You know that feeling! That moment when you open your trailer door. The anticipation, to only hope that the cargo you are carrying has not shifted. We have all seen the image!
When most of us think of the cost of freight claims, we think of the cost of a damaged product from an unresolved claim. Or maybe the cost of not being reimbursed for your full loss. But there are many other hidden costs of freight claims. Do you know how much they are costing you?
#1 Freight Claim Cost: Labor
It typically takes 2 – 3 hours to manually file a freight claim. This reflects the time spent filing the paperwork for the freight claim, but not the time spent on other freight claim-related tasks, such as:
#2 Freight Claim Cost: Storage
If you have a large warehouse with excess space, you probably don’t consider storage as a cost of freight claims. But if damaged goods weren’t taking up space in your warehouse, you wouldn’t need the same amount of space, and you could manage with a smaller, less costly warehouse. So consider the following costs of your current warehouse, compared with the costs of a smaller one:
#3 Freight Claim Cost: Salvage
Carriers expect you to mitigate your freight claim loss – for example, if the product is partially damaged and has some resale value, the carrier will only pay you for the difference between the original value and the current, lesser value. In theory, you’ve been reimbursed for your losses. But there can be disadvantages to selling salvage product.
You may not want cheap damaged product competing with your new full-priced product. Or you may not want to risk your company’s reputation by selling sub-par damaged products with your name on it. While the carrier reimburses you for the damages, you will need to eat the loss of the salvage value if you choose not to sell the remains.
#4 Freight Claim Cost: Unhappy Customers
In the event that you are filing a freight claim because you shipped a product to your customer and it was damaged on receipt, you need to take your customer’s perceptions and actions into account.
This can be especially damaging if they were relying on receiving the product by a certain date, or if they incurred costs due to not receiving the product as expected. Consider how much business you could lose due to one unhappy customer.
#5 Freight Claim Cost: Opportunity Costs
Costs that are rarely considered as freight claim costs are opportunity costs – those opportunities that were lost to your company due to the cost of freight claims. For example:
Consider the return on investment for these activities. Also note that even if you recoup 100% of your freight claim losses, your cash may be tied up for several months before you are reimbursed.
#6 Freight Claim Cost: Time Sensitive Losses
You may have been expecting – even relying – on your shipment to arrive by a certain date. However, unless you specified that a product would lose its value if not received by a certain date, the carrier is not obliged to reimburse you for this loss.
Another example of a time sensitive loss would occur for a retailer who receives a damaged commodity product such as light bulbs or grocery items. If they are out of stock when their customers need that product, chances are their customers will buy someplace else, and the retailer will lose that sale.
#7 Freight Claim Cost: Unfiled Freight Claims
Also consider the costs of small freight claims that go unfiled. While a $50 unfiled freight claim does not sound like much, ten $50 freight claims becomes $500, and one hundred $50 freight claims becomes $5,000…Do you know how many small freight claims are left unresolved?
Written by Guest Blogger Vanessa Glavac, TranSolutions Inc.
Help prevent freight claims. Make sure your cargo is loaded correctly and properly secured. Logistick, Inc helps reduce freight damage claims and provides you the customer a more secure future.