Business Challenge
The company had engaged a logistics service provider for warehousing and transportation of finished goods to customer locations under an agreed commercial arrangement per trip from the godown to the customer site. Management sought assurance over the accuracy of freight billing and compliance with contractual terms.
Our Approach
Understand
Reviewed logistics agreements, freight rate contracts, GR (Goods Receipt) generation process, dispatch procedures, billing methodology, customer delivery patterns, and vendor invoicing practices. Conducted discussions with Logistics, Procurement, Finance, Dispatch, and the logistics service provider.
Assess
Assessed controls over freight bill verification, contract management, GR issuance procedures, dispatch documentation, invoice validation, and vendor payment approvals. Evaluated whether billing practices were aligned with contractual provisions.
Identify
Identified that the transporter was raising freight invoices per GR instead of per trip as stipulated in the agreement. Further observed that multiple GRs were generated for different components dispatched in the same vehicle/trip, resulting in multiple freight charges being claimed against a single transportation movement.
Analyze
Performed contract-to-billing reconciliation, GR-wise and trip-wise freight analysis, dispatch document review, vehicle movement verification, invoice analytics, and historical trend analysis covering multiple years. Quantified excess freight claims and assessed the financial impact arising from the deviation from agreed commercial terms.
Recommend
Recommended immediate alignment of billing methodology with contractual terms, implementation of trip-wise freight validation controls, maker-checker review of logistics invoices, periodic freight audits, ERP-based freight verification controls, and standardization of GR generation practices to prevent duplicate freight charging.
Implement
Assisted management in reviewing historical claims, validating excess freight recoveries, strengthening invoice verification procedures, developing freight audit checklists, and implementing exception reporting for freight billing anomalies.
Monitor
Established periodic freight audits, trip-to-GR reconciliation reviews, logistics vendor performance monitoring, freight variance reporting, and management dashboards for continuous oversight of logistics expenses.
Outcome
Identified excess freight charges arising from incorrect billing methodology with a substantial financial impact. Strengthened contract compliance, improved freight billing controls, enhanced vendor accountability, and established a sustainable framework for logistics cost governance.
