How to Settle a Freight Claim

I recently got a call from a customer asking me to help them out with a freight claim. They told me that they were completely dissatisfied with amount of money the freight carrier decided to pay (which was about 10% of the filed amount) and wanted to continue the battle. So I rolled up my sleeves, made a few of phone calls, asked them to fax me documents and emailed a claim expert friends - only to find out that - THEY ALREADY CASHED THE CHECK!!!

Golden Rule #1: If you get a check from a carrier in response to a claim that is less than what you accept, DON'T DEPOSIT IT!

Depositing a check will close the claim forever 99% of the time. Usually the check will even have verbiage near the endorsement spot that states: By depositing this check you accept this claim as closed (or something like that).

But don't feel bad if you have done this. It is actually not that uncommon especially with the automated way company's process checks these days. But this actually brings up another point; that just because a carrier sends a check it doesn't mean the claim is settled and done with.

A claim is not dead until you say it is. The carrier may send you a check in the hopes that you will setlle. In fact, a lot of times they hope the claimant will take the bait.

If this happens, just don't deposit the check and let the carrier know of your unhappiness. Golden Rule #2: The squeakier you are, the more likely you will get your claim resolved to your satisfaction.

If you make it clear to the carrier that you do not accept there resolution to the claim and that you won't stop until you get fair value, than you stand a much better chance in getting what you want. This usually takes a lot of calling, writing and fighting. But sometimes you just need to do that to get what you deserve.

Everybody hates claims, carriers more than anybody. So I am not telling you to start digging up things to start filing. But I am saying that you don't need to settle less than what you expect.

But if you do decide the fight a big battle, make sure you have your facts straight. Carriers have seen it all when it comes to shadiness so if they detect something smelling fishy, you are SOL (Sorry, Out Of Luck!).

Also, there is a governing body called The Transportation & Logistics Council, that will assist in helping companies settle claims through arbitration. This is a non-for-profit organization that can help people out before spending thousands on a lawyer.

The bottom line is that if you feel you are getting hoodwinked on a claim, and you have all of your facts straight, than you will get what you deserve. Don't accept a check for less than what you are due. Just fight for what you deserve and you will get what is due you.

ADVERTISEMENT: With fuel going through the roof, most U.S. companies will are paying 20% more in freight than they did last year. Take your 2007 freight spend, add 20% to it and that how much extra you will be paying this year (not including any rate increases that you already were hit with). Now is a great time to contact George Muha to have LMI perform a FREE Freight Analysis to determine the savings available to your company.

The Savings Impact of Consolidating Shipments!

By George Muha

Since freight is such a huge cost center at companies and a big part of their sales gets eaten up by freight, I get a lot of calls from sales people asking for ways to lower costs to their customers. The first challenge is trying to convince sales people that freight is a real cost - something I know a lot of accounting and operations people can sympathize with. Hey, I am a sales guy so I am allowed to pick on other sales people.

Actually, all I really need to do is to delve into some simple shipping patterns. There is a really easy way to provide a cost cutting solution to your customers, without lowering your invoice price and without threatening your relationship with your freight carrier. This innovative solution is called consolidation!

It is really amazing with what a little consolidation of shipments to the same customer will do for your cost per lb. The reason for this is that most freight carriers charge less per hundred pounds for heavier shipments than for lighter shipments.

So it will cost you less per hundred lbs for a 1,000lb shipment than it will for a 200lb shipment. In fact, your cost per lb will be less than half for a 1,000lb shipment than for a 200lb shipment.

I have a customer who is based in Cleveland who has particularly high classed items. We recently did a review that showed that they ship three 200lb shipments a week to the same customer in King of Prussia, PA. Each one of these shipments carries a cost per lb of .41 cents. However, if they got their customer to buy one large 600lb shipment at the beginning of the week, then their cost per lb dropped to .24 cents per lb. That is a savings of about $100 a week to that customer!

If you multiply that over a year that is $5,200 in savings to their customer. My customer didn’t have to lower any invoice prices. Plus, their customer was happy because they don’t have to expend the labor to unload the truck three times a week.

What if my customer won’t consolidate orders?

Sometimes getting with customers to consolidate their orders is an eye opening experience for them. A lot of times, they don’t even realize how often they are ordering.

Even with the above situation with the King of Prussia customer. When we approached them, they initially didn’t want to go for it because they didn’t think they were ordering that frequently. In fact, they didn’t believe us when we told them they were shipping three times a week!

