More efforts needed to mitigate cargo losses

Loss expects at leading fleets say more thought needs to go into package design to ensure cargo is well protected during transit.

Preventing loss is a top priority for any carrier or shipper, but the prevention of cargo claims really begins with the basics, and that is packaging, blocking and bracing. And according to panelists at the 44th annual Transportation & Logistics Council meeting in Charleston, SC, not enough is done at that level to mitigate losses.

“I would suggest shippers test their packaging before testing it in the supply chain,” said Daniel Hill, director-SRV, cargo claims & prevention for ABF Freight. He added that it’s always surprised him that more carriers are not involved in the process of designing packaging for cargo.

ABF employs four full-time professionals that work with shippers to ensure packaging is secure, compact enough to maximize space, and sufficient for transport. Hill suggested shippers reach out to carriers for assistance. “A lot of carriers don’t even charge a service fee for helping with packaging design,” he noted.

The exact extent of losses within the supply chain is difficult to pin down. Hill said ABF is working with the University of Michigan on a study to try and quantify it, and that “anecdotally from them, it’s easily going to be in the billions of dollars.” He hopes the study will be released before the end of the year.

“There are threats to the supply chain and we have to manage that risk, otherwise products don’t make it to market,” Hill said.

And those losses come not only from theft, but also from preventable damage. Ed McQueen, director of loss prevention for Southeastern Freight Lines, noted that some shippers will simply put cargo into a crate and assume it is protected. “Just because it is in a crate doesn’t mean it is secure,” he told the audience. “You can stack things eight pallets high in a warehouse, but a warehouse isn’t moving 60 mph.”

Hill added that designing a crate that is both the proper size and offers the proper protection for cargo is a science and needs to address the mode of transport and how it will likely to secured inside a vehicle or container.

“We have a material handling conflict of interest,” he said. “Someone designs a [crate] and whoever does that needs to understand how that package will be transported.”

The panel’s moderator, Martha J. Payne, Esq., Benesch, Friedlander, Coplan & Aronoff LLP, pointed out that a carrier can refuse to take a load if it doesn’t feel the packaging is adequate. Legally, she said, a carrier that takes an improperly packaged load could be opening itself up to additional liability.

Of course, packaging is only one portion of the loss equation. As Hill explained, data can help mitigate losses by identifying areas of concern. ABF will look at damage claim trends to try and identify potential problems and, in some cases, has found that the way items were packed into a particular area of the trailer has impacted their security. This is where some of the science comes into play.

“A lot of times shippers tell us this is happening but the data [on damage history] is telling us something else,” he said. “So, we take a little material from one area and move it into the problem area.”

Adding technology to the mix can also help, the panelists agreed. GPS tracking adds visibility into where trucks and cargo are at all times, but Stephanie Penninger, Esq, Benesch, Friedlander, Coplan & Aronoff LLP, advised brokers and shippers to be careful about the wording of contracts that specify tracking technologies. She said the contract should be carefully written so that it states the broker is only tracking the cargo and not the equipment or driver.

“Tracking or monitoring of a carrier, and by proxy of the driver, could put you at risk for too much control of the driver” in a lawsuit situation, she said. There are also some cyber concerns, Penninger added, as some of the systems collect additional data on the driver.

At the same time, technology can also create conflicts that lead to additional litigation. Penninger listed a situation where a trailer’s temperature sensors record one set of temperature readings yet the product arrives out of spec. “Whoever documents the best and has the best data wins,” she said, “so use the data wisely.”

Sometimes, there is nothing that can be done, such as when severe weather strikes. McQueen pointed out how hurricanes that result in evacuations or flooding can delay shipments, causing missed delivery times, not just in the immediate time around the event, but for days or weeks after.

“Not only is there a flood of water in the system, but there is also a flood of freight and that creates a bottleneck,” he said. Everyone needs to understand these situations and when possible, plan for them, McQueen said.

Hill advised carriers and shippers to be aware that standard cargo liability covered does not include “acts of God.” When relating a conversation he once had about what constitutes an “act of God,” he response was ‘whatever he wants.’” An example of this situation arose in 2010 during the flooding in Nashville when Hill said ABF suffered $3.5 in damage to its operations.

The other area of concern is straight out theft of product or trailers. At Southeastern Freight Lines, which handles primarily LTL freight delivered within a day or two, all LTL trailers use locks and linehaul trailers are equipped with seals, McQueen said. If a seal is on an LTL trailer or vice versa, it’s an indication of a potential issue.

“It’s a very simple system, but a driver is making 20 stops a day so that trailer’s doors are being opened and locked 20 times a day,” he said, adding that “it’s a process” and drivers are trained to make sure that doors are locked before “they turn their backs on the tail lights.”

McQueen went on to explain a personal story of how following a process diligently can mitigate a potential loss. A $720 vacuum was being delivered to his house by a carrier from Macy’s – a vacuum he never ordered (he would later learn his credit card had been stolen). On its way to the house, the “customer” called the carrier and asked for the vacuum to be delivered to a different address. The carrier said they could not do that without contacting the shipper. A call to Macy’s was made and no, it was not supposed to go to the new address, so Macy’s advised the carrier to return the vacuum to the warehouse.

“If we follow the process, it’s easy to avoid the hiccup,” McQueen said. “We sometimes fall all over ourselves trying to help someone and probably 900 out of 901 times it works out fine.”

The responsibility to prevent damage falls to everyone in the supply chain, said Penninger. Hill added that the key is ultimately to be prepared.

“That’s how we get caught, because we don’t have a plan and there is progressive damage and the clock is ticking,” he said.

The panel concluded with a few best practices, including the careful drafting of contracts to ensure responsibility is assigned appropriately and undisputable; that shippers and brokers follow proper carrier selection protocols; and that insurance coverages are adequate.

When a claim is needed, McQueen added a quick checklist to follow:

• Make it clear and readable
• Make it limited (file for only what you loss)
• Make it accurate
• Make it manageable
• Make it specific (if you lost 2 cartons with 5 items in each, specify it was 2 cartons and not 2 items).

None of the panelists could say there is a fool-proof way to avoid loss, but having a plan and documenting your approach can help mitigate those losses.