Multi Bill-To model for Savings Sharing

Author: Victor Isaev
Victor Isaev
FMS Software Architect
McLeod Software

While the typical 3PL (Third Party Logistics) type of operation is built upon having a separate, sometimes dedicated team of transportation professionals handling each customer’s shipping requirements, it may make sense to build combined shipments with higher capacity utilization. This approach typically results in operational savings by utilizing optimal freight capacity, decreasing mileage and fuel cost. Those savings not only impact the Third Party Logistics Provider's margin, but they can also be passed onto the clients to reduce their overall transportation services expenses.

A popular scenario with shipper companies who bill their consignees is to combine freight for truckload shipments and save money comparing to an LTL (less-than-truckload) mode or an under-utilized TL method. With your freight combined for truckload you may have questions such as: How will I bill each consignee accurately and fairly? How to share savings accordingly and how to provide the customer with visibility to their freight, status of their shipment, billing details without exposing other customers’ data?

MB2L (Multi Bill-To Load) model is dealing with all those scenarios and addresses the following problems:
•    Client Order management
•    Multi-stop truckload shipments (load) building
•    Savings calculation rules
•    Providing client access to the shipment details and status
•    Passing the load information on to brokerage / accounting systems

Client Order Management

The crucial part of the MB2L model is providing the ability to see all your client’s purchase orders with shipping instructions in one place. In FMS (Freight Management Solutions) terms it’s about having the list of Product Orders each consisting of Shipper Location, Consignee Location, desired Ship Date/Time range, desired Delivery Date/Time range and a list of Products – SKU items. This information available in one centralized location allows the second step of MB2L process to take place:

Multi-Stop Load Building

The secret ingredient that greatly increasing savings and simplifies the overall experience would be the FMS Optimizer.  Similar results can be achieved by linking orders that share similar geographical features. Common scenarios here would be to build either Outbound loads where all the orders traveling on the truck are originating in the same shipper location or Inbound loads, where all the orders have the same consignee.

 

Savings calculation rules

Savings calculation requires the following rules to be set:
•    Cost allocation formula
•    Gain sharing percentage
Cost allocation may depend on the transportation mode and the nature of shipped orders – whether it’s a 100% LTL, full Truckload or a mix of LTL and TL orders on the same truck. Generally, we would suggest using mileage-based cost allocation for Truckload and either weight-based or weight*distance-based method of allocation for LTL and mixed modes. If, for example, total transportation cost is $1000, Customer A ships 8000 lbs. and Customer B ships 2000 lbs., the allocated cost for Customer A would be $1000 * 8000 lbs. / 10000 lbs. = $800 and the remaining $200 is allocated to Customer B.

Savings appear as the difference between the Revenue (the amount the customer would’ve otherwise paid for shipping, if his order was the only one on the load) and the allocated cost. In the 0% margin scenario the entire amount of these savings would be passed to the customer and that would correspond to 100% gain sharing percentage. As long as the margin is required to keep business going, gain sharing percentage can be set to a lower number and can vary on per-client basis.

Client access to shipment details

Whether it’s shipment progress tracking or last-minute changes to product availability or quantity, clients need to have access to their data in your system. Clients entering the FMS system via the web can see all of the loads built for the purpose of shipping their products, with all of the arrivals / departures information, weight and quantity of their product being shipped.   We can show everything down to the shipping costs breakdown, including line haul cost, stop-off charges pertinent to their shipment only, fuel surcharge and, of course, savings shared:
 
There is an option to download customer’s invoice right in the load details screen.

Brokerage / accounting systems interface

Last but not the least MB2L-related feature is the ability to effectively execute and bill such loads and even though this can be done from within FMS, there are much more powerful specialized tools for this task and FMS is integrated with those tools closely enough to make this last step in MB2L processing seamless.

McLeod PowerBroker is a top-notch product and the Market leader in the transportation software industry. FMS integration with this product allows us to send multi-customer multi-stop load information, including both the route details and financial information and the rest is done by the PowerBroker product: multiple movements are created under one manifested load and the financials are processed accurately in accordance with FMS MB2L instructions.

The main goal of the MB2L model is to achieve highest possible market competitiveness by providing clients with the most cost-effective transportation solution while maintaining margin requirements and managing revenue in a predictable way. The use of MB2L can be enhanced by pairing it with FMS Optimizer to gain access to even better savings.

For more information, contact:

Cody Arnold,
Regional Sales Manager
Email:  Cody.Arnold@mcleodsoftware.com
Office Phone: (205) 907-0983

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