It wasn’t until we showed them two years of data of them ordering three times, sometimes four times a week, did they consider listening to us. In this case, it was multiple purchasing people ordering at different times. But now they are ecstatic that they are saving these extra dollars and not clogging up dock space.

I have also found that even customers who won’t or cannot handle a consolidated order, appreciate you looking out for them.

How do we go about reviewing this?

The first thing you need to do is pull out a spreadsheet of all of your shipments for the last quarter and sort them by “customer” then by “date”. Then scroll down and break down all the shipments into week blocks.

Then it is simple. Just get your rating program to price out all of the consolidated orders as if it were one big order. Then subtract them from the total of the multiple freight invoices and there is your savings.

This is not rocket science but it is a great way to provide an excellent cost cutting solution for your customers that does not affect your bottom line!

If you are an LMI customer and you want to look into seeing the impact of consolidating shipment to customers, just contact me and we will perform this review for you.

If you are not an LMI customer and you want to lower your freight cost, the first thing you need to do is have LMI perform a FREE Freight Evaluation. Typically, LMI’s program provides over 20% savings to shippers. Contact me today!

Reducing Freight Damage

Through my 12 years in this industry no other topic has been brought up more often, nor with more passion, than the topic of concealed damage. Customers are distraught when they open a vendor order a week after delivery to find that it is completely destroyed, despite the intact box.

Shippers are perplexed when they get a call from a customer, asking for a new order at NO CHARGE! And motor carriers cannot understand how they can be expected to pay for something that was delivered free and clear weeks' prior.

My goal with this piece is to educate the general public about this distressing subject. My hope is that after this short article, everyone reading this will have a better idea of how to protect their company from dreaded freight damages.

First, I would like to explain some of the rules surrounding claims and filing statues. A lot of people think they have 15 days to file a claim for a concealed damage. There also seems to be a popular belief that if they do file a claim in that time frame, concealed or not, the claim should be paid in full, end of story.

But the Interstate Commerce Act (in the Carmack Amendment) states that a shipper has nine months to file a freight claim, damaged or otherwise. So you can take your sweet old time when filing a claim.

However, when it comes to damages, the person filing the claim is responsible for the "burden of proof." So the claim filer is basically guilty until proven innocent in a way.

When filing a claim, there are three factors involved:

a) That the shipment was tendered to the carrier in good condition.
b) That it was delivered in damaged condition.
c) The shipper suffered economic injury as a result of the damage.

Letters a) and c) are usually easy ones to come up with. But letter b) is the tricky one. How do you proof that your shipment was delivered in damaged condition? Well, the first and most important way is if the consignee signs for the freight with a remark about the damage on their delivery receipt.

When a consignee signs for something with damage, nothing counts more than specifically noting it on the delivery receipt. The remarks should say things like, "Bottom half of the box looks to have two pallet marks indenting and seems to be touching products" or "Big rip in middle of box with dented unit exposed".

DONT DO THIS: I have seen consignee's sign for everything saying "Subject to inspection". This will not fly. These people are better off not putting anything on their delivery receipts. The carrier is asking for proof of damage. They can easily pull all your other delivery receipts and prove that you put that on every DR.

If the damage is concealed and not noticed quick enough to note it on the delivery receipt, then the thing to do is to contact the carrier the second they notice it. If you call the local terminal that delivered the freight, they will send an inspector in right away.

We have seen concealed damage claims with clear delivery receipts that were paid in full because the consignee reacted quickly. However, we also have a tough time getting a 3rd of the claim if a few days go by, even if the damage was legitimate.

Remember, a bill of lading is a contract between the carrier and you. Claims can go to court if they are big enough. The longer the freight is the consignee's hands, the tougher it will be to convince an impartial jury that the damage has occurred while the carrier was transporting the goods.

What do we do?

For people where freight damage is a concern there are two things you can do. First, consider better packaging. This past year, one of my customers invested in hiring a packaging consultant to find better packaging practices.

Although they put some of their hard earned revenue dollars back into packaging, they have noticed a tremendous result. They have a dramatic decrease in damages, happier customers and a savings of man hours. People who were dealing with calling carriers, filing claims and writing letters are now focused on their core business.

The second thing you can do is to educate your customers on how to receive your product. Make sure they know how to properly note their delivery receipts of any damages. It might even be worth buying your bigger customers a cheap digital camera to keep on their receiving dock. Remember, the "burden of proof" is on you.

