Cargo damage, reducing freight damage, reducing claims

Whether they are importers, exporters, or freight forwarders, most of my cargo insurance customers are international shippers. It’s the nature of the business. With this in mind I reviewed the articles and blogs I have written and the heavy international theme shows in most articles. To that I can only say…shame on me. I have been totally neglecting the few North American ground customers I have. Along with that I ignored most international ocean and air shipments quite in fact do have an inland transport portion leg of the transit. It’s time to fix that.

Whether for domestic ground or inland leg for international there are three major perils for your freight during ground transportation:

A. Collision and tipping of the conveyance

B, Poor freight handling, securement, and packaging

C. Theft

Collision or Tipping of the Conveyance  

This is the one most of us think of first because we get to see the video on the morning news of freight spilled onto highways. While you may think this threat is out of your control, it isn’t totally.

For truck transportation your first tool is the Federal Motor Carrier Safety Administration’s (FMCSA) tool for shippers and 3PL’s (third party logistics) called ‘Company Snapshot’ .  Snapshot is a free online tool that allows shippers to look up a carrier using the carrier’s USDOT number, MC/MX Number, or name to get a peek at the carrier’s safety record. Searchers can gather information such as a trucking company’s size, crash data, main cargo handled, inspection data, related out of service summary, and safety rating. The safety rating in this tool is a ‘satisfactory’ or ‘unsatisfactory’ with no letter or number grade.

Don’t live and die by this rating system. Even if a carrier has a ‘satisfactory’ rating, look at their numbers and compare them with other carriers of similar size and service. You don’t want the bottom of the ‘satisfactory’ pile.  Pay attention to crashes, tows, and out of service numbers. The site will break down the numbers to percentages and compare the subject carrier’s numbers to the national average. If these numbers are significantly higher than other carriers of similar size and service, it should give you pause. Your ‘would be’ carrier may be the lowest of three quotes for a reason. Higher numbers could indicate sloppy operational practices across the board. The carrier may have hurried drivers and equipment that is not maintained well. If your transportation vendor is a 3PL it is important you present, and require them to sign, an agreement (or have included in their broker/shipper agreement) terms outlining carrier safety benchmarks the 3PL must adhere to in regard to selecting carriers to carry your freight. Make sure to include remedies to protect your interests in the event a carrier that does not meet the benchmark is used and there is a loss from an incident.

Cargo Handling and Securement:

This category quite literally starts at home if you are a shipper who loads their own freight. There is an old saying “Nature abhors a vacuum” and I am here to tell you, so does freight. Empty spaces are bad. Whether within your palletized freight or around it (except for above it), empty space leaves room for damage. In the case of within your pallet, having half empty cartons leaves room for ‘carton crush’. Carton crush itself may not damage the freight, but it could start the pallet leaning in one direction. Compound this by the pallet possibly getting stacked on by another pallet and both pallets may tip inside the conveyance or during handling. The best freight is a cube that is as solid as possible with of course sturdy crates being best. Since crating isn’t always practical, ensuring each carton is uniform in size, full, and laid out on the pallet in a good pattern reversing direction with each layer with ample shrink wrap and pallet banding is second best.

The next empty space to be weary of is around your pallet whether if front, behind, or on either side. Typically the inner dimensions of a standard van trailer or container are larger than the dimensions of pallets side by side in the trailer and there is often space and the end of the trailer for movement. Empty space allows for pallets to move and slide when in transport. During transit with empty space pallets can be banging into each other if not secured. Stacking only compounds the danger. Keep in mind there is a good amount of long haul van trailer freight transferred to rail transport for the line haul. While rail transport is a great way to move cargo, it is in no way gentle. Package and secure van freight as you would for rail transit because it just may be the underlying form of transport.

products_dimond-corr_02The best answer is cardboard or inflatable dunnage placed in empty spaces throughout trailer. The dunnage isn’t that expensive and does a great job of protecting your freight. In addition, if the trailers you load typically have space at the end of the trailer, ask your carriers to use ‘load-locks’ to lock the end the line of pallets in place. In the absence of load locks, keep lengths of 2″x4″ boards handy to nail into the wooden floor of the trailer to pin the last two pallets in tightly. Although first ask the driver for permission and be careful it is not a reefer trailer. Reefers cannot have nailed down dunnage as it would damage the trailer. Thanks to Tyoga Container in Tioga, PA for the picture. They are my ‘go to’ for dunnage products. Tell them I sent you and I might get lunch out of them next time I am in Pennsylvania.

