Fraser Robinson, Co-founder and CEO at Beacon
Finance leaders are under more pressure than ever to increase efficiency by reducing costs and improving customer satisfaction. Yet the supply chain, one of the largest cost centres in any product business, remains stubbornly opaque.
The data does exist to identify where money is leaking, which suppliers are underperforming, and where freight spend is significantly more than it should be. The problem is it has never been connected – it’s unstructured and spread across forwarder portals, spreadsheets, carrier invoices and operator inboxes. The CFO sees the total freight bill, but they rarely understand what’s driving it, and where opportunities lie to reduce it.
These costs hide more easily the more of the journey you hand to someone else. Every leg you delegate to a counterparty tends to come back as a single, bundled price rather than an itemised one. On Cost, Insurance and Freight (CIF) terms, the seller books the freight and insurance through to the destination port and rolls it into one figure, so the buyer never sees what’s driving it. On Delivered Duty Paid (DDP) terms the seller handles the lot, and the buyer sees less still. But this isn’t really a question of Incoterms. Even on FOB or EXW terms, where the buyer controls the booking, the same costs scatter across forwarder portals, carrier invoices and operator inboxes and rarely get reconciled. Whatever the terms, the question is the same: does anyone actually know what makes up the number on the bill?
AI-powered intelligence is now changing that, making it possible to connect operational data to financial impact in real time. The businesses who are using these capabilities to join the dots are now finding significant savings hiding in plain sight. For example, a delayed container isn’t just an ops problem – there can be daily demurrage fees and freight costs for any rerouting that needs to take place, which all impact a product’s margin.
When finance teams can see this detail, they stop treating their supply chains as an overall number on a bill and start drilling down on where costs are taking place.
Here, I outline the specific costs that can remain hidden – and why they’re important to see.
Demurrage and detention
These charges accumulate quietly and are often only caught after the fact. Demurrage fees accrue daily when containers are sat in a port terminal for longer than their allotted free time, while detention fees are for time spent outside of the port premises. The catch is that these charges rarely arrive labelled as a delay. They land as line items, or bundled into a freight invoice, often long after the event that caused them, while the context that would explain them, which container, which lane, whose dwell at origin, sits in a different system entirely. Without that link, finance pays the charge and never sees the story behind it.
Over a five-year period, the US Federal Maritime Commission documented that nine major carriers collected roughly $15.4 billion in detention and demurrage.D&D can be a large source of income for them.Therefore,buyers and sellers need to be able to understand how oftenthese charges are happening and any patterns behind them. For example, are there any carrier-lane combinations where demurrage fees occur more frequently? With this context, they can then interrogate who is accountable for the cost. They can see if it’s on the carrier, the forwarder, the supplier, or if the dwell happened with them at the origin.
Freight invoice errors
Overbilling is endemic in freight and most businesses don’t have the data infrastructure to catch it systematically. Industry research shows that, typically, 3-5% of freight spend is overcharged. There could be missed duplicate charges, or shipments getting categorised under a lane that is more expensive than the one they travelled in.
Without a granular breakdown of costs for a shipment and systematic reconciliation, these charges remain uncontested and simply get paid. Over the course of a year, it’s easy to see how much buyers could be overpaying without even realising it. If a company had freight costs of £2m in a year, for example, and 5% was overcharged, they’d have overspent by £100,000. And one of the underlying factors for these errors is mismatched data.
Supplier and forwarder underperformance
Most CFOs will be able to see the total cost of carriers and assess their performance by judging their arrival times against this cost. But what they can’t see is how specific suppliers or forwarders are costing money through delays, rerouting and expediting as this data never gets traced back to the root cause. Gaining this level of insight is only possible by connecting operational and financial data across systems and having a live overview of metrics like carrier ETA and ATA times.
Without this independent performance data, charges can build silently, and this can also impact contracts. While carriers have years of performance data that they can use for every negotiation or deal, shippers often lack the same level of insight. This means that contracts get weighted in favour of carriers and companies end up overspending on their shipments.
The cost of reactive decisions and safety stock
CFOs can’t plan for everything, and supply chains are disruptive by nature. But when actions such as rerouting containers, air freighting stock and emergency procurement are made reactively and quickly due to a lack of early data, costs can surge. Connected data, on the other hand, can enable finance leaders to spot incidents earlier and find the most cost-effective solution for any disruption that takes place. And context is critical for guiding these decisions.
A late container providing stock for a production line tomorrow is a different proposition to a late container arriving with safety stock. For CFOs, there is a balancing act between the cost of acting – choosing whether to pay a premium freight, split the shipment or expedite it – and the cost of not acting, risking D&D charges, stockouts and line shutdowns. Without connected data, these decisions depend more on hunches rather than informed, context-driven insights.
To safeguard against such risks, companies can build up excess safety stock. But this means they tie up working capital. This excess stock generally emerges as data can’t be trusted and so the buffer is seen as a necessary safety net.
A clear line of sight
All of these hidden costs involve money leaving a business unnecessarily. When they are made visible, CFOs can shift their strategy from seeing D&D charges or invoice errors as operational inefficiencies to be absorbed to viewing them as recoverable cash. But that only comes from connecting operational and financial data to understand why a shipment is late and how that impacts costs.
Building this context requires teams to perform three key steps. The first is to centralise every element of supply chain data in one place. The second is to standardise how milestones, ETAs and costs are captured. And the third is to connect live data from carriers in one location to provide a real-time, automated picture of the supply chain. AI then has the foundation to provide analysis and recommendations that guide financial decisions.
Crucially, this gives CFOs a clear line of sight around where costs are leaking out of the business or where working capital is tied up. The traditionally opaque supply chain becomes markedly clearer, and this can open up a crucial advantage over competitors.
