Freight Claims: How Much Are They Really Costing You?

A report by Packaging Digest says, “As much as 11% of unit loads arriving at a distribution center have some level of case damage.” These damages can be very frustrating to brands, as they not only lose their products but are also unable to meet retail store deadlines. The only consolation in this matter is a freight claim. It is a standard operating procedure undertaken by several shippers to recover the cost of their damaged goods.

The freight claim is issued against the company responsible for the logistics, and the company is expected to pay for the losses. However, a freight claim cannot be seen as a simple reimbursement of losses. It comes with a lot of hidden charges that are levied on the brand making a claim. These charges include the money required to fill the claim and labor charges to dispose of the damaged goods, among many others.

Filing and labor costs 

While filing the freight claim, a brand needs to get in touch with its logistics company or the distribution warehouse used by it and get all the paperwork in place. This paperwork has a fixed charge, and the company has to pay to get these papers to make the freight claim. It takes anywhere around 2-3 hours to prepare all of this paperwork and file the reports. Furthermore, the laborers are also required to get the damaged products repacked if the brand plans to resell them at a lower price. 

In addition to these inspections from the brand's side, the logistic company also sends an insurance inspector to determine the actual damage. However, an independent inspector takes a lot of time, which causes loss of money and unexpected delays in further operations due to time spent waiting for the refund. 

Storage cost 

Not every clothing brand has the luxury of a big warehouse. Most fashion brands rent or buy storage units for a time period from other storage services. So when a company shifts its damaged products to its storage units, they need to pay extra charges to keep them there while they wait for inspection and reimbursement from the insurance companies. Furthermore, on several occasions, brands want to resell their damaged goods at a lower price to compensate for the losses, but they cannot do that until the freight claim is fulfilled. This also leads to serious storage issues. Moreover, no brand ever faces 100% damage to their products, and the freight claim is made only on the percentage of products damaged. 

Disposal costs

Big brands do not take the risk of selling damaged products to their customers. So they sell their products after taking off the tags and the brand markers. Although this seems to be a lucrative proposition to many brands, it can severely affect the brand's identity. Unhappy customers create waves of negative reviews on the internet, causing serious dents on the brand and its products. Therefore, most fashion brands pay extra sums of money to dispose of their damaged products. If the products are made from harmful materials, then the cost of disposal increases manifolds amounting to huge extra charges. 

Salvage 

Suppose the carrier fails to transport the goods at the right position at the right time. In that case, it is the owner's responsibility. Therefore, the owner tries to keep the loss of goods to a minimum. However, suppose all goods are partially damaged. In that case, the carrier will be responsible for covering the difference between the original and damaged value, which means the brand will get reimbursed for their transportation. Thus, to save on transportation and resell damaged goods, brands have no choice but to salvage their products.  

Lost productivity

Handling the damaged products and their return causes severe damage to the company’s productivity. Employees and laborers spent a lot of time repacking, tracking products, shipping, and sorting products. These activities distract them from their day-to-day work, causing a loss of productivity. Moreover, employees do not undertake these responsibilities, do not see this extra work as their primary duty, and ask for extra charges. 

However, it is hard to define the exact loss of productivity; the impact can be felt if a significant amount of shipments are damaged. 

Dent on customer satisfaction

Freight claims can give brand money for all their losses but cannot recover all the customers lost in the process. Often, brands set a release date for their products, and if they do not meet it, customers feel disheartened. And these dissatisfied customers are less likely to come back for more products. This led to a permanent dent in the brand image, and the close groups of customers are also likely to move away from the brand due to negative social media influence from customers' negative reviews. 

Lost business opportunities 

Spending days and weeks filing freight claims is not the ideal case scenario. There are more productive ways for brands to get themselves out of this mess. Brands lose time they would spend making business strategies to improve their business. The money spent on claims can be otherwise invested in improving other aspects of the business, which can cost brands more than damaged goods. 

Ways to reduce freight damages 

If a brand can minimize its freight damages, it would not have to file for a freight claim and incur these additional charges. To do this, brands must look into various factors that might lead to freight such as: 

• Material handling
• Mode of transportation used for products
• Packaging of products

Brands should hire a trusted company for these jobs and ensure that the products are handled correctly and that there will be no issues in the transportation of products. Furthermore, if a brand receives damaged products consistently for a very long period, it should switch suppliers and find a company with a lower rate of in-transit damages. 

Conclusion 

Freight claims are the easiest and safest way to recover freight loss. However, freight claims may seem like a massive and tedious process, as it includes a lot of brainstorming and paperwork. For any business, its customers are its best assets, and it cannot afford to delay the product’s delivery and compromise on the quality of products. With little planning and understanding, a business can reduce its freight costs to a larger extent and increase overall customer satisfaction.

The damage a freight claim does to a supplier is no less than it does to the brand. Loss of customer trust and delays in a company's operations takes years to get fixed. So if a brand is looking for a company they can trust with the transportation of their products, they can trust Fashinza. 

Fashinza is a B2B apparel manufacturing platform. We overlook the entire production process from design to delivery - our partner brands only need to place the order. Fashinza’s chief offering is its platform, which brands can use to place an order, track it, receive daily production updates, communicate with manufacturers, and make payments. We make the apparel manufacturing process hassle-free, fast, and transparent for the brands.