2-B-4 Manage the resolution of delivery/receiving problems including freight loss and damage claims

1) Freight terms (domestic and international)

Incoterms are the common standard for specifying freight terms and were described in Task 2-B-3. When resolving delivery / receiving problems, the supply management professional should first refer to the Incoterm used in the contract.

2) Delivery tracking systems

Real-time tracking systems are typically used by large organizations to determine shipment dates, determine where a shipment is at any given point in time and when delivery has taken place. These systems allow the shipper to take remedial action when necessary or re-direct cargo to respond to a sudden need elsewhere. Technology has improved how supply management professionals can track their products, and this trend will continue. The increased usage of radio frequency identification (RFID) systems will add to the information provided in tracking systems. It will be able to provide realtime communication.

3) Delivery performance measurements

Delivery performance is an important determinant of customer satisfaction. So the primary objective is for the supplier to deliver the required materials or services on time. Some measures frequently used to measure whether a delivery is satisfactory include:

• Damages: ($) Amount per vehicle.

• Damages: ($) Amount to goods while in transit.

• Damages: ($) Amount to goods during loading.

• Damages: ($) Amount to goods while unloading.

• Late deliveries as a percent of all deliveries.

• Percent of orders delivered on time.

• Percent of deliveries outside preset delivery windows.

• Cost of damage claims.

4) Visible versus latent damage

Damage can be visible, sometimes called unconcealed loss or damage, or latent, sometimes called concealed loss or damage .Visible damages are easy to detect during routine inspection. An automobile delivered with a cracked windshield is an example of visible damage. Latent, on the other hand, is not easy to detect. A latent defect is one that is hidden and is therefore unnoticeable during inspection. An air compressor that looked fine when delivered, but was later found to have a faulty electrical switch would be an example of latent damage.

The buyer of the goods has protection in cases of both visible and latent damage. Goods that are visibly damaged can be refused for delivery or can be replaced at no additional cost to the buying organization. The damage should be noted on the carrier's delivery receipt in order to substantiate the liability. The organization should keep a copy of the receipt. Latent damages can be a bit more challenging, particularly if the defect is discovered after time has passed. A concealed loss or damage may be difficult to collect because it is difficult to determine where the damage occurred. However, the supply management professional may still invoke warranty rights to replace or repair the item. (Stanley and Matthews, 2008.)

5) Rules for freight claims

Freight claims as defined in the ISM Glossary are claims against a carrier due to loss of, or damage to, goods transported by that carrier; also for erroneous rates and weights in assessment of freight charges. Freight claims are extremely important when loss or damage occurs in a transport move. The procedures and forms used are generally standardized across all modes. Claims handling involves the actual recording, handling and monitoring of product claims arising from carrier-responsible loss or damage. Accurate, real-time data collection is important. Organizations are advised to keep historical records for the purpose of identifying trends in loss and damage, and response times for claims payments.

6) Resolution processes .

A typical resolution process consists of at least two key components: Escalation and corrective action.

A) Escalation -A shipment may be damaged, lost, incorrect or late. In these circumstances; the parties involved must settle the dispute. Initially, the supply management professional should contact the shipper or carrier to rectify the situation. If the shipper or carrier fails to rectify the situation, the supply management professional may take the next step and file a claim. To help determine whether responsibility lies with the shipper or the carrier, receiving personnel should strictly inspect incoming goods and record any issues or problems (for example, damaged boxes, short orders). Some negotiation may be required to resolve the claim and is a skill that is critical for supply management professionals. Narrowing the differences in a dispute can allow both parties to give a little and arrive at a mutually agreeable resolution. When both parties end a negotiation feeling content with the outcome it is a win-win proposition. However, this is not always possible and in the event a claim can not be settled amicably, litigation may be necessary. Litigation can be costly and time consuming for all involved. Although the judicial system is available to all, it is often preferable .to resolve differences outside of the courts.

B) Corrective action -To avoid escalation of claims and satisfy the customer the carrier or shipper has the option to take corrective action before a claim is filed. For example, a carrier communicates to the shipper and receiver that the goods have been lost in transit. It then seeks to retrieve them. In the event the goods cannot be found, a claim is flied immediately by the receiving organization. If an over shipment has been made, the buying organization can either keep the additional goods and pay for them or return them to the shipper for a refund. In the case of damaged goods, the responsible party may offer to replace or repair them, or the receiving organization may do the repairs and charge the party responsible for the damage.

7) Freight audit procedures

In order to control transportation costs, organizations need to implement procedures for auditing their freight bills. Many mistakes in billing occur as a result of human error, which can include variances in rates, descriptions, weights, duplicate invoicing, wrong payment terms and routing. A large organization can experience between 3 and 5 percent overcharge in its freight bills each year. While the auditing function can be performed internally or externally, many organizations find it beneficial to outsource this service. A small organization can find it particularly advantageous to do so, as they likely do not have a staff person for this function. Organizations that perform freight auditing are called freight bureaus. They normally provide service on a percentage or commission basis (Stanley and Matthews, 2008.)