August 24 2023 | 9 Min Read

Situation Files #4: Taking the sting out of a difficult carrier negotiation

Posted By
Wendy Mackenzie
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Situation Files #4: Taking the sting out of a difficult carrier negotiation

How IL2000’s freight claim negotiation saved a customer $325 on one disputed shipment

Welcome to entry four of our "Situation Files" — an ongoing series where we look at practical clipboard 'n duct-tape examples of how we make our clients' lives easier. If you're late to the situational party, here's a trail of informational breadcrumbs for you.

  1. $4k in freight savings and 10 hours of admin avoided
  2. $2k saved in 1 week + a rapid response to weather-delayed shipment
  3. $800 saved on 1 shipment + major shipping efficiency gains identified

So far, we’ve shone the spotlight mainly on efficiency gains and finding a better path between A and B. Let’s shift focus a bit, then, to look at how we can help resolve freight claim disputes.

In this situation file, we’ll look at how we helped our customer, a food ingredient manufacturer, resolve a claim for a damaged shipment. It’s a good illustration of how a tough and seasoned freight negotiator can pave your way through a problematic freight claim.

The upshot

  • $325 saved on one shipment
  • ~12 hours of negotiation and paperwork avoided
  • A smoother freight operation moving forward

The sitch

A shipment of ingredients arrived at the destination warehouse with clear signs of damage. A pallet filled with bags of corn meal toppled in transit, leaving several bags either partially open or damaged. Because this was a food-grade product, the damage was enough to make the entire shipment instantly unusable. The only course for our customer was to submit a claim with their freight carrier.

This is all pretty routine so far — shipment damages happen. The inevitability of occasional in-transit damage is up there with taxes and late-night hair replacement infomercials hosted by a guy named Bob.

But here’s where things got tricky.

A letter came back from the carrier advising that, yes, they’d reimburse the shipment value. But they only agreed to reimburse $8.99 of the $334.53 freight shipping cost. Their rationale: The food manufacturer had invoiced their customer for $8.99 in freight, so that must be the actual amount they had paid in freight.

Let’s hit pause here on the events for a second and reflect on the state of play between shippers and carriers. There’s a power differential at work here:

  • Carriers ship all the time, they understand how shipping works, and their shipment terms are encased inside a (typically long and cryptic) contract.
  • The shipper, meanwhile, is busy and under considerable time pressure. Their whole reputation with their customer base is predicated on moving quickly. They don’t have time for this. They just need the transportation of goods based on accurate freight rates. 
  • Add those variables up, and here’s where you end up: when a carrier responds to a shipper’s freight claim with a page of legal jargon and a ruling to only reimburse on the shipment sales invoice … well … capitulation seems like the logical course.

And that was exactly what our customer was poised to do on this occasion. After all, many similar negative rulings on freight claims had come back to them prior to working with IL2000, and just accepting the loss was what they had always done.

Back to the tangibles, then: Our customer was down $325 on a damaged shipment. They felt outgunned and outnumbered. They were all set to file the debacle away in a fat, sad folder labeled in thick black sharpie, “the inevitable price of doing business.

What was going wrong?

  • Lack of knowledge: The company just wasn’t equipped for these kinds of negotiations. When a carrier came to them with the line, “We only pay the freight fee you invoiced your customer,” it was easy to assume there was some big inviolable rulebook out there guiding that decision. The company just didn’t have the knowledge and experience to push back.
  • Lack of time: While this annoying little situation was going down, you can bet that at least a dozen other problems demanded the company’s attention. It was just too time-consuming for the company to jump through these negotiation hoops on top of everything else. The irony, of course, is that this lack of bandwidth practically guaranteed the issue would keep coming back.
  • Lack of leverage: This gets back to the power differential we were talking about. Without knowledge, without time, our customer was left getting strong-armed by their customer and their carrier. Capitulate or keep losing money and face?

The solve

When we caught wind of this problem in IL2000, you can bet that someone in our team nodded knowingly. They may even have cracked their knuckles, but that’s taking a bit of poetic license. The point is these kinds of shenanigans go down all the time. When a shipper submits a freight claim with a carrier, more often than not, they’ll get a full-page response back explaining why the claim wasn’t accepted.

There’ll be one sentence in that wall of jargonese that counts. The trick is finding it.

The first part of the solve, then? One of our experts read that letter, swiped left on the wall of needless exposition and found that one crucial sentence. The customer had claimed $334.53 in freight charges and the carrier said they would only reimburse $8.99 in freight. Why? Because that was the amount listed on our client’s invoice to their customer, and  — obviously! — that was the amount they were going to pay.

Only … that isn’t obvious at all. Freight companies frequently pay more for transportation than they charge a customer. There are any number of legitimate reasons why a customer might not invoice a customer in full for freight.

So … we contested that decision. We emphasized that $334.53 was still the amount our customer paid, and it was still the amount our customer was rightfully owed for a damaged shipment. The carrier reiterated its policy.

So … we escalated the issue – with facts and figures and that carefully fair tone of voice that suggests we can and will do this all day because we have right on our side.

And then … a few hours later, the carrier reimbursed the full amount for shipping services.

We’d secured a favorable decision within a couple of working days minus a few hours in change.

What went right?

  • Capable and strong freight advocacy: The company’s freight was handled by an IL2000 expert with eight years of freight claim experience and a decade’s experience in supply chain management. They had the knowledge to push back.
  • Time: We’re experts at this. We move fast and efficiently.
  • Data: Vigorous opposition isn’t enough. To win a freight claim, you need the facts and figures on your side. We challenged this decision in a logical and data-driven way. The carrier saw we had a defensible position and responded accordingly.

The take home

The take home here is that this kind of freight carrier negotiation is routine for us.

Long, jargon-loaded letters don’t flap us. Detailed fact-checking over the minutiae of a claim doesn’t deter us. Appeals to fallacious rules or questionable policies won’t bamboozle us, nor will they fluster our people into accepting less on a freight claim than the amount to which our clients are entitled. We’ve been there. We have done that. We have purchased all of the t-shirts and cataloged all of the commemorative teaspoons. Sick of getting the wrong end of the stick with freight claims?

Talk to IL2000 about how we can help you with our trademark blend of fierce, fair and fearless supply chain advocacy.

 

Topics: Pricing Strategy, Supply Chain Management, Freight Costs, Shipping

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