The real cause of most preventable shipping losses.

I draw on personal experiences to form my opinion for many things I write about. When I do this, my writing is still fiction but broadly based on real happenings somewhere, sometime. My experiences enable me to form ‘hypotheses,’ but well short of ‘theories,’ and there is a difference between the two. Suppose you use scientific test results, existing accepted data, and research to produce evidence and draw a conclusion. In that case, it is a ‘theory,’ which is as close to a fact as possible and still leaves room for modification or challenge.

For a hypothesis, however, it is constructed before any applicable research has been done, and there is yet to be any objective evidence to support the hypothesis. It is clear the pecking order for information is fact, then theory, and then the lowly hypothesis.  People have ‘opinions,’ and intelligent people have ‘hypotheses.’ I am feeling particularly clever today, so I will go with I have a ‘hypothesis’ I would like to share.

It is an accepted theory, which data even supports as maybe fact, that most preventable ocean cargo damage results from improper stowage.

However, I hypothesize that most ocean cargo damage results from ‘the lowest of three quotes.’  

My logic in supporting my hypothesis is that poor stowage, along with other significant causes of damage, can be the surface symptom. Still, the underlying actual cause is often the lowest cost, or lowest of three quotes, was used to execute the handling and stowage, making subpar results more likely. The following reviews how the lowest cost option can be the actual root cause of damages.

First, we should consider what shippers must address when shipping their cargo.

Things shippers care about in getting cargo from here to there are;

01.   suitable packing and stowage,

02.   the mode(s) of transport matching the commodity well,

03.   the speed of the transport fitting the need,

04.   routing that is focused on the safe delivery of the shipment to the consignee,

05.   and the overall cost of the transport.

The above goals are all of importance. Unfortunately, in many instances, the overall cost of transport, which is number 05 on my list, is number 01 on the importance list for some shippers. Why is making cost number 01 so bad? Making cost number 01 is bad because when the cost is number 01, everything else on the list is negatively impacted by trying to achieve number 01 the most.

Next, I’d like to present a structure and example of how things unfold to support my hypothesis.

In many instances, shipping agents route our shipments. It is what they do. On many occasions, US-based importers buy goods overseas, leaving the responsibility of delivering them to their door up to the shipper/seller overseas. For overseas exporters, getting a container of goods to the port of entry of the buyer is easy. The challenge for the overseas exporter comes with the transit from the port of entry to the buyer’s door. This is where shipping agents as an asset come in who often work for the seller’s freight forwarder. Shipping agents used by forwarders are typically local to the port of entry and have resources in place to arrange port-to-door service. It is a sound system. However, there is one thing that can screw up an excellent system, money.

As an illustration of how things can go sideways due to money, I will use the following example:

Full Container Load: Ocean

Commodity: Thingamabobs in Cartons

Volume: 14 Standard Pallets

Origin: Outside the USA

Destination: Door, O’Malleyville, Florida USA

US Port of Entry: Tampa

Instructions: No Stack Cargo

I have changed up some of the exact information on port of entry, commodity, and the like for obvious reasons. And there really is not a place called O’Malleyville I am aware of. Too bad, it has a nice ring to it.

What could have been

For our first scenario, the overseas seller’s routing for the full container load shipment seems straightforward.  Since our shipment is no stack cargo, and only 10 standard pallets will fit in a 20’ container on the floor, the cargo should be loaded, blocked, and braced into a 40’ container at origin, loaded to a vessel, sail to the port of Tampa, with the container unloading at the port of Tampa. Once the container in Tampa is ready for pickup, the overseas seller’s shipping agent books a truck, the 40’ container is loaded to a chassis, and the truck heads out the 200-ish miles to O’Malleyville for delivery; the container is unloaded in O’Malleyville, and the dray truck returns the empty to Tampa.  All is well that ends well.

What was

For what was, even though the bones are correct, there is some speculation on my part since I did not have all the information there was to have, so there are some assumptions by me.

The overseas shipper in this scenario did not want to spend the money on a 40’ container and books and loads, a 20’ container with the 14 pallets stacking some of the pallets. The container is loaded onto a vessel at the port of exit and sails to Tampa, and as before, is offloaded. This time, the agent, who has a stripping warehouse, either by instruction or initiative, does not wish to spend the $1100USD for a round trip dray; it was too much money. The agent unloads the container, which is a ‘soft cost’ to the agent, and transloads the cargo to a cheap $700USD truck looking to head north to get out of Florida. Things go as planned until the trucker calls O’Malleyville to schedule a delivery that day. The trucker finds out they can’t be unloaded until the next morning. The truck wouldn’t wait until morning to deliver a cheap 200-mile run, so the truck returned the cargo to the shipping agent.

Now, the shipping agent is in recovery mode. The agent missed the expected delivery day and had no truck.  The agent now books the 14 pallets with an LTL carrier that had the space to move the freight (if you stacked it) and loaded the LTL truck that delivered the cargo to O’Malleyville. Booking a truckload in a hurry would have been too much cost, and the cheap truck was gone, so LTL it was.

Unfortunately, by the time the cargo was loaded (stacked) into the container by the seller, then unloaded at the agent’s warehouse, then loaded to truck number one, then unloaded again, then loaded to truck number two for delivery to O’Malleyville, the 14 pallets of thingamabobs had busted and broken open cartons from stacking the pallets, fork damages to pallets from excessive handling, and countless bent thingamabobs.

I am sure someone called the loss ‘improper stowage’ and ‘rough handling.’ However, the driving force behind the damages was bad choices motivated by money, by the seller, the seller’s forwarder, the shipping agent, or all three. It can be argued that the shipping agent’s actions were the smoking gun, but that would only be known after an investigation. If the container had been drayed round trip to O’Malleyville, it is very likely there would have been no damages at all. As a guess, I estimate there could have been $350USD saved by not using drayage to door to get the goods to the destination.

If the seller gave instructions and paid for the forwarder and shipping agent to have the container round trip drayed to O’Malleyville and unload the container there, the forwarder and/or shipping agent could have a world of trouble if the financial loss were significant. The owner of the cargo who took the loss would be able to hold the forwarder and/or shipping agent responsible for the damages.  Even if the cargo was insured and the insurer paid the claim, there is something called ‘subrogation’ where an insurer can pay a claim and then take the place of the injured party as the one able to chase who was responsible for the loss demanding reimbursement.

What is responsible for the most preventable shipping losses? Improper stowage or rough handling? I think not. It is the ‘lowest of three quotes’ business plan and is all about the money.