The world is in the midst of the COVID-19 pandemic and the global economy has been greatly hit due to this. You may agree that during such times, it is important more than ever to find ways for saving costs and taking all measures possible to safeguard your business.
As a small or midsize business, there is no doubt that you are familiar with the stress of operating on tight margins, and you know how valuable even a small percentage of cost-savings can be to your bottom line.
However, what many small businesses don’t realize, is that their supply chain – particularly when it comes to imports – can be a significant source of cost savings!
We are speaking here about the untapped area of cargo claims.
What kind of damages/cargo losses do you have?
The National Cargo Security Council (NCSC) U.S., estimates that the global financial impact of cargo losses exceeds $50 billion annually. And if we keep in mind that more than 60% of global cargo is uninsured or underinsured, you may understand what an impact this can have on businesses and customers.
All too often, we do not properly calculate all the elements of cargo loss. Many underlying factors need to be considered when calculating the true financial costs of cargo loss, including supply interruption, higher insurance claim costs, expedited freight costs, loss of profits, loss of revenues from canceled deliveries, and more.
Even more painful than the loss of the cargo itself can be the damage to relationships with your trade partner.
The cost of damaged or lost cargo can be enormous. Given the tight profit margins that prevail in the retail industry, a single lost shipment can represent a significant drag on profits.
For example, in Q1/ 2019, Ralph Lauren posted a net profit margin of 6.83%. If the same company were to lose a shipment worth $100,000 – this would mean an additional $1.46 million in sales to pay for the lost shipment!
The potential for large losses has caused some shippers to insure cargo, but it is not a panacea as the regular pace of claims drives up insurance costs.
Moreover, cargo insurance policies are narrowly constructed, and even then, many cargo claims are rejected. Often, the choice for the shipper comes down to the eternal trade-off between potential loss and security/insurance service costs.
So, how do you save money?
- In order to discern the right level of security for your cargo, first, you need to realize what is your historical cargo loss ratio. You need to divide the last 2-3 years of cargo-related losses by the total number of loads you had in the given time period. This will get you a cargo average loss ratio. Thereafter, if the typical value of your load is $100,000, and you have had a 2.8% historical average loss ratio, then you are losing on average $2800 for every load. So now, you can already make an informed decision on cargo insurance.
- Even if your insurance covers the cargo loss amount, you still need to figure out the possible impact on future insurance premiums. It may happen that it makes more sense to pursue small amounts of cargo claims from the liable party directly or seek compensation with the help of a specialized service provider.
- When insurance does not cover your cargo damages/loss you should take measures to pursue claims against the liable party directly or seek compensation with the help of a specialized service provider. The same strategy applies to cargo claims below insurance deductibles. Why should you absorb these losses?
- Even if your claim was once already rejected by the shipping line (which is the case in more than 85% cases) you should keep defending your interests with a better-prepared claim again.
- The ability to automate claims submission saves a lot of money, time, and effort. Repeatable processes that traditionally rely on manual (human) effort to execute adds significant costs into your operations which can be avoided.
You may agree that in the current times the stakes are high – and every dollar saved is a dollar earned!
So, if you are losing money to unsettled or unrecovered cargo claims or don’t know how to place a claim, update your details below, and our team of experts will contact to help you. YOU ONLY PAY IF YOUR CLAIM IS SUCCESSFUL.
About the Author
Lina Jasutiene is an entrepreneur, international shipping lawyer, an expert in marine insurance, and cargo claims with strong business acumen.
Prior to founding Recoupex to fix the cargo claims refund experience in global trade, Lina worked with one of the biggest shipping lines, where she witnessed first hand the implications of unrecovered claims for cargo owners and insurers.
Lina is passionate about merging technology and industry expertise to create a radically better customer experience and to substantially reduce losses and increase cost savings for marine insurers and cargo owners.
Recoupex is a technology company helping customers globally to obtain the compensation they are entitled to when cargo is lost or damaged in transit.