Written by Marc Rutledge
Retailers in the United States have $300 million in refunds with ocean freight vendors, yet they are unaware of this because of invoice errors by their ocean freight transportation providers, an industry insider confirmed this week. Steve Ferreira, President of Ocean Audit, states that this problem has been plaguing US retailers, who import 90% of what they sell to consumers.
Ferreira said -
“US retail companies have been paying overcharges to ocean freight vendors for decades. This is due to them (US retailers) not having robust controls in place to audit and identify these errors. Without preventive measures in place, these overcharges will continue to cost US retailers millions of dollars in lost profits each year. To make matters worse, consumers end up bearing the brunt of these overages when they make purchases because retailers have no choice but to increase the in-store or e-shop retail price to ensure each imported product is profitable."
Problems with infrastructure of ocean freight carriers are also part of the issue. Manually-driven processes — which include invoicing — have an adverse effect on the accuracy of pricing for more than 40 million containers that are shipped annually to the United States. Most ocean freight carriers lack efficient automation in their accounts receivable process and together with legacy systems that are unable to track proper invoice processes, over 12% of all ocean freight invoices are defective. On face value, most Retailers see the system (container rates being depicted accurately on invoicing) as simple enough. The reality is that most Retailers lack enough ocean freight content expertise to truly grasp the magnitude of the problem.
Ferreira said -
“The amount of overcharge funds that foreign ocean freight vendors have in their bank accounts is staggering. I would put the total in the billions [of dollars]."
More audit and forensic staff is required to stem the tide of lost profits that end up going offshore due to the fact that most of the world’s leading ocean vendors are not US based corporations. US Retailers could create an additional 5,000 – 6,000 jobs in the United States each year if they are able to recognize that ocean freight overcharges and billing defects not only impact consumers, but also inhibit them from hiring or reducing staff.
NOTE: Information for this article was provided by Steve Ferreira, founder and CEO of Ocean Audit Inc., New York, NY and Prague, Czech Republic.