Kargo x FreightWaves Research: Everybody Pays for OS&D
| Kargo | 7 min
| Kargo | 7 min
Companies across the logistics industry deal with overages, shortages and damages (OS&D) on a regular basis. Many have processes in place to reduce and resolve OS&D.
Yet when it comes to freight claims - demands for reimbursements - companies struggle to prove where OS&D occurs and who is at fault. Companies end up paying claims they may or may not be responsible for.
Uncertainty around OS&D affects more than just one line item. Investigations take time and effort. Disagreements over responsibility may cause friction with suppliers and customers. Unpredictable payout amounts can hurt profits, undermine forecasting, and limit reinvestment in growth.
Kargo, in partnership with FreightWaves, conducted a survey of shippers, 3PLs, and carriers to learn more about the impact of OS&D.
The survey found that these companies feel responsible for only 10-30% of OS&D-related charges per month. They still spend up to six figures on OS&D-related payouts, due to the lack of visibility or evidence of what happened.
Here, we’ll take a look at the real costs of OS&D and explore how emerging technology can resolve uncertainty around OS&D. Questions? Ask us anything at email@example.com
OS&D is a threat to fulfillment. Without accurate quantities of sellable goods, shippers can’t satisfy demand. Maintaining accuracy is fundamental to the entire logistics industry.
That’s why companies need to take OS&D incidents seriously. When OS&D incidents occur, the standard recourse is to file a claim for compensation with the responsible party — but who is responsible?
In the survey, FreightWaves and Kargo discovered companies aren’t always certain who is responsible for OS&D, even when they pay for it.
Across shippers, carriers, and 3PLs, there is a significant gap between what they feel responsible for and what they end up paying.
The difference between payouts and perceived responsibility is partly due to the industry’s protocols for resolving OS&D.
Whether dealing with overages, shortages or damages, industry protocols require companies to immediately identify the issue, produce a detailed report of what happened and compile various supporting documents to prove each instance of OS&D.
This limits recourse for all companies, because, without visibility into what happened, it is difficult to know or prove freight count or condition at the loading dock. Within this framework, it is often easier for companies to cut a check and cut their losses. When no one can prove culpability, companies prioritize preventing further loss.
Our survey revealed some of the specific methods respondents use to mitigate OS&D:
These different approaches show the effort that goes into resolving OS&D. The variety of measures also highlights a business challenge: Without visibility into what really happened, companies have to think outside the box, designing programs to limit the impact of OS&D.
The survey results also show a range in how companies allocate internal resources to resolve OS&D.
Some respondents say their company spends no time on OS&D at all. This is the clear benefit of outsourcing to insurance companies or other third parties, although time saved doesn’t necessarily equal money saved. Some of these companies still report paying several thousand dollars in OS&D claims each month.
Approximately 39% of respondents dedicate staff to OS&D. A high majority of these respondents have 10 or fewer dedicated staff, but a few outliers have teams of 100 to 200 people. Of the outliers, two are carriers, one is a 3PL and all three have more than a million square feet of warehouse network.
Survey results show a negative correlation between the average amount a company spends on OS&D per month and the average number of employees dedicated to OS&D.
On average, shippers spend the most on OS&D every month and have the fewest number of people focused on OS&D. 3PLs, on the other hand, have on average more staff dedicated to OS&D and spend the least on OS&D charges.
Most common are the companies that handle it internally, either paying a dedicated team or staff with other responsibilities must carve out time.
OS&D resolution can be constrained by industry processes and outdated technology.
The two are closely tied: Without technology to provide certainty around freight counts and condition, warehouse staff and carriers may rely on hand-scanning or other manual counts to indicate accuracy.
OS&D resolution efforts follow other workflows. When companies lack visibility into shipping and receiving, they’re limited to theoretical standards of who should pay for OS&D events.
For example, in theory, the consignee signs the bill of lading only after they’ve checked the freight, transferring over the title as well as the responsibility for OS&D.
This leaves companies with freight in their possession to dispute claims from a weakened position. There may be images of an event, but they only show that the OS&D exists, not when or how it occurred. There is no real proof of responsibility, just laborious processes that contribute to costs and uncertainty around OS&D.
Given the costs of OS&D on shippers, carriers and 3PLs, the industry is looking to emerging technology for a solution.
Vision-based technology can reduce occurrences of OS&D and provide visibility that makes it easy to resolve any uncertainty.
Computer vision enables computers to derive meaning from what they “see” in images or videos. In logistics, this technology can be used to extract information from real-world events, such as an image of a label or a video of pallets being unloaded from a truck.
Computer vision can be leveraged to resolve OS&D by:
Companies that invest in vision-based technologies can unlock new levels of visibility while eliminating the delays and errors inherent in manual workflows.
As logistics technology evolves, instances of OS&D will become much easier for everyone to resolve.
The lack of visibility into where OS&D occurred, what exactly happened, and who is responsible contributes to the uncertainty around OS&D. The survey shows that, as a result, shippers, carriers, and 3PLs pay more for OS&D than they feel responsible for.
OS&D costs go beyond claims or chargebacks. Companies must spend time and resources resolving OS&D and can even lose business as a result of friction or disagreements with partners – but as they invest in new technologies that increase visibility, resolving OS&D will cost everyone less.