Effective warehouse operations are undoubtedly one of the most important parts of an eCommerce business. While most logistics managers mainly concern themselves with automating their processes, it’s crucial to pay attention to the state of the stored merchandise.
Dealing with over, short, and damaged (OS & D) goods is inevitable, especially if you manage nearly hundreds and thousands of items in your warehouse. Essentially these are merchandise that needs to be corrected in terms of quantity, quality, or location. These can occur during the manufacturing process, transport, and in storage.
OS & D can also refer to the process of recognizing and correcting these issues. Due to the potential for missed sales, increased expenses, and irate clients, OS & D can be problematic for your business. Having a reliable tracking system in place to track and manage OS & D. This can assist you in minimizing OS & D and ensure that any shortages or damages get swiftly fixed.
Shippers and cargo owners may file an OS & D claim to recover costs for goods mispackaged or damaged in transit. A shipper’s costs increase due to OS & D claims, which often cause delays and negative interactions with clients and carriers. Data analytics of logistics performance can be used to lower the frequency of OS & D claims and prevent problems.
OS & D Explained
As mentioned previously, OS & D stands for over, short, and damaged items. These items are compared to the original shipment’s bill of lading (BOL).
The BOL is important for any shipment but plays a special role during an OS & D freight claim.
The carrier and shipper will go over this document together to determine how the merchandise was brought into the warehouse or distribution center.
The BOL must be signed to recognize the product’s arrival and condition. Before approving the BOL, the recipient must confirm the count and checks to ensure the freight is undamaged.
- Overage – Excess freight received is more than originally recorded on a shipping document. Any freight overage must be handled by returning it to the sender or adding it to the consignee’s inventory and billing for it accordingly.
- Shortage – When the freight quantity in a cargo is less than what is specified on the shipping document. Any billing, inventory, and order/fulfillment management must be modified to account for shortages.
- Damage – Products that are received in a damaged condition. This can be classified as either apparent or concealed. This is because some items cannot be fully inspected upon arrival, hence concealed damage.
The receiver’s inspection report for materials received in a shipment is known as an OS & D report. This report details every aspect of the items delivered damaged or in different quantities from what was on the bill of lading (BOL). These documents are usually handed out when a shipment arrives. It’s given to both the delivery staff and the consignee.
The receiver is then given a choice to either sign the bill of lading and give up the right to submit a future OS & D freight claim or to file an OS & D claim.
A Breakdown of OS & D Claims
Following an OS & D report, filing a freight claim is a time-sensitive process. Shippers must file claims against a carrier within the time frame provided in the contract, tariff, or other legal requirements of the carrier. Usually, most freight claim types must be filed by shippers nine months after delivery.
There are several reasons why OS & D occurs. Overstock would exist, for instance, if a producer manufactured excessive amounts of a specific item during a peak season. Products that are harmed during shipping are referred to as damaged goods.
Additionally, goods are out-of-stock if a shop can’t locate an item originally listed as available.
Whether or not there is a claim related to the freight bill, a shipper must pay their invoice in full. Payment for the freight claim is considered a separate and independent transaction.
In other words, the shipper is not permitted to withhold payment on any invoice for which a claim has been made. The amount lost from an OS & D claim is reimbursed at a later date, pending approval.
Here are some common OS & D claims that you may encounter:
1. Visibly Damaged Claim
When shipments are damaged, the damage is visible when they arrive, and claims for visibly damaged shipments are filed. Typically, a shipper has nine months to file an OS & D claim for visibly damaged cargo. In these situations, it’s important to file as soon as possible. The longer you take, the less likely you are to be paid. The carrier can argue that the damage occurred after the item was delivered. To document damages, it’s recommended that you take a lot of photos and videos.
2. Concealed Damage Claim
Shipments may arrive damaged, but the damage may only be immediately apparent or noticed after the bill of lading has been signed. These claims have a lower reimbursement rate than claims for a damaged item since they are more challenging to verify. Most carriers only permit the submission of concealed damage claims after five days of receiving cargo.
3. Regular and Concealed Shortage Claim
When shipments arrive in fewer quantities than what is listed on the bill of lading, shortage claims are made. As such, these claims are prevalent.
However, when cargo shortage is not immediately noticed and indicated on the bill of lading before it is signed, concealed shortage claims—like concealed damage claims—occur. Claims for concealed shortages are complicated to prove and payout at a low rate. Most carriers let you five days after receiving a package to file a disguised shortage claim.
4. Refused Shipment Claims
A consignee has the right to reject all or a portion of the shipment if they are unhappy with the state of the delivered freight. Damaged freight, late shipments, and incorrect products are a few examples of refused freight.
There are several options for dealing with refused shipments. They can be returned to the carrier’s terminal for delivery. Alternatively, they can be forwarded to their original address or another address. Finally, the items can be disposed of per your company’s policies.
5. Loss Claims
When the carrier loses a shipment, loss claims are filed. Before shippers may report a loss, carriers usually have a week to find lost cargo. If the carrier can’t locate the missing shipment, this claim is easy to file and pays out almost immediately.
Dealing With OS & D Issues
Shippers should be concerned about OS & D claims and work to prevent them for several reasons. First, is that not all OS & D claims result in payment. Even if the claim is paid out, there are still a lot of unrecognized expenses with OS & D claims.
OS & D allegations may sour ties with your clients and carrier partners. Customers simply don’t want to bother with the inconvenience even if they get paid back. On the other hand, carriers frequently experience significant delays and costs due to shipping exceptions that go above and beyond the price of paying the claim. As a result, submitting several OS & D claims are unlikely to make you a “preferred shipper.”
Thankfully, there are strategies you can employ to lower the number of OS & D claims. Utilizing data-driven loss prevention is the most successful of these tactics. Shippers can streamline their procedures to reduce the number of exceptions by analyzing historical data on OS & D events, such as identifying the SKUs and carriers responsible for the most OS & D claims.
Managing inventories and shipping loads efficiently depends on working with correct and current data. Making judgments based on out-of-date information can be detrimental. This will frequently result in misunderstandings, delays, delivery mistakes, and poor customer experiences. It is essential to have access to real-time information on OS & D incidents inside the warehouse and during transit.
Doing this will increase order accuracy.
The best way to examine and address the warehouse’s difficulties and problems is to consider the short and long-term implications. Analytics perform better on data gathered together and taken in the context of internal and external factors. Putting things in context will improve the effectiveness of your decisions and make OS & D easier to confront and overcome.
OS & D claims are added costs and potential roadblocks for all parties involved. With ZhenHub, shippers and eCommerce businesses can immediately utilize our advanced logistics software to spot OS & D patterns. Through complete supply chain visibility and advanced analytics, take control of your shipments and avoid having to file OS & D claims. Sign-up for free at our website.