THIS IS A GREAT IDEA: One of my customers even sends a letter the day an order comes in. The letter runs down a quick three bullet check list of how they should receive and inspect the shipment when it arrives. That is a .50 cent way to educate your customers.

All of the customer service people at LMI are trained experts in the proper way to receive freight. You can contact them anytime for the rules or tips about claims and preventing damages. LMI can even visit our customer's customer service departments to better educate their customers about receiving freight.

Article by George Muha

Fuel-Surcharges at an ALL TIME HIGH!!!

I wanted to reach out to you to let you know about something that is slipping under the radar at many companies and effecting your bottom line in a big way...FUEL-SURCHARGES ON FREIGHT BILLS!

Fuel has been skyrocketing every week for the last month. Yesterday, the Department of Energy announced that fuel is at an all time high at $3.81 a gallon (diesel national average). That means motor carriers will be charging 29% extra to your freight bills.

To give you an idea of how dramatic this increase is, on Febuary 18th, 2008 the National Diesel Index was at $3.39 a gallon. Now it is at $3.81. That is a .42 cent difference in three weeks.

To put this into dollar amounts, last year the average Fuel-Charge that you were paying hovered around 15%. That means, this new Fuel-Surcharge will be raising your freight expense by 14%. So if you spent $500K last year in freight, you will be spending $70,000 more if this fuel stays where it is at.

What Can You Do?

Any customer of LMI reading this already knows they have nothing to worry about. Because although their fuel-surcharge is going up a little bit because of this spike, they know it will not make that big of an impact in their bottom line. In fact, LMI's fuel has raised to 12.5% this week. This actually our ALL TIME HIGH fuel-surcharge. But when you compare it to 29% that is being thrust upon everyone else in America, our customers can rest easy.

In fact, LMI's "National Account" status with its carrier partners protects its customers from things like outragous fuel-surcharge spikes, mid-year rate increases and unforeseen accessorial charges.

With many financial guru's admitting that we are in a recession, with sales being down around the country, with consumers keeping their spending to a minimum and with the rising diesel prices, IT MAY BE TIME TO LOOK AT ONE OF YOUR BIGGEST COST CENTERS = FREIGHT.

LMI would be happy to offer a FREE Freight Cost Analysis to determine the savings to your company. In 2007, the average savings to companies who spent less than $1,000,000 in freight was over 22% savings.

For a FREE Freight Cost Analysis all we would need is copies of recent 30 day sample of recently paid freight invoices. Withen three weeks, we will be able to tell you how much savings will be available to your company immediately.

LMI's services are a non-contractual way to dramatically cut freight costs and streamline freight billing while improving delivery service to your customers.

Please feel free to contact me for your FREE Freight Cost Savings Analysis or to arrange a meeting at your earliest convenience today!

Sincerely yours,

George Muha
Regional Sales Manager
Logistics Management, Inc

The Actual Impact of a GRI (General Rate Increase)

I don’t want to scare anyone, but freight rates are going up. I am not making this up either; by the end of this month forecasters are predicting that most major trucking companies will have implemented about a 5.5% rate increase to your freight rates. What that means in dollars is that if your annual freight spend is $500,000, you will now be spending $527,500.

Now if you don’t like the sound of that, what if I told you that this is the second increase you will have taken in 9 months. In other words, if in January of 2007 your freight spend was $500,000, your current annual freight spend is $556,516.50. Sound crazy? It actually gets worse than that...read on.

On January 11th, UPS Freight (UPS’ less-than-truckload division) implemented a 5.4% increase off their regular tariff rates. Then FedEx Freight followed suit by implementing a 5.48% increase on January 14th. Now Old Dominion Freight Lines has just announced that they will be taking a 5.4% increase on February 11th. It will be just a matter of weeks before every major common carrier has taken their "annual general rates increases".

Actually they call them “annual general rate increases” but they really should be called "bi-annual rate increases". What the freight carriers hope everyone forgets is that they just implemented an increase in May of '07. That is not even nine months ago. It is amazing that the trucking industry can get away with this especially on top of the outrageous fuel surcharges they charge (that were as high as 25% a few weeks ago).

Here’s where it actually gets worse; these increases are only a “weighted average increases”. This means that you are probably actually realizing a much higher increase. So if the thought of paying an extra $56,000 on a $500,000 freight spend was bad, consider if you were actually taking 10% increases twice a year (which is what you are likely realizing). That turns your $500,000 freight spend into a $605,000 freight spend!

