"Less-than-truckload carriers must reconcile thousands of complex invoices daily, involving various goods, services, geographies, customers and suppliers. Managing accurate A/R collections is vital to reducing dilution reservesand enhancing borrowing power."

The Challenge: Reduce Re-Rates and Write-Offs

Life in the less-than-truckload (LTL) business comes at you fast. Our client, a leading, publicly traded, U.S. transporter of industrial, commercial and retail goods, specializing in mixed load freight shipments between 200 and 6,000 lbs., was experiencing serious  dilution problems. Specifically, their estimate of collectible accounts receivables, including negative re-rates and write-offs, was less than actual by over seven percent per month. Lenders were demanding greater dilution reserves from them to extend operating credit, which was tightening as the margin between projected and actual collections widened.

At a loss to stem the tide, the client charged EXL to identify the source of the problem and propose a long-term solution.

"Our intimate knowledge of their business and domain space helped us craft a reasonable approach; our offshore resources helped us work the process 24/5, effectively collapsing the timeframe to achieve a solution."

Context: A Tangled Web

EXL had been serving the LTL carrier in various capacities since 2007, just as the U.S. recession started. Over the next several years, the company’s business curtailed, leading to downward pressure on its stock price and increased borrowing against projected receivables. Many businesses across the sector were suffering similar setbacks, characterized by personnel layoffs, rising costs and deepening debt.

After the recession broke, it took several years for the industry to stabilize. By 2011, business had picked up, but the dilution problem lingered. The reserves required to borrow money remained high.

With tens of thousands of transactions occurring daily and so many customers and vendors working off different terms and agreements, finding the source of the trouble seemed impossible. As soon as one problem was identified and corrected, another cropped up. Gaining visibility into the root cause was only the start. How do you proactively monitor the flow of information and correct out-of-profile issues on the fly?

The keys to solving the puzzle included a full investigation, backed  by widespread process re-engineering and efficient monitoring of the situation, identifying outliers and correcting errors moving forward. EXL proposed a comprehensive program, and the client’s management team granted approval to begin.

Orchestration: A Numbers Game

EXL had a number of team members on-site full-time going into the dilution reduction assignment. We augmented this with a dedicated support team offshore, as well as a certified Six Sigma Black Belt consultant to lead the project.

Starting in 2012, the process began in classic Six Sigma fashion: define the project, benchmark and validate a measurement system, identify key outcome drivers, determine an improvement strategy and make the improvements stick.

"After reviewing the dilution numbers for August 2012, we have found that we have actually saved $3.7M through adjustments, bringing the dilution percentage down to 5.43 percent, for a savings of $4.7 million in the first month of implementation." - VP of Cash & Revenue Management for Leading LTL Company

The work commenced with our on-site inspectors sharing data with EXL’s off-shore analytics team to systematically identify the root causes for dilution enterprise-wide. We established a database of findings as new hypotheses were tested, and charted the results into reports, useful in developing new upstream processes to remediate each scenario. The rigorous, numbers-driven approach relied on a heavy dose of analytics, along with tight, cross-functional coordination among stakeholders to accelerate progress.

The tools, reports and resulting database applied in the process became essential components for a dashboard application EXL provided to monitor the situation long-term. Dozens of underlying causes were fixed but, because of the dynamics of the day-to-day operation, new problems consistently emerged.

Results started coming in shortly after EXL was engaged. By the time the assignment ended, all systems were in place and producing results. When the client finally took over, their progress continued, showing continuous improvement over time.

Outcomes: Dilution Down, Lending Up

After 12 months on their own, the client experienced steadily decreasing amounts of dilution in their A/R account. With a clear view of the situation at hand, they began reporting significant re-rate and write-off reductions, lowering the company’s monthly dilution below the targeted five percent mark. As their required dilution reserve dropped from $11M to $4.2M, their borrowing capacity increased to $7M, improving their cash position and separating the company from its competition. By the end of the period, they had significantly diminished their need for any dilution reserve.

Since then, prioritization lists serve to triage corrective actions, giving the client a clear idea on where to focus resources and activities. Balance due amounts as a percentage of A/R have continued to shrink, currently hovering below 1.4 percent. Best yet, the system has effectively lowered re-rate incidence, reduced dilution and given the company a healthy financial outlook into the future.

Solution Summary
Client Challenge

  • Identify sources of dilution, correct them and emplace a permanent solution.
  • Reduce dilution to less than five percent per month.
  • Significantly diminish reserve requirements over 12 months.


  • Correct negative effects highlighted during the 2007 recession.
  • Provide visibility into an extremely complex A/R process involving thousands of diverse daily transactions.
  • Develop and deploy a 12-month plan to reverse the negative trends and restore financial health.


  • Follow Six Sigma methodology heavily grounded in analytics and tightly coordinated among stakeholders.
  • Analyze root causes for balance due amounts and engineer corrective processes.
  • Create a proactive application for ongoing A/R monitoring, maintenance and control.


  • Dilution reduced below five percent in the first 12 months.
  • Dilution reserve requirements were reduced to $4.2M, increasing borrowing capacity by $7M.
  • Re-rates and balance due amounts continue to improve over time.

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