20 March, 2019 Ben Spilger Ben Spilger

The Real Cost of a Claim

The Real Cost of a Claim

We can all remember a claim or two from our (hopefully not too recent) past that went truly awry. Not just the run-of-the-mill overage, shortage or damage, but the claims that drive your decision making for years to come.

This got us thinking about how to put a price on the anguish that can come with claims of any type, but especially the doozies. Aside from the value of a claim vs. that which is (or isn’t) recouped through insurance, salvage or direct compensation… What does a freight claim really cost?

We’ve spent the past week discussing the topic with customers across the globe and reviewing literature to come up with a very brief summary of the most common factors we’ve heard companies express they’d like to assess…

Time. This is the easy one. The average claim, depending on volumes, scale and region takes 2 to 6 hours to file - but can take so much longer. There’s also the handling (and storage) of product while decisions are made, and discussions and time spent getting to the bottom of the issue - and ultimately assessing fault.

Relationships. This is the hard one. You can do everything right and still have long-lasting and oft peripheral repercussions. Decreased contracts, reduced capacity in tough markets, additional competition and new burden in getting business done can all come later and with notice. It shouldn’t happen, but it can and does. Claims are a part of all supply chains, but they are also a factor in partnership success.

Opportunity Cost. This is the wildcard. What should you or your team actually be doing when you are stuck working on claims? Getting business, filling orders or market outreach? Take your pick, they’re all better than figuring out who put that big dent in your bottom line. Prevention, of course, is the optimal remedy, whether performing inbound and outbound inspections or assessing historical data on claims from the past.

How do you assess claims?…

  • How do you capture the full costs of claims?
  • What other measures are important?
  • What do you do to prevent or avoid claims?

Please reach out to me, or one of my collegues to discuss your views!