The freight carriers do not highlight the fact that these increases are "weighted average increases". So for your sake, I will. Look at the fine print in Old Dominion’s recent AP announcement of their 5.4% rate increase (I am not picking on Old Dominion...every carriers rate increase announcement says the same thing):


What exactly does this mean? Well, it means that you will be taking an increase higher than 5.4% basically. More specifically it means the carriers will be taking higher increases in longer haul lanes and minimum charges. Many of the carriers will also take higher increases on lower weight shipments. Shipments under 500lbs get hit the hardest. The next hardest hit are shipments between 500lbs and 1,000lbs (which, by the way is probably your average shipment size). And so on...

What can I do for my company? Well, nothing. Unless you are owned by General Electric and are taking advantage of their multi-gazillion dollar freight spend and their nationally negotiated corporate freight contracts. Either that, or (here comes the sales pitch) solicit the services of Logistics Management, Inc. (LMI).

I really try not to sell too much on this blog, but when this topic comes up the value of a company like ours is immeasurable. LMI customers actually have nothing to worry about with all this increase talk. In fact, we have not allowed an increase (with most of our carriers) since the end of December of 2006. So that means if your freight spend was $500,000 at the beginning of January 2007, it will still be a $500,000 at the end of December 2008. That extra $105,000 goes right into your companies pocket.

LMI's Top 10 Account Status with all of its carrier partners (Top 5 with most), allows LMI to protect its customers from things like multi-year rate increases. In fact, LMI's contract rates are frozen on a calendar year basis. So their is no way our customers could be hit with a mid-year increase(s).

Every January 1st, LMI customers are subject to an increase, however, it is usually half of what the carriers increase their rates. Most year's when the carriers take two 5.5% increases, LMI actually only takes one 2.5% rate increase...and when LMI takes their increase, it is an increase right off the previous years base rate. So when LMI announces a 2.5% rate increase, it is 2.5% across the board (it does not vary on weight or lane).

But, like I said above, this year LMI did not feel the market warranted an increase. So when it came time to negotiate with our carrier group, LMI was able to avoid an increase for its customers this past January with most of them.

A good analogy of working with a company like LMI is like if your company was bought by General Electric. Immediately your freight expense would go dramatically down because you would be taking advantage of their corporate freight tariffs. Then your freight deals would be protected from unforeseen increase by GE's corporate traffic council who are always looking to ensure they have the best freight deals.

So if you want a great way to reduce your freight cost and lessen your exposure to unexpected rate increases you can do one of two things: 1) You can try to see if GE will buy your company or 2) you can contact me to have LMI perform a complementary Freight Cost Containment Review on your freight expense.

I can be reached at (908) 879-2978 or gmuha@lmiservices.com.

Beware When You Hit FREE Freight Levels from your Vendors!

Of course, every buyer in the world wants to buy enough product from their vendor so they can hit their "free freight" threshold. It is always wise to attain this goal if you can. However, you would be suprised how many vendors are continuing to ship collect to its customers who are hitting these FREE levels.

A customer recently brought to my attention that they found out that they were being billed for freight on a shipment that happened to have met the vendor's free freight policy. I emediately got involved. We wanted to contact the vendor on this apparent mistake. But before we did, we went back to see if there happened to be any more that might have slipped through the cracks.

Much to our suprise, there were more than a few from this particular vendor. Then we started to look at other vendors and we found even more. In just a few minutes of digging, we discovered over $1,000 in freight charges that should not have been billed. Of course, my customer was more than agitated.

So we decided to call all of the vendors right there. They all seemed generally concerned and upset as my customer was. Every one of them was quick to credit their customer and a few of them even lowered their free freight threshold on the next order.

But my customer was still pissed that if they didn't happen to stumble on these mistakes, they would have been unjustly billed.

After talking to the vendors, we pretty much determined the problem was basically laziness on the vendors end. The culprit was that the one hand didn't know what the other hand was doing. In other words, the order would come through sales at the FREE Freight level. But the shipping clerk was not looking at the pick ticket close enough. Then, they were shipping the way they normally do for that particular customer.

At the end of this day, I couldn't help to wonder how common this is. So the following day, I called a bunch of my customers and told them this story. I asked them when they had time to review their receivables to see if they are getting billed on orders where they are hitting the FREE Freight Levels.

Sure enough, there were instances where they were getting nailed.

