Lost Freight Loads Aren’t Only about Damage
The U.S. Department of Transportation and the Bureau of Transportation Statistics reported that in 2015, the U.S. transportation system moved an average of approximately 49.3 million tons of freight per day valued at more than $52.5 billion. With increase consumer demand for products, the value of freight is expected to increase from $1,044 per ton in 2012 to $1,461 in 2045.
When companies consider freight loss, they often focus solely on the damage to goods. While these costs do add up, there is more at stake. For every load that is damaged or lost in transit, there is an interruption to the supply chain. The order must be replaced, causing the manufacturer to have to stop the normal flow of business to produce more goods and causing disruption in supply to the end customer. Even if there is extra product on the shelves, they must replace that surplus at some point – perhaps with a different brand
Inbound Logistics notes there is also the financial burden of higher insurance claim costs, expedited freight costs, lost revenues from cancelled deliveries, and more – all leading to the annual total cargo loss of more than $50 billion.
What can companies do to reduce the risk for lost freight loads? Is there an automated solution that detects risks early enough to make calculated adjustments? Let’s first break down the types of losses.
Types of Freight Claims
The easiest way to identify the types of freight losses that do so much damage to the bottom line is to look at freight claims. According to PartnerShip, there are four common types of freight claims:
- Damage – when freight is delivered with visible damage
- Spoiling – when freight is delivered spoiled (this may not be visible and is a significant reputational risk, for instance frozen beer or separated mayonnaise)
- Loss – when freight is picked up but never delivered
- Shortage – when only part of the freight is delivered
- Concealed – when loss or damage is discovered after delivery
Who is at fault may not yet be known, however, the carrier is on the hook for proving it was not them who was negligent. The damage, loss, shortage or concealment may, for instance, be an “act of God.” This may include a natural disaster, major weather event or wildfire. Interestingly, even with these seemingly unpredictable events, the carrier may still be found liable if they could have taken precautions to avoid the event but didn’t. In this case, a claim can still be made against them.
Similarly, another exception the carrier can claim is that the nature of the goods led to the fault. This is typically relegated to temperature-sensitive items, such as produce, dairy, meats and medications. If they are naturally vulnerable to decay or disease and the carrier did not speed up that process by its own negligence, the freight loss may not be their responsibility. The carrier is responsible only for transporting the goods to their destination. If, however, the carrier did not use the proper refrigerated truck or did not safeguard the freight against extreme temperatures, for instance, they are liable.
Assessing the Risk
In order for a company to prevent lost freight loads, they must first understand their risks. As part of a larger initiative, the U.S. House Transportation and Infrastructure Committee recently testified to the benefits of performing risk assessments across many areas of transportation. Clearly, risk assessment is a top priority for not only carriers, but every company and agency who depends on our infrastructure to deliver goods.
For carriers, risks include anything that could impede their delivery of goods as expected. Weather events, extreme temperatures, natural disasters, road hazards, infrastructure issues and even social unrest are among the plausible threats. Unfortunately, many carriers lack the visibility into the entire freight journey to see where risks lie, how likely they are to occur, and their potential severity.
It is critical for companies to be able to detect risks along the whole of the shipping lane and proactively develop alternatives. Because the carrier is liable for the goods once they are loaded onto the truck, train, plane or ship, it is worth the investment into an automated solution that gathers the many data points and presents the information in a consumable way. Carriers must act quickly. Having the relevant data at their fingertips gives them the ability to work with the shippers ahead of time, set proper expectations, and manage the freight more thoughtfully.
Choosing a Supply Chain Predictive Analytics Solution
Preventing lost freight loads begins and ends with a transportation risk management solution. Instead of legacy processes to assess risks, companies need data from multiple sources. They must move away from manual efforts or antiquated, disconnected systems in favor of a consolidated solution that pulls together all of the relevant data into an integrated system. No one has time or the resources to manually connect every dot within a complex supply chain of hundreds of thousands of deliveries per week to get an accurate picture of where and how freight loss may occur. With the scale of shipping only expanding, these efforts are not only inefficient, but they are also unreliable and can lead to significant freight loss.
An automated supply chain predictive analytics solution will provide a consistent, real-time measurement of risk that includes everything from weather and natural disasters to bridge collapses and civil unrest. The best solutions will not stop there, however. They will score the potential and severity of each potential risk so the carrier can be alerted, visualize where they need to take action and receive a recommendation on the best action to take to mitigate the risk. Leaders can make educated decisions on what risks need attention and how to address them before they impact the freight.
The solution will also enable companies to build a historical picture of each lane to better understand patterns, how frequently the carrier actually faced each risk in the past and what alternatives worked best. This gives decision makers the data they need to make smart decisions about whether the chosen lane should be shifted permanently or by seasons, for instance. It may also provide insight into a better mode of transportation or truck type for a particular load going forward. By looking at the wealth of historical data, informed decisions can be made for continual improvement.
Reducing Lost Freight Loads Claims
As carriers attempt to reduce the impact of freight loss claims, they must address those “acts of God” and “nature of goods” risks. The supply chain predictive analytics solution will help them take those precautions to avoid certain risks, such as bad weather, floods, extreme temperatures and wildfires that can damage freight. When, for instance, a flood occurs, the system should be able to assess which roads are impacted and where and when trucks can be rerouted. If extreme temperatures threaten a leg of the shipment route, the carrier may decide to use a refrigerated truck to protect delicate freight or shift pickup dates to avoid the risk altogether.
These are the types of actions expected of carriers, yet without a reliable system in place to detect these dangers in real-time, companies often stick to the original plan and hope for the best. Carriers who make the investment in a modern supply chain predictive analytics solution will reduce freight loss claims while bolstering their reputation for being a dependable, smart company who is proactive in protecting their client’s freight.