“If a customer gets a TV with a forklift hole in it, he won’t be happy,” said Richard Lang, director of cargo claims and prevention for ABF Freight System, a unit of Arkansas Best Corp., which is ranked No. 14 on the Transport Topics Top 100 For-Hire Carriers in the United States and Canada.
A 35-year employee of the Fort Smith, Ark., less-than-truckload carrier, Lang measures the accomplishments of his life’s work in basis points, helping the carrier drive its claims ratio to 0.49% last year from 1.66% in 1996. That means for every $100 in revenue ABF generated in 2010, only 49 cents was bled off to pay cargo claims.
While all sectors of trucking have freight protection issues, the LTL world faces a particularly difficult challenge because of the mix-and-match nature of combining goods from vastly different shippers within a single trailer.
“LTL is a bear. There are so many different kinds of shipments,” said Brett Sant, now a vice president of Knight Transportation, Phoenix, but also a former less-than-truckload manager. The move to Knight, No. 31 on the TT for-hire list, meant he also had to master truckload and refrigerated techniques.
“Most of our freight we don’t load or secure. We rely on customers to do this in many cases,” Sant said. Therefore, Knight tracks its customers’ performance.
“We want customers to have good practices, and we’ll work together to find solutions to problems,” said Sant, who handles safety and risk management for the carrier.
Cargo damage claims are an un-avoidable annoyance for trucking companies, insurance executive Jay Woodward said.
“Hauling imports is not simply going from A to B. From the time a product is packaged in Asia, shipped across the ocean and then distributed domestically, it could be A to J, K or L. And the carrier is often faced with some kind of settlement,” said Woodward, vice president of safety and compliance for brokerage McGriff, Seibels & Williams, Portland, Ore.
“How do you prove you didn’t do anything? Usually you throw some money at it. It’s a sad thing, but the last to touch something is assumed to have broken it. You can’t prove yourself innocent, so instead you have to protect your business relationship with the shipper. The trucking company pays for it, either as a claim or as lost business,” Woodward said.
An example of that came in December when the North Dakota Supreme Court ruled 4-1 in favor of shipper Pizza Corner Inc., which brought a claim against trucking company CFL Transport.
The four justices backed a trial court’s ruling that the frozen pizza manufacturer was entitled to $12,903 in damages, 6% interest worth $2,434 and other costs from the motor carrier based on an unacceptable delivery in July 2006.
The opinion said CFL was hired to ship frozen pizzas from Valley City, N.D., to Tacoma, Wash. From there the refrigerated freight moved by ship to Anchorage, Alaska, where A.A. Pizza Corner was intending to take possession.
Although the reefer trailer was cooled to 4 degrees Fahrenheit when it left Valley City, when it was opened in Anchorage the reading marked on the bill of lading was 41 degrees, and A.A.’s owner refused to accept the shipment saying the cheese on the pizza had gelled.
The one vote that CFL got, from Chief Justice Gerald VandeWalle in dissent, did not say that the trucking company was blameless, but rather that the case should have been remanded to the lower court for a new trial.
Woodward said there is no industrywide database for cargo claims to assist in benchmarking, so trucking companies must monitor their own experiences to see how they can make improvements.
He also recommended training employees — online programs are generally replacing the paper manuals of old — and talking to employees and customers about accidents that occur frequently.
Third-party logistics provider Red Arrow Logistics is particularly concerned about cargo insurance this year, said CEO Liz Lasater. Earlier this year, the Federal Motor Carrier Safety Administration discontinued its practice of requiring trucking companies to carry cargo insurance.
Lasater said she regrets the change, but requires it of the trucking companies that haul for her clients.
“The insurance game is a challenge. The policies can be very difficult to understand,” she said.
Wading through 100-page policies often can uncover exceptions such as paying off claims at 50 cents a pound, even for very expensive commodities. Sometimes there are even exceptions for electronic products, precisely the sort of high-value shipment in which Lasater specializes.
