How much cargo damage is acceptable in your supply chain? Often, the answer comes down to costs: the cost of damages weighed against the cost of solutions. $500,000 in yearly damages may still not be worth a $10,000,000 packaging investment. However, in this equation, hidden costs need to be factored in too.
1. The cost of replacing goods
Your customer will likely still be waiting for their order. If you have the replacement on hand, you’ll be paying a price for inventory management. If you don’t have the replacement on hand, you’ll need to manufacture new product. No one wants to manufacture a shipment twice, let alone a high-value one.
2. The cost of downtime
Delayed shipments are by nature unexpected. Unexpected events often lead to downtime, or worst-case scenario, standstills. The price tag is steep. An hour of lost productivity for a large manufacturer could be worth well over $100,000. What does just one hour of lost production cost your business?
3. The cost of claims management & repairs
On the other hand, damage incidents mean uptime for claims management and repairs. It typically takes between 30 and 120 days to resolve a single claim. Plus, the goods themselves need to be dealt with. This involves inspections, repairs and property costs for the storage of damaged items.
4. The cost of insurance
If you ship low-value cargo, a few broken goods here and there might not break the bank. Perhaps your claims management department is effective and can process claims quickly. Even then, how much are you paying in insurance premiums? And how much could you be paying if you were filing fewer claims?
5. The cost of lost opportunity
Time is money, as the old adage goes. Replacement, downtime and claims management certainly cost time. Could it be put to better uses? All the time spent mending customer relations and troubleshooting packaging is time not spent productively, for instance securing new customers and improving packaging.
6. The cost of reputation
Should delays and damage occur too frequently, it may cost your reputation. Unhappy customers are not returning customers. Nor are they customers who recommend you to others. Another negative side-effect of damaged goods occurs if your damaged goods are often sold at a discount. A tarnished brand is hard to quantify, but it’s not positive.
7. The cost of no accountability
Even after all this there may be an even higher price to pay: the inability to hold other parties accountable. If your shipment has been handled by multiple suppliers, across multiple modes of transport, there may be no way to know exactly what happened or where. In which case, expect to incur the exact same costs again soon.
Direct costs are not total costs
Clearly, any complete assessment of damage will not only consider the direct costs of damage, but also costs in terms of time, productivity and customer relations. Still, how can you expect to make an honest assessment if you don’t have a complete picture of your damages?
What data can do for you
A real-time tracking solution such as Visilion provides data to help answer the “what”, “where”, “when” and “why” of cargo damage. The location and condition of your cargo is streamed to you in real-time. This data provides deeper insight and understanding into your supply chain.
Data on location and time of damage helps identify patterns and hold other parties accountable, making both claims small and large insurance claims management more effective and worthwhile.
Making improvements based on data
The data might reveal that your total costs of damage are much higher than anticipated. However, as long as there are no reasonable alternatives, you may have to simply put up with it. Or maybe not. As it turns out, real-time location and condition data also supports preventing damage in the first place, by revealing underlying causes and providing immediate notifications of disturbances. As a result: Visilion helps you both understand the true cost of your damaged goods and pave the way to a supply chain with fewer damages.
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