Freight claims are an issue for every business. The question is not will it happen, but how often. Smart businesses realize that freight damage is inevitable, leading to increased costs, operational inefficiencies, and customer dissatisfaction. The best thing you can do as a shipper is understand the common causes of these freight claims while developing effective strategies to reduce them.
Freight Claims in the US
According to industry data, approximately 1-2% of all freight shipments result in claims. While this may seem like a small percentage, the volume of freight shipped annually in the US means that the number of claims can be substantial. For example, with over 18 billion tons of freight moved annually in the US, even a 1% claim rate translates to millions of claims each year.
These claims can involve various types of cargo, from consumer goods to industrial equipment, and occur across all modes of transportation, including trucking, rail, air, and sea. The financial impact of these claims is significant, often costing businesses thousands of dollars annually in direct and indirect costs. How much have they cost your business?
The Negative Effects of Freight Claims on Businesses
Freight claims can have several negative effects on businesses, particularly small and medium-sized enterprises (SMEs), which may lack the resources to absorb these costs easily. Freight claims often cause:
- Financial Losses: businesses incur direct costs from damaged goods, including the cost of the goods themselves, replacement costs, and the cost of handling the claims process. They can also incur indirect costs, which include administrative costs, increased insurance premiums, and potential penalties from missed delivery deadlines.
- Operational Disruptions: freight claims can disrupt supply chains, causing delays in production and distribution. This can lead to stockouts, production halts, and delayed deliveries to customers.
- Customer Dissatisfaction: damaged goods and delayed shipments can lead to customer dissatisfaction, which can harm a business’s reputation and result in lost sales and customers.
- Increased Shipping Costs: frequent freight claims can lead to higher shipping costs due to increased insurance premiums and reduced carrier network who is willing to move your freight.
The Most Common Causes of Freight Claims and How to Avoid Them
There are many types of freight claims:
- Freight damage: when freight is damaged
- Shortages: when freight is missing
- Loss: when an entire shipment is lost
- Refusals: when customers refuse part or the entirety of an order
Understanding the common causes of these types of freight claims will help your business develop strategies to prevent them. What are the most frequent causes of freight claims?
Improper Packaging
Insufficient or inappropriate packaging materials can lead to damage during transit, which is why it’s important to use high-quality packaging materials appropriate for the type of goods being shipped. Ensure that packaging provides adequate cushioning and protection against shocks, vibrations, and environmental factors. If you are shipping high value or delicate items, invest in custom foam packaging or another type of fabricated material that provides 360-degree protection.
Inadequate Labeling
Incorrect or unclear labeling can result in mishandling or misrouting of shipments. This leads to late shipments that can be refused or those that are lost altogether. One of the best ways to ensure freight reaches its destination is to make sure that all packages are clearly labeled with handling instructions, destination information, and any necessary hazard warnings.
Poor Loading Practices
You may be moving quickly to load an order, but incorrect loading of goods onto trucks or other transport vehicles can cause damage during transit. Always make sure your fulfillment process has a quality assurance team that makes sure all freight is properly packaged and loaded for transit. Train staff in proper loading techniques to ensure goods are securely and evenly distributed. You can work quickly and still make sure every shipment is sent off correctly.
Environmental Factors
Exposure to extreme temperatures, humidity, or other environmental conditions can damage goods, especially if they are not properly packaged or sent on the right type of trailer. Use climate-controlled transport options for temperature-sensitive goods and ensure packaging materials provide adequate protection against environmental variables.
Handling Errors
Rough handling during loading, unloading, or transit can result in damage. LTL shipments, which are frequently loaded and unloaded on trailers, are particularly susceptible to handling errors. Make sure you work with a reliable partner that has a network of carriers that have a good reputation and claims ratio.
Work with King Solutions Today
Freight claims can have a significant impact on your business, leading to financial losses, operational disruptions, and customer dissatisfaction. At King Solutions, we handle the claims process from start to finish. That’s just one of the many benefits of working with a third party logistics provider (3PL). When you work with King, we also provide:
Logistics Expertise: our freight experts have extensive experience in logistics management. We can help you with everything from packaging and labeling advice to warehousing and fulfilment. We provide valuable insights and recommendations to improve your shipping processes.
Carrier Management: we have established relationships with a network of reliable carriers. We’ll help you negotiate better rates and ensure that your goods are handled by carriers with a good track record for safety and reliability.
Technology and Tracking: our track and trace team uses reliable technology that monitors your shipments every step of the way. This visibility allows for real-time tracking of goods, enabling proactive measures to prevent potential issues and ensure timely deliveries.
Ready to talk about how we can have a positive impact on your supply chain? Reach out to us today.
Joel Rice