The Ultimate Guide to Optimizing Claims Management
Shrewdly managing claims is a vital part of any profitable supply chain. But claims management is a headache for many companies—from finding and checking the bill of lading, invoices, shipping notifications, or any other related documents to prove the cause of error, including documented proof of loss or damage, and then submitting the claim for review.
In 2018, a survey of 272 respondents showed that 52% of US companies report damaged goods as the top reason for product returns. The trick is to mitigate that risk, and more importantly, stop losing money. Fully understanding, optimizing, and mastering the matter can cut down on the headaches and lead to incredible benefits, such as improving efficiencies, processes, and your bottom line.
We’ll help you build a strong foundation so you can master claims management.
- Common Mistakes of Freight Claims Management
- Trax Transportation Spend Management Maturity Model
- Optimizing Your Claims Management
- Re-thinking Claims Management is Key
Common Mistakes of Freight Claims Management
Claims management is the process of recovering financial losses from damaged or lost freight during carrier shipping. Although claims management has plagued the industry for decades, its importance is growing as margins grow tighter. In such a tight, competitive market, every dollar counts. Optimizing claims management is an area that enterprises often overlook.
Mastering claims management involves avoiding common mistakes:
- Not filing a claim, just taking a loss—Claims usually aren’t a daily task for most shippers, so companies don’t always realize how much money is lost. Chalking up a loss here and there may not seem like a problem, but over time it can be a major financial impact. What’s worse, this means the root of the problem is rarely identified and addressed, which creates a vicious cycle of claims and losses.
- Ignoring small claims—Of course, there are instances when filing for a small claim isn’t worth it. How small of a claim to go after depends on the profit margin, current market prices, and other variables. When you optimize claim management, you have the data for an objective analysis to know when to claim and when to discard.
- Accepting lower claims reimbursement or outright denials—Many shippers don’t have the resources or expertise to know how much you should be owed or when to contest a claims rejection. Because different carriers respond differently to claims, utilizing carrier scorecards helps to keep track of such variances and can aid in optimizing your claims management to boost your bottom line.
- Not having experts file claims—Many companies don’t think they need a claims expert, which can be true in a few circumstances. But do keep in mind that having non-experts file claims can result in denials, lower reimbursements, longer wait times, lost time and money, and hits to your profit margin. While the premise is straightforward, claim management has intricacies and nuances that should be handled by someone with the expertise. You’ll quickly recoup the ROI of bringing in an expert.
It takes more than avoiding these common mistakes to optimize your claims management process, however. It requires true mastery, which can be accomplished through the Trax Transportation Spend Management Maturity Model.
Trax Transportation Spend Management Maturity Model
The Trax Transportation Spend Maturity Model provides a roadmap for large, global enterprises to shift from a lack of visibility and control to a fully optimized and accurate data-based transportation supply chain—for all modes and geographies. This model helps companies become more proactive and fully optimized to eventually be leaders in their market.
Trax Transportation Spend Maturity Model
- Proactive—Companies respond to issues as they arrive, and eventually begin to plan and anticipate matters that lay ahead.
- Optimizing—Accurate and high-quality data is obtained and assiduously analyzed. This offers a company better visibility and the ability to make informed decisions based on data rather than assumptions.
- Leading—A company at this stage is fully capable of not just weathering challenges, but using them to their advantage. These companies have aptitude, capabilities, visibility, control, and optimized operations. They become pioneers of the market, leading change and innovation while extensively growing their market share and simultaneously cutting costs.
Now we’ll dive into the ways that you can mature your claims management process to minimize—and ideally eliminate—claims.
Optimizing Your Claims Management
The end goal of optimizing claims management is to eliminate, or at least minimize, freight claims by addressing the root of the problem. This is possible with Transportation Spend Management (TSM), a data-driven approach to analyzing and optimizing financial and operational performance of your logistics network, including factors that impact spend and the delivery of value to customers.
As you move through the stages of maturity, your claims management processes begin to transform. You begin to optimize factors, such as:
Gain better data capture and management
What data you gather and how you analyze it changes—data is collected in real time and analyzed along with historical data. This creates a well of analytics and the capability to easily produce reports (ones that are reader friendly, too).
What was once passive in nature is now actionable data, enabling you to build upon it by making informed and timely decisions to take advantage of the market. It also creates a blueprint that helps you innovate your processes to overtake the competition.
Increase spend visibility
As you progress through the Trax Transportation Spend Management Maturity Model, you’ll have more and more data and analytics. Trustworthy data and analytics. This offers increased visibility into processes, efficiencies, issues, etc. You’ll become proactive and increase your spend savings, as opposed to reacting to issues as they arise, which is usually the more costly route, too.
Optimizing processes increases efficiencies and decreases claims, so you have the time, resources, and money to focus on company growth opportunities instead. The more resources needed to deal with claims involves more cost than just employees’ salaries—it also includes indirect costs, such as possibly overtime, missed growth opportunities, and so on. All of that employee time could be better spent on growing your business.
Raise your bottom line
Needing fewer employees and less money and time dedicated to filing claims opens you up to projects that can help grow your company. This enhanced flexibility allows you to highlight areas of interest to allocate these resources to expedite your growth. With more money and resources dedicated for growth and fewer claims to file, it’s a double-whammy that bolsters your bottom line.
Strengthen your shipper-carrier relationships
A shipper-carrier relationship is a symbiotic one, as it’s built upon mutual prosperity. By optimizing processes and increasing your data and analytics through Transportation Spend Management, you can help carriers identify weak spots in performance with real-time data.
You’ll reap the benefits through fewer claims, better service, and happier customers. Furthermore, you’ll be able to identify weaknesses in your own processes, such as damaged shipments due to not the carrier but poor package processing on your end.
Boost customer satisfaction
Keeping customers satisfied and coming back is the basis of any successful business. Optimizing claims management gives your customers the best value and service, every time.
As you progress through the Trax Transportation Spend Management Maturity Model, claims management reaches a stage where customers constantly get top value, you receive few or no customer complaints, and cash flow is optimized so there’s no need to delay customers’ needs until you get reimbursed. This is especially evident during hectic holiday seasons when 70% of incidents that lead to claims occur. A leading company uses these occasions to surpass the competition and build its brand and customer loyalty.
Mature your Transportation Spend Management to be a leader
Optimizing claims management is a crucial step that transforms your supply chain management into a powerful tool. You become a leader in the industry.
In a highly volatile market that’s only increasing in competitiveness, it’s imperative to take advantage of opportunities to dominate and lead your market. Transportation Spend Management allows you to do just that, and enables you to grow your company through better visibility, informed decision making, and absolute confidence. This resilient foundation gives you the peace of mind in even the most hectic times.
Trax is the global leader in Transportation Spend Management solutions. We partner with the most global and complex brands to drive meaningful optimizations and savings through industry-leading technology solutions and world-class advisory services. With the largest global footprint spanning North America, Latin America, Asia, and Europe, we enable our clients to have greater control over their transportation performance and spend. Our focus is on your success.