Whether domestic or international transport, take the time to review all of your cargo losses traced to pallet movement while in transit separately not the result of a recordable truck incident such as a collision or flipping. Then get the total dollar amount loss of all the damaged cargo and divide it by the total number of shipments which will show your average loss per shipment. The dollar amount per shipment is your budget for the dunnage I mentioned earlier. The money you will save in reshipping to replace damaged freight, reverse logistics, customer satisfaction/retention, increased insurance premiums (if you decide to make a claim), and labor dealing with the loss will be your true savings.

LTL transportation presents special challenges for shippers attempting to reduce freight damages. LTL carriers take control of the freight at their trailer door reducing the amount of control shippers have over mitigating freight damages. Added to that your freight many be cross docked two, most of the time more, times between the time being loaded and received by your customer. Having a good, hard to damage, cube becomes more important than ever. As a shipper you can also have the LTL company designate your freight ‘do not stack’. This will help prevent toppling in transit as well as heavy items being stacked on top of your pallet. Cross docking warehouse personnel can’t always tell, or care for that matter, if your freight is top heavy.

Another weapon against damaged freight (and ‘lost’ freight) is collecting and using data on all losses for LTL freight. Most LTL companies don’t advertise their loss records and will give a vague answer if asked directly unless they are a shining example of freight protection for the industry. It’s up to you. By collecting data related to losses such as… what, who, when/where, and how, you can take action. What was damaged, who was the carrier, when/where was it damaged, how was the freight damaged? Combine that information with what was the financial loss for each incident and you have all the information you need to reduce your losses. Using a spreadsheet keep a running log of all losses broken up by each LTL carrier you use. Each quarter review the total number of losses brushed up against the total number of loads transported by the subject carrier and come up with a ‘loss ratio’ for the carrier. The carriers with the highest loss ratio get eliminated from you approved carrier list. You can even have more fun and dice the numbers even further by slicing the ratios into average dollar loss for each carrier separated by type of loss. You may uncover something like a carrier has an unusually high dollar loss ratio in the ‘lost freight’ column indicating there may be targeted theft operator within the carriers system. Additionally why not look at trending for other segments? You may find out that freight loaded on Friday is more likely to get damaged than other days or freight that runs through a specific cross docking or delivery out terminal gets damaged/lost more than other terminals. Collecting the data is half the task, carefully analyzing the data will make the collection effort worthwhile. It may take a while but trends will appear in the data, but it can guide your risk mitigation efforts to have a positive impact. There are benefits to be a ‘numbers’ nerd.

Lastly, if you are remotely close on transport rate choose the dedicated truckload (don’t forget the load-locks) over LTL. Truckload damage rates are less than LTL due to the cargo not being handled at cross docking locations along with you get to load the freight. Less handling is almost always better and since you loaded it you can use the dunnage I mentioned. Additionally, truckload contract carriers are also required to carry $100,000USD of cargo coverage while LTL often only offers cargo insurance by the pound based on the freight class which may not fully cover your freight value.

Cargo Theft

Theft happens all over the globe. Although don’t think we are better protected in the confines of the USA than other places. Ranking number four on the list the United States is in the top five for cargo theft globally in the company of Mexico, Brazil, South Africa, and Russia. The exact number for cargo thefts is hard to pin down. Many shippers don’t report thefts in fear of their insurer raising insurance premiums. The FBI estimates the dollar amount to be between $15 billion and $30 billion every year. The following are a few things to keep in mind.

chartIt is a misconception that only high value freight gets stolen. As a matter of fact, due to sheer volume of shipments the commodity ‘food and drinks’ tops the list of stolen items. Looking at the nifty pie chart I made gives an ‘over the thumb’ look at the prevalence of theft by sector. No one is immune to cargo theft. While it is true organized targeted thefts often focus on high value easily sold items, there are plenty of thefts that are crimes of opportunity. In the event you ship desirable theft commodities one way to reduce the risk of crimes of opportunity is to put your freight in ‘stealth mode’ as an everyday procedure.

