Shake those cobwebs out of your head and try to imagine this:
If we are pretty well sure that we shipped something and the customer says they didn’t get it, then we have to go beat up the trucking companies for compensation. Only we are too busy getting beat up by other customer who want us to (attempt) to ship them their orders.
Now, anything that’s worth doing is worth getting someone else to do. I was in one project that attempted to map out how we get an order from a customer and get paid for fulfilling it. . . the transaction went through so many hands, both inside the company and then to contracted agencies, that we never really did quite figure it all out. But I got a nice polo t-shirt.
So of course when Acme realized it was losing a lot of money because nobody was held responsible for MIA freight, it decided to: outsource the claims! Of course. We decided to use the Mafia collection company. (Fictional name.) But it turns out that Mafia does not bother with claims less than, oh, let’s just make up a number and say ten thousand dollars. Most claims are filed for a few items. The volume of claims is such that in total, Acme has a lot to lose in not pursuing the blame-the-trucker claims, but the individual claims almost all fall beneath Mafia’s radar.
Supposedly, Mafia passes along all small claims to the Shrill collection company. But persons in Acme contacting persons in Mafia get very disinterested replies to the smalls claims. Something on the order of, “Oh, you are holding your claim in your right hand. Try holding it in your left hand, and go to the back of the line, and when it’s your turn again we will see what we can do for you.”
Pop quiz, class! Does Shrill company return money to Acme? Do they care about our claims? Do they ever even see our claims? Does Shrill Inc. even truly exist?
The real problem here goes right back to that project I was in about how we get paid. Since nobody at the site of shipment tracks, tabulates, or ever–ever!–knows about the actual end-customer payment for a particular shipment, anything we say we shipped is income to our plant. It is presumed income. The sale has been made, the cash received, move on, move on, don’t stand around gawking!
If the shipment is outright returned, that’s a debit. But it’s kind of like throwing a fastball around a world–eventually it hits you in the back of the head, but you have no idea where it came from. Because usually returns are repackaged by the service center before they get to our plant, and they are always cleaned up of any and all shipment information and looking like ordinary product by the time we see them again at shipping.
But if the shipment is just MIA, someone else (I don’t know who) has to take the hit. Probably the same entity that takes the hit for claims that can’t be adequately answered by the shipping site, or that are valid but have been previously adjusted for by the shipping site (because claims can come in months–think even quarters–after the time of shipment, and we still entertain them).
Think about what this means for the factory. We say we shipped the product. Customer says he didn’t get it. Okay. Assuming we don’t tell the customer to get lost and never come back, than no matter what happens, we will still have to:
- Build more product
- Ship more product
- Get “paid” for shipping more product
If we just kind of do nothing and the customer gets sick of waiting and orders more, the above applies. If we graciously concede, the tools don’t magically come back so the above applies. If we go beat up the trucking company and get some money back, the above still applies. And those steps above are all anyone at the factory cares about.
Now, it takes time to investigate a shipment claim. I know. I’ve wasted enough time on it. In general, for what I in particular do, it takes the most time to investigate the claims worth the least amount of money. Checking if we shipped an entire pallet of product is easy. Checking to see if we shipped one tiny little bitty part (we have tens of thousands on hand)–well, that’s impossible but there are thing down there in that range that can be checked, with enough time.
Actually talking to someone on the phone so that you can complain that they didn’t perform a service they were already paid for–yep, that takes time, too. Lots of time. Nobody’s in a real hurry to return the calls that say, “You may already have lost a thousand dollars. Please call me back so I can bill you for it.”
Let’s pretend they do call back. Get ready with your conclusive evidence that they did not deliver the product (all 200 items of different kinds, mind you–nobody argues that they delivered 198 items, it’s the last two we’re arguing about). First at your disposal will be the delivery receipt, available online, which 95% of the time shows a signature from a customer employee along with the statement that the shipment was recieved in good order. Oh, wait. That might not help.
We had one claim for an entire pallet of missing product that was signed received in good order. The claim was from another branch of Acme! And they kept pestering us about it, too. We would say, “Uh, you signed for it. It weighed hundreds of pounds when it left. Go ask the guy who signed for it where it all is.” And a couple of weeks later they would ask if we had an answer yet.
It’s hard to blame the customer. Freight comes all bundeled up in mish-mashed heaps without good marking. Checking to see if it is all there would be like making the mail man wait on your doorstep until you read all of your mail. In the case of freight delivery, its actually possible to do. . .but it takes some really tough gumption.
Not to mention that the trucking companies have little disclaimers like “claim must be filed within one business day, per statute something or other, etc.” I might hear about a claim within 24 hours of the customer’s reciept. And maybe, if you take a really long shot, maybe I even determine that this problem was not our fault within the 24 hours. But there is no way that Mafia corp. begins pursuing the claim within 24 hours.
So, with that mountain to climb, how much do you think Mafia corp. has to be paid to make a profit chasing other people’s claims? I’m thinking that as soon as the trucking company hears that Mafia is not an actual customer of said trucking company, the rest of the claim just fades into the ethereal music of the spheres. . .nevermore to trouble the mind of a mortal.
Obviously, there must be a little more traction here than I imagine, or Mafia corp would not even exist. Still, it must take some effort. And that must cost some money. So out of what we actually even refer to Mafia–remember, that’s only the shipments where we don’t admit any wrongdoing and the customer doesn’t admit any wrongdoing–taking from those the claims that Mafia wins, within the value caps set by trucking companies for uninsured freight, cutting out a piece to pay Mafia corp with profit, how much money do you think returns to Acme?
I am not given to understand that this is unique to Acme. I am inclined to think it is pretty common for a global company–not necessarily any company with international orders, but probably any company that styles itself “global,” and tries to achive the upside-down pyramid of maximum cash flow with minimum overhead, so called.
Never fear. Mafia corp is disappointing, so we may well switch to some other claims handling company.