Best Practices to maximize damage claims recovery

Claims as a whole could get very complicated if it is not done correctly. When we set up the process for the first time our recoveries were below 20 % of the product value. By identifying specific issues and reworking the process we have increased recovery to 35 % of retail price. Our damage rate was about 4 % of sales, so process improvement resulted in savings of (4 % * (35 % - 20 %)) = 0.6 % of Sales or $180,000 on $30m annual revenue.

Here are some of the key elements of an effective process:

Acknowledge the claim to the carrier.
Damage must be noted at the time of delivery, if the POD is signed clear and then we find the item damaged and report to the carrier there are good chances that the claim will get rejected. It’s mandatory to check for damages before letting the carrier go out of sight. Another safe way would be to sign the POD stating “Subject to Inspection”.

Provide pictures of damaged item.
When there is a damage reported, the carrier will need pictures which will prove the extent of the damage (This is a must in case of concealed damage). In many case the carrier will decide whether the item needs to be inspected or not and If the inspection does not happen on time the claim will be rejected.

File claims on time.
All carriers have a time limit within which a claim has to be filed, with parcel carriers like UPS, FedEx etc it is anywhere between 21 days to 3 months. Some carriers allow us to file claims within a year (provided the carrier is notified of the damage).

Furnish supporting documents.
The key to get the best recovery on claims is by providing all the required documents along with the claim form.

  • Claim Form – This form can be downloaded from any carrier website, these forms are unique for each carrier. With some carriers we can file the claim online whereas the others would require us to fax over the claim form.
  • Copy of the invoice – This will prove to the carrier the actual value of the merchandize, If this is not provided the carriers usually tend to look up similar products and average out the cost.
  • Tracking number – Download a tracking sheet for the particular shipment from the carrier’s website, this will help the claims adjuster to verify the shipment to be one of theirs.
  • Damage pictures – It is very important to attach pictures while filing claims, the pictures should be taken at the time of delivery that will show exactly how the package appeared when it was delivered. Pictures are absolutely mandatory if we are filing claims on concealed damage.
  • Waiver form – Some carriers insist that only the shipper can file a claim, in such a case we could take ownership of claim by submitting a waiver form that will give rights to the third party to file claims.

Calculate fair Claim Value.
Some carriers only allow you to file a claim for the costs of the product; in some other cases you can include full retail price and delivery fees. There is an adjustment mechanism but you still should claim the maximum reasonable amount. If order was damaged in transit – file the order value, provide carrier with supporting documentation and start exploring different liquidation options. Sometimes, the products you consider to have zero value can be refurbished thus providing you with the buffer against claims adjustments on other orders.

In conclusion, efficient claims management process pays off. If your internal efforts bring less than 35 % of retail value of the damaged goods - consider outsourcing your claims management.

Good luck and have fun!

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1 Comments:

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November 27, 2013 at 10:55 PM  

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