Hidden Costs in Retail Logistics: The True Damage Caused by Damaged Freight

Retail logistics managers are tasked with keeping costs under control—but that’s easier said than done when there are costs they just can’t see. From small, incremental charges that gradually eat away at the bottom line to the avoidable loss of major customers, there are many areas where supply chain managers could be saving money, if only they could see them.

In the first of a two-part series on hidden costs in the retail supply chain, let’s explore the true cost of damaged freight. Here’s why this area is such a large blind spot for many shippers—and what you can do to minimize the costs.

Damaged goods—and relationships

Damaged shipments cost shippers thousands of dollars every year. But while replacing goods and offering refunds and discounts stings, it’s all the other costs associated with in-transit damage that shippers should really be worried about—because many fly under the radar.

For one, there are additional labor costs that should be factored in. Navigating claims forms takes time, as does dealing with unhappy customers calling to find out why their shipment never arrived. Shippers may also have to pay to store the damaged goods until they can be inspected. If the damage is severe, they may then have to pay for disposal.

Perhaps the biggest cost that many supply chain managers don’t factor in, however, is the potential long-term damage to customer loyalty. A replacement is all well and good, but the new shipment might not arrive until days after the client expected to receive their goods, which could have a knock-on effect on their own customers and reputation—especially if the goods were intended for a holiday shopping event, hot-ticket item release, or other brand-critical initiatives. Discovering this only when it’s too late to deploy contingency plans is likely to sour your clients’ impression of your company—and greatly reduce the chances that they’ll order from you again.

So, what can shippers do to minimize the hidden costs of damaged shipments?

A proactive response trumps a reactive one every time

Carrier reliability is one factor that contributes to shipments arriving safely and on time, so it’s important for shippers to carefully vet their carriers and recognize that the lowest rate doesn’t always amount to the lowest overall cost. If a carrier is cheap but doesn’t take care of your freight, requiring you to send an angry customer a replacement at a premium freight rate, then it wasn’t really cheap at all.

Unfortunately, some damage can’t be prevented, no matter how good a carrier’s safety record is or how careful and diligent they are. That’s why visibility and communication are critical. If something goes awry when a shipment is in transit, it’s essential that supply chain managers know about it as soon as possible, allowing them to take proactive steps to salvage the customer relationship and get replacement goods out the door in good time. In some cases, they may even be able to line up a replacement that will arrive only hours after the original order was expected to arrive, keeping problems for the customer to a minimum.

A leading-edge transportation management system (TMS) makes this possible, providing real-time event management and shipment tracking information that allows managers to rapidly identify problems and get to work deploying solutions. After receiving an alert about an in-transit shipment, staff can call customers immediately to let them know what happened and what they’re doing to rectify the problem—impressing them with superior customer service, rather than leaving them confused and frustrated at the loading dock when the shipment doesn’t arrive.

Eliminate hidden costs in your retail logistics operation

Damaged freight can do a lot more damage to your bottom line than you might realize—if you let it.

Honeybee TMS™, CTSI-Global’s proprietary transportation management system, can help retail logistics managers streamline their operations and bring costs down. Quickly identify the best and most reliable carriers for every shipment, keep track of your freight with superior pre-shipment, post-shipment, and in-transit visibility, and deploy contingency plans in no time with a solution designed to boost efficiency and cost-effectiveness every step of the way.

Discover what all the buzz is about. Learn more about Honeybee TMS™ by contacting us today.

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