“I’ll get a certificate with $250,000 in coverage, but there’s an exclusion. You really have to be careful to understand these. A business owner can be taken in a heartbeat,” Lasater said.
Packing a trailer properly is an “art,” said Eric Mauro, vice president of security and claims for UPS Freight, the LTL division of UPS Inc., which sits atop the TT 100 for-hire carrier list. However, there is also a lot of science supporting that art.
“There are people with PhDs in package engineering and skid configuration,” Woodward said, referring to what becomes the basis of the company’s training of dockworkers and drivers.
“There are industry experts who test everything. They recreate the rigors of being in a truck, testing for dropping and vibration. They learn the bursting strength of materials,” he said.
Mauro started on the parcel side of UPS, moving to the LTL carrier after the corporation bought Overnite Transportation Co.
“It took me a while to realize that LTL freight is not just a bunch of very large packages,” Mauro said. Tightly sealed rectangular crates are prized as LTL freight, but they aren’t typical, he said.
Lang, Mauro and Sant all said they use cardboard dunnage, inflatable airbags, fiberboard, decks, logistics bars and straps — the industry standards for securing freight within a trailer.
Lang said ABF spends about $100,000 a month on airbags and dunnage material.
ABF said in a training video that there is an abundance of university-level research on packaging — mentioning California Polytechnic State University, Clemson University, University of Florida, Michigan State University, the Rochester Institute of Technology and the University of Wisconsin-Stout.
Two industry organizations also provide research and standards: the National Motor Freight Traffic Association’s classification and the International Safe Transit Association.
ABF’s Lang said he has seen shippers skimp on packaging recently to reduce spending and the amount of trash that gets generated. While understandable, he said the practice causes problems.
“More and more of our customers want to go green and cut back on packaging. Since the recession, people have also wanted to do more with less, and they’ve definitely changed. But some of what we’re seeing doesn’t meet National Motor Freight Classification minimums,” Lang said.
In addition to inadequate packaging, Lang and the ABF video said vibrations inside the trailer from a lengthy over-the-road trip are what can damage freight, hence the need for blocking, bracing and filling in gaps with packing materials.
Mauro said this is particularly the case at the back of the trailer. As a child, he said, it was most fun to sit in the back of the school bus because it bounced the most wildly, but freight gets no joy from the ride; it just breaks unless secured properly.
ABF even pays attention to the effects of gravity on different sides of the trailer. Since roads are usually highest in the middle and then slope to either side, ABF packs the heaviest freight behind the driver rather than the passenger side. Doing otherwise would cause the trailer to pull further downhill.
Similarly, the company has learned it is better to stack high at the front of the trailer and then stair-step down toward the back.
Knight’s Sant said transloading of intermodal freight can cause problems. Historically a dry van truckload carrier, Knight has expanded into refrigerated and intermodal shipping.
Sant said export commodities in Asia are often packaged just for shipping in an ocean container. However, if they are transferred from an international box to a domestic container, the freight is not always packaged sturdily enough, he said.
On the refrigerated side, Sant said he likes real-time wireless monitoring of refrigerated trailer temperatures to avoid situations such as the one the North Dakota court addressed.
“Bananas are an example. They have a range of about 58 to 60 degrees during transportation.
There’s really no room for error with them,” Sant said.
Regarding equipment, Lang said he probably gets the most benefit from specialized forklift adaptations on the traditional side and personal digital assistants as a modern innovation. ABF has specially designed forklift adaptations such as furniture bins, glass racks and blades for moving long items.
“We used to have paper with every shipment, but now all of our dockworkers use PDAs,” Lang said of the communications change. “They can record data in real time and take photos.” He said dockworkers get assignments via PDAs and can use them to look up shipments by their pro numbers (shipment reference numbers). They can also use them to generate e-mail alerts.
While shippers and their motor carriers don’t always listen to every word one says to the other, UPS Freight’s Mauro said that on freight protection that is not the case.
“We work with them, often at their sites, and they’re very receptive to us. They listen.”