I thought this was epidemic enough that people should be made aware of this. I highly recommend taking some time and dig through some recent vendor invoices.

If you find more than a couple of these, it might be neccesary to make the effort help stop this. One suggestion is to establish a matching process to confirm every thing is billed the way it is supposed to be.

Another is to implement a rule in your purchasing terms that if you are charged for freight on free freight orders than you will charge back your customers for the freight plus a $150.00 fee for making you go through this hassle. Nothing cures laziness better than a chargeback.

There is another thing that one of my customers brought to my attention. They confronted one of their vendors on why they were billed freight when they hit the free freight level. The vendor explained that even though they hit the free freight levels, they shipped it out on two separate bill of ladings. They basically explained that they were penalizing their customer because they didn't have the inventory. Don't buy into that balongna! It is not your fault they don't have the inventory.

All in all, I beleive good vendors try to do the right thing by their customers. However, their are some slimy people and their are some lazy people. A rule of thumb if you decide to thumb through your files, start with the vendors which already raise question marks. That will be the likeliest spot you will find the biggest nuggets of gold first.

ADVERTISEMENT: For a FREE Freight Cost Savings Analysis to determine the savings to your company contact George Muha at (908) 879-2978 or gmuha@lmiservices.com.

Sharpen Your Bill of Lading, Pay Less in Freight

It used to seem like motor carriers would "look the other way" when it came to the way shippers filled out their bill of ladings. As long as the class going along with the description was close to what they were shipping, no one bothered them.

However, now with carriers generating millions with Weight & Inspections, shippers can no longer be lax in this area.

The way it is nowadays is if a shipper does not fill out their bill of lading accurately they get nailed not only with the extra charges but also with a "Weight & Inspection" fee (which can be as high as $30.00).

When visiting with a prospect or even a customer, I always review their bill of lading. Many times there will be a vague description on their bill of lading. In a lot of cases, the description has nothing to do with what their product line.

This past year, a prospect had a hand written description of "TOOLS" on their bill of lading. However, they actually manufacture drive shafts for race cars and other engine parts. They do not ship any kind of tools.

What a Bill of Lading Should NOT Look Like

This description leaves too much up to interpretation by the carrier.

What was interesting in this example is that when we properly classified their products, most of the engine parts were actually a lower class than the class the carriers were billing them at under "TOOLS".

By doing nothing more than helping them to fill their bill of lading properly they lowered their freight cost by about 12%. Of course, the president of that company and I are friends for life now.

Don't laugh, this happens more than you think. In fact, many companies I call on are putting vague descriptions on their bill of ladings that are actually getting billed higher than if the description was properly filled out.

Most companies are really not at fault though. Basically what seems to be the culprit most is that years ago, a local trucking rep came in to help the shipper to properly fill out the bill of lading. Back then, they told the shipper of a description that they felt they could "get away with" or they actually gave the correct description. But through the years, two things have happend. First, the carriers have sharpened their inspecting skills, and second the National Motor Freight Classification has updated many of their classes (either higher or lower).

Now, incentive craved dock workers and clerks search out flaws in bill of ladings. Their goal is to generate revenue. The vaguer it is the better. That is because if any part of the bill of lading is left to speculation, they will speculate at the highest possible class.

What can you do?

There are two things that you can do to eliminate carrier inspections. First, get the weight right. Once the carriers determine you to be one who "guesses low on weight", then you are flagged in their system. You will be nailed every time.

Second and most important: be as accurate as possible with your description. Make sure you have the most up to date NMFC number followed by the description (the way it is read in the NMFC). What happens is, when your bill of lading is properly filled out, the clerk at the carrier is more likely to move to the next bill of lading. But when it is vague, that is when they have you in their evil web.

What a Bill of Lading SHOULD Look Like

This is the text book way to fill out a bill of lading.

It is very important to follow these instructions more than ever. Transportation guru's are actually predicting sometime in the not too distant future, that carriers will scrap this class system altogether and use shipment density to rate freight. Some carriers are actually measuring pallets and boxes when they come to pick up freight now. You may have seen them doing this and wondered why they were doing it.

How do I do I properly fill out our bill of lading?

Simple, contact me. I'd be glad to help. LMI subscribes to the National Motor Freight Classification and has experts on hand to ensure your bill of lading is properly filled out.

Here is my contact info:

George Muha
P - (908) 879-2978
E - gmuha@lmiservices.com