Items such as laptops, cell phones, LCD TV’s, and other desirable theft commodities should be packaged in ‘blank’ packaging and the bill of lading should be as vague as possible. If you are unable to have blank cartons use black shrink wrap and band the pallets well. Bill of ladings and pallet labels stuck to the outside of pallets do not have to be specific for domestic transport. Cell phones and laptops can be stated as ‘miscellaneous electronics’ on the transit documentation. Code numbers can be used for outer pallet labels with more specific manifests reserved for the inside of of the pallet. If a thief of opportunity is rummaging through the back of a trailer looking to run off with several cartons, they may not wish to waste time and labor accessing cartons in a well wrapped and banded pallet for an unknown reward. Although they will be sure to grab a carton that says ‘Apple or Samsung’ on it.

Cargo thefts increase by up to 40% over holiday weekends. We do love our long weekends, don’t we? So do the criminals. While we take some well-deserved time off criminals are punching their time clock to go to work. The three most active theft locations are;

Parking Lots                      Truck Stops            Warehouses and DC’s

The criminals know there will be as much, or more, unattended freight over extra-long weekends than there will at any time of year. If you have a choice, adjust your shipping schedule to have your freight delivering before the holiday or pick up after the holiday. If your truck freight must move over the holiday practices such as ISO compliant barrier seals in combination with hardened pad locks, air brake valve locks, and king pin locks will deter some thieves.

For truckload long haul make sure your driver has enough fuel and driving hours left to get several hours away from pick up. Also ask your carrier if the trailer your freight will ride in will be parked in a secured terminal for any layovers. The lion’s share of freight theft is whole trailer container load and the largest share of those is unattended trailers/containers. Remember, a trailer in a secured area is your best weapon. The best trailer lock is of no value if the doors are removed from the trailer or a thief has plenty of time and a few tools in a remote area.

Deserted warehouses will also be the prime targets. Double checking proper function of all security cameras, door and window locks, and checking good working order of all barrier protection like fences and gate locks are a must. If criminals do get in, there is no need to help them once they are. It is wise to remove the keys from all material moving machinery such as forklifts and yard dogs. Padlock all trailers in the yard even if they are empty and lock as many interior thru doors as possible. One tool I used to employ when there was room was backing the trailers rear end to rear end making access to the trailers doors more difficult. I also tried having the drivers back up against the building wall but that didn’t go very well if the driver was inexperienced.

There is no such thing as a false alarm over a holiday weekend. One small tool many people miss is police drive-by patrol help. Unless you yourself are a wanted meth-cooker, call your local police department and let them know the warehouse will be empty and for how long. The police would rather prevent a crime than investigate a crime. Letting them know your warehouse will turn into a prime target over the holiday will help the police prevent a crime. Officers have to sit somewhere filling out reports in their cruiser. Why not near or at your facility? If you are indeed a wanted meth cooker it may be better to have someone else call.

Don’t overlook organized targeted theft. Cyber thieves posing as legitimate truckers will always be trying to take advantage of shippers in a hurry to get freight booked and loaded. Comprehensive due diligence in booking trucks is more important than ever. ‘Strategic cargo theft’ is the fasted growing form of cargo theft. Verify the trucking company name on the door and the tag number. Ask for, and make a copy of, the driver’s license. Making sure the picture matches the person is important. Make sure the agent or dispatcher’s phone number you booked the freight with matches the trucking company’s phone and fax number of record. If not, call the carrier to confirm the agent and the truck. Watch for fuel advance requests and lower than market quotes for your freight. Taking the lowest bid may be handing your freight to a criminal. Not that I am picking one anyone, but the highest cargo theft rates in the county are in California, Texas, Georgia, and New Jersey.

This article is in no way a comprehensive guide to all methods to prevent freight losses. It can however be an indicator there are steps you can take for little or no cost to help reduce losses. If I included anymore free information I would never make another honest consulting dollar again. Besides, being aware of loss mitigation techniques is only one third the risk mitigation battle. The second third is updating your procedures as the volume and the shipping environment changes. As your company grows and changes so must your freight risk mitigation procedures. The last third is using the techniques day after day, month after month, year after year, and keeping your team motivated to follow the best practice procedures on a continuing basis. Any fool can put practice and procedures on paper. Keeping the procedures practical, alive, and kinetic in use is the trick. Time passing, deadlines to beat, apathy, and personnel/management changes can be cargo risk mitigation kryptonite. Don’t let the subject of risk mitigation become one more motivational poster on the wall that becomes invisible. I’m just saying.

Freight Loss Data supplied by CargoNet and Freightwatch International