When you’re a retailer the size and scope of Walmart Canada Corp., invoice and freight-payment disputes just come with the territory.
The big-box retailer’s operations north of the 49th parallel are fed by 11 distribution centers across the country, which receive more than half a million shipments of inventory annually. On the carrier side, Walmart Canada relies on a combination of its own fleet, consisting of 180 tractors, 2,000 trailers and more than 350 drivers, and some 70 other independent providers. Together they deliver around $12 billion worth of goods each year.
All that adds up to an extremely complex freight network. An individual shipment is subject to nearly 200 variables, including location data, mileage, fuel surcharges, tolls, tariffs and shipment details. Do the math: That’s around 7 billion invoice permutations per year.
Every purchaser of freight services, large and small, has to ensure that the trip went off as planned, in accordance with all of the details agreed to up front. Yet precious few freight moves ever take place precisely according to plan. A shipment might be subjected to heavy weather, poor road conditions or fuel issues. Any of those variables could pop up as a source of friction between retailer and carrier. In fact, it’s estimated that 70% of freight contracts are in some way subject to dispute, tying up some $140 billion and driving administrative expense to a whopping 20% of transportation costs.
A 'Broken’ System
The disconnect between shipper and carrier led to something like a double-entry accounting system, with each side making its own calculations in isolation. As a result, shippers would find it increasingly hard to secure and retain carriers, while carriers would be spending excessive amounts of time calculating and then justifying dispute invoices. In short, the whole freight audit and payment (FAP) process was broken.
Enter an option for recording and managing data that’s all the rage with forward-thinking supply-chain managers today: blockchain. Originally devised as a means of logging transfers of Bitcoin, this method of creating a permanent ledger that’s distributed among multiple computers is being put to the test for any number of supply-chain transactions, including quality control, product origin, tracking and tracing, and, in the case of Walmart Canada, freight payment.
The retailer saw the technology as a way to split a contracted event into many smaller agreements, each agreed to in real time, according to business logic dictated by so-called smart contracts. The goal was to head off misunderstandings before they had a chance to occur, or for minor disputes to balloon into something much more serious. Moreover, blockchain offered the chance to establish an immutable chain of data and share it with partners to achieve full transparency.
To put the system into place, Walmart Canada enlisted the aid of blockchain expert DLT Labs, which supplied a configuration of its existing platform dubbed DL Freight. In the end, the setup would be 80% pre-built, with the remainder customized to the needs of Walmart Canada and its carriers. The retailer was especially attracted by the promised speed of delivery: within 90 days, versus the year and a half it would have taken to implement a wholly customized solution.
The DL Freight platform employed blockchain as a means of defining the complex workflows within Walmart Canada’s supply-chain and transportation operations, both internally and with outside carriers. In the process, the retailer was able to acquire a real-time view of carrier invoices, eliminating the need to engage in lengthy disputes and reconciliation.
Internet of things (IoT) devices and smart contracts were brought in to help calculate accessorial costs, based on arithmetic business logic and rules configured within DL Freight. The resulting data could then be used for invoicing and reconciliation.
Validation and testing of the new system were extensive: more than 50,000 loads processed, 170 formulas configured, 2,500 test cases successfully passed, and more than eight security audits conducted.
The results were correspondingly impressive. Walmart Canada realized an immediate savings of $30 million, as carrier contracts went into production according to plan. The retailer further acquired visibility into planned (and unplanned) shipping costs, reduced data discrepancy and cost arising from the use of electronic data interchange, and realized faster decision-making and processing of carrier payments, all without the need for a third-party outsourcer.
The consequent improvement in overall business practices helped to position Walmart Canada as a “client of choice” among drivers — no small advantage in times of restricted capacity and the bodies needed to move it.
From the carriers’ perspective, shipper contracts went into production as intended, invoices were created in real time, proof of delivery became automated, payments were accelerated thanks to real-time reconciliation, overall administrative effort was reduced, and invoice disputes dropped from over 70% to below 2%, a 97% decrease.
Today, Walmart Canada knows its true freight costs, notwithstanding the many factors needed to calculate them, by route and carrier. It doesn’t have to spend time and effort on constantly updating custom software. And it has managed to forge a stronger and more trusting relationship with carriers.
As for DLT Labs, it calls the blockchain initiative “a new paradigm that has the ability to greatly improve workflows, reduce paperwork, and make the business we do with Walmart more efficient.”
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