The ongoing freight recession has now plagued the market for longer than the COVID boom, but high-frequency data from FreightWaves SONAR suggests it might be coming to an end sooner rather than later. Brokers, however, should not expect a market turn to completely alleviate the downward pressure on their gross margin.
While the freight recession has had a negative impact on both brokers’ margins, and carrier linehauls, an explosion of automation and technology, along with an unprecedented number of well-capitalized, non-profit focused players in the brokerage space have also been a significant contributor to the downward pressure. The rapid introduction of new technologies has led to an environment where brokerages properly leveraging the technology to keep costs in check find themselves able to be more competitive in their bid process, without impacting profit.
This competitive environment will not revert back to previous years, even as the market rebounds. Instead of relying exclusively on the market to provide relief, brokers can proactively address their cost structure to protect themselves and offset this trend of decreasing gross margin. For most brokers, reducing operating costs will be the most effective, reliable and accessible way to do that.
When brokers think about operating costs, a commonly overlooked aspect of those costs are hidden in their back office processes. Innovation in this area will prove impactful, as it is completely within the brokers’ realm of control. Protecting margins starts with securing proper visibility and control of back office costs, down to the per-invoice level.
Brokers that embrace automation-driven cost control now have the best chance at safeguarding their profitability and maintaining their ability to win new business, when the market improves. Not only will these brokers be able to adapt to market changes quickly, they can also leverage automation in their back offices to boost margins both now and in the future, as leading providers continue to update their platforms to include ever-changing improvements in technology.
Brokers that have embraced back-office automation workflows will be able to shift into a more aggressive growth mindset quickly, without compromising their internal infrastructure or sacrificing service levels.
Despite the advantages of back office automation, brokers may be wary to initiate workflow changes for a variety of reasons. This can be attributed to the fact that, for many, attempts to integrate automation into their workflows have yielded mixed results in the past or acquiring new technology is not financially feasible in today’s market. These results are likely due to a disconnect between what a broker was sold – for example, an AI-powered cure all – and what they actually got.
AI has become THE industry-leading buzzword, and new solutions are popping up every day. While many of these add-on tools do provide some level of value to brokers, both tech providers and users are still working to figure out the best way to practically integrate AI into the industry. Why? In many cases, brokers do not have sufficient visibility into the end-to-end supply chain, and therefore can’t provide sufficient data to make AI a viable answer to their problems… yet.
Epay Manager Powered by OTR Solutions is a back-office automation solution that enables teams to easily collect and process carrier invoices, manage disputes, schedule carrier payments, and bill customers in one centralized platform for AR and AP teams. Epay Manager’s platform is designed to virtually eliminate operational reliance on email and the need to audit carrier invoices for rate and delivery information, thanks to its Audit Proof Invoicing feature. Epay Manager was founded in 2003 and maintains over 200,000 carrier and factoring company accounts. Backed by the power of OTR Solutions, Epay Manager now offers integrated AI driven NLP automation and in-platform working capital solutions for brokers and carriers.
Epay’s AI Natural language processing (NLP) automation is the first AI driven broker automation tool that can leverage enough operational insight to provide brokers with tangible benefit. The solution has been refined by millions of carrier invoices and billions in freight spend. The model recognizes over 145 NLP attributes on carrier documents and applies up to 166 custom business rules, achieving real-world straight-thru automation rates of 83.48%. This process provides key insights into why invoices are approved or denied for automation, eliminates manual issue spotting and shifts employee focus to true issue resolution.
“Invoice automation has been a fundamental component of our business since we were founded, so it’s extremely exciting to be able to bring our AI NLP technology to the freight brokerage community. Epay Manager gives brokers an unprecedented platform to leverage best-in-class freight broker specific back-office workflows, with cutting edge NLP document recognition, both of which are necessary to drive the levels of automation brokers have been searching for. ” said EVP & Chief Strategy Officer Clayton Griffin.
Implementing AI NLP in factoring is incredibly difficult, due to the liability associated with purchasing invoices and the risk erroneous purchases pose to profitability. OTR Solutions reports that they’ve maintained a write-off rate under 3 basis points of total factored volume with this software, a level significantly below normal factor thresholds.
Where many companies have attempted to solve brokers’ data discrepancies through improved email inbox connectors, only Epay Manager has looked to involve one of the most important elements: the carrier. By connecting partners via Epay, brokers can create a single source of truth in their existing TMS.
“There have been a lot of efforts to improve fundamentally broken processes,such as the invoice email inbox problem that every freight broker has had to struggle with for decades,” said Griffin. “OTR made the transition from accepting carrier invoices via email to online and mobile uploading years ago. Today, less than 1% of our invoices are submitted via email, enabling an integrated automation rate north of 80%, all while decreasing write-off rates. Brokers already possess delivery and rate information, so it only makes sense for them to originate the invoice and require the carrier to approve or dispute the amount when they return the POD. Back office teams then have no need to cross check information, because both parties have already shaken hands on the payable amount, allowing our AI NLP to get a significant headstart on non-integrated platforms. It’s a level of efficiency and connectivity I’m not sure the industry has really seen before.”
Epay Manager establishes the broker’s TMS as the source of truth from which all downstream activities reference. This approach enables what they are calling Audit Proof Invoicing, a functionality that eliminates rate verification post delivery and enables the back-office to work from a centralized AR/AP board. It also all but eliminates carrier disputes after the fact, which solves the billing issues those changes can typically cause between brokers and their shippers. Epay transparently connects each member of the supply chain in new and needed ways.
Brokers have a unique position in the market. They are at the center of the supply chain, working alongside shippers, factors and carriers. This means that brokers are disproportionately affected by the industry’s overall lack of efficient connections.
Not only does Epay strengthen connections between partners, it also helps the industry manage carrier fraud. Communication is driven through the Epay platform and its curated carrier network, reducing the chances of encountering fake carriers or other bad actors.
Carriers and factors can access Epay’s portal via secure and unique logins in order to gain visibility into invoice statuses and outstanding disputes. Carriers are also able to update their bank account information, which is verified by Epay, so brokers can have peace of mind that they are paying to the right account.
In order to provide maximum security and accuracy, Epay automatically generates carrier invoices using TMS data and then solicits the documents directly from the delivering carrier or factoring company. The invoice is only presented to the broker back-office team once the carrier or factor has accepted the amount due to be paid, ensuring the right amount is paid every time.
Additionally, automated document retrieval is triggered by the load details being entered into the broker’s TMS, so the correct documents are matched to the appropriate load every time.
These brokers may soon find that increased staffing needs and reliance on swivel chair integrations will impede their ability to maintain profit margins in the coming years. Adopting a solution like Epay Manager proactively can better safeguard their future profitability.
With Epay, brokers can expect to process three to five times more invoices per back-office team member than before. Additionally, Epay’s NLP automation means that significantly more invoices can be automatically approved through Epay, making employee workloads more manageable and scalable.
Future-proofing your brokerage starts with automating your back office work and empowering your employees to do more nuanced, human-intensive work. Click here to learn more about Epay Manager powered by OTR Solutions can help you do just that.
