest suppliers for its responsible procurement program. By 2012, they had already reached their 2020 target of reducing CO2 emissions by 25% per container from 2007 levels. Tesla and Cummins are both preparing all-electric fleets of semi-trucks. But even if you don't have space-age technology, there are a number of strategies that can go a long way towards both lowering your shipping costs while also reducing your carbon footprint. Shipping consolidations, for example, will reduce the number of miles

your goods need to travel along with the amount of turns they need to make shipment optimization even better. that's gonna cut down loads miles and costs before you and the last interesting way that I really came across that companies were doing some green thinking was in product recovery. right what happens to the product when it's done consumer demand has changed the scope of corporate thinking in the past. the supply chain ended when the consumer bought the product. now there is an ever-increasing demand by the public to know about a product's afterlife. how can I dispose of this is it recyclable reusable reclaimable will my garbage dump even accept this. as we have mentioned earlier Reebok has created shoes you can simply throw in a compost pile instead of a hefty bag. companies like SodaStream have this process built into their business model. bring an empty co2 cartridge to a participating retailer and receive a new one at a discounted rate. Green thinking and logistics can go a long way towards building consumer confidence in your brand reduce waste and emissions while.

creating cost-saving opportunities and a great world for our children to live in. Ashley, I hope that that answer helps you think of some new strategies your company can use to be more green, and whatever you do end up doing, let me know. I want to hear back from you. Stuff like this gets me super excited, that's why I do the show, and it's why I, I don't know why I get up in the morning, why hit record on this. Anyways, if you have any questions, Ashley, you can email me at, and you, the listeners, if you have any questions you'd like to have me answer on air, feel free to email me at tea dinner at a born in co.com. That's TD double o n ER at a born and co.com. I'd be happy to learn something new with you. Looking to future-proof your supply chain, get ready for tomorrow today with a born and company's advantage modern managed freight solutions. For a complimentary consultation, just visit a Bourne and codes I come find out how we've combined

traditional freight management fundamentals with data and technology to negotiate over five billion dollars in client freight expenses. Isn't it time you got optimized? For this episode and all of our previous shows, visit consulting logistics dot IO or simply search for consulting logistics on iTunes, Spotify, or your favorite podcast player of choice. And hey, if you like the show, don't forget to rate, review, and of course, subscribe so you don't miss any new episodes. For details about Transtech 2020, a supply chain vision and innovation conference, visit trans tech 2020 dot-com. That's trans tech the number 2020 com. That's it, folks. We are out of time. For Ryan Curtis and Ashley, I'm Tim Doner saying take care and happy [Music].

Freight Accruals, Vendor Chargebacks, Thinking Green, and More Listener Mail

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FreightPlus

A born and company presents Transtech 2020, the first supply chain vision and innovation conference in Boston.

The conference will cover topics such as AI, automation, blockchain, and future-proofing the supply chain.

For registration and sponsorship, visit transtech2020.

Managing Freight Accruals for Optimal Financial Performance

Freight accruals are the opposite of prepaid expenses, representing liabilities on the balance sheet.

Many businesses are exposed to financial risk due to unstable freight costs and outdated billing practices.

Implementing a Transportation Management System (TMS) and optimizing the freight accounting process can improve shipment visibility, save time, and ensure the accuracy of financial records.

Managing Vendor Chargeback Fines: A Guide for Shippers

Retailers like Walmart and Target, along with online vendors such as Amazon, are increasing vendor chargeback fines, which can account for up to thirteen percent of a retailer's revenue.

To reduce these chargebacks, shippers need to audit their invoices, quantify the costs, and establish a cross-functional team to manage vendor compliance.

It is also crucial to select carriers who can remain in compliance with the needs of retail partners and to implement modern inventory management tools and EDI for automated data transfers.

Optimizing Vendor Compliance for Efficient Supply Chain Management

Retailers and suppliers need to improve communication and collaboration to minimize chargebacks and build better relationships.

Conducting regular reviews and setting up conference calls can help in addressing and resolving issues.

Benchmarking against industry standards and challenging unfair fees is crucial for optimizing vendor compliance and improving the supply chain.

Sustainable supply chain practices are becoming increasingly important, and companies need to focus on environmental impact and green initiatives.

The Changing Landscape of Green Logistics

The discussion around green logistics is no longer separate from traditional supply chain management, as environmental concerns and cost factors are driving a shift in the way companies operate.

Green supply chain practices are now being rethought, with a focus on impacting the bottom line positively.

Companies are reviewing and optimizing all aspects of the product lifecycle, from design and materials to manufacturing and distribution, in order to operate more efficiently and sustainably.

Additionally, major players in the industry are making significant commitments to reduce carbon emissions, with some transitioning to all-electric vehicle fleets.

Green Thinking and Logistics in Modern Business

Consumer demand has expanded the scope of corporate thinking to include product afterlife and sustainability.

Companies like Reebok and SodaStream are integrating environmentally friendly practices into their business models, such as creating compostable shoes and offering cartridge exchange programs.

Green thinking in logistics not only builds consumer confidence and reduces waste but also creates cost-saving opportunities.

The growing public demand for sustainable practices is driving companies to optimize their supply chains and embrace green initiatives for a more environmentally friendly future.