Many companies fear product damage during shipping solely because of the potential for customer complaints. Most businesses live and die by the satisfaction of their customers; a customer who receives a damaged product is unlikely to make another purchase, promote the brand with friends and family or take other actions that will lead to company success.
However, complaints are far from the only thing businesses have to fear from shipping damage. Here are just a few of the additional costs that companies can expect to incur when their products are damaged during shipment.
In most cases, when a customer receives a product that has been damaged in shipping, they will not hesitate to return it. Unfortunately, returns are always expensive for companies; research has found that the typical return costs an organization somewhere between 17 and 30 percent of the primary cost of the product. Those costs can increase when a company assumes full responsibility for return shipping expenses, and they certainly increase when a business is dealing with a damaged item, which must be repaired before it can be resold.
Rework and Repairs
Larger and more expensive items are much more difficult for customers to return, so they may file a damage claim that requires a company to send a repair technician to the customer’s location. Technicians can cost much more than repairing an item in-house, as a business will need to pay their hourly rates as well as any inflated prices for tools and parts. Thus, most businesses use impact indicators on shipments involving heavy or complex equipment, so they can monitor damage and avoid the demand for expensive repairs.
Many customers order products because they need something specific within a tight timeframe. If that product arrives damaged, the customer has even less time to acquire their goods before they need them. Thus, many companies that process returns also need to be able to expedite shipments of undamaged products to their customers. If customers receive products after the period of high demand has passed, they will be unhappy with the service they received and unlikely to order another product again. In fact, they may even disparage a brand to friends and family, further worsening the company’s reputation and harming their future profitability.
Interruptions and Delays
Business clients may order many types of materials and goods to transform them into finished products, but doing so requires those materials and goods to arrive in specific sequences and quantities. If one shipment is damaged, it may cause an interruption in the manufacturing process that leads to frustrating and expensive delays. Because time is money for every business, leaders need to do everything in their power to prevent damage to critical components of a larger manufacturing machine.
Discounts and Markdowns
If a damaged product still functions as intended, a company may try to resell it as-is at a noticeable discount. Some businesses also try to avoid the costs and hassles of product returns by refunding customers with damaged products some of the purchase price. However, discounts and markdowns erode at a company’s margins, and if a business is already operating with a thin line between profit and loss, an abundance of shipping damage may send them deep into the red. Business leaders need to perform ample research to determine what kind of discount to offer and whether discounts are more effective than processing returns or making repairs.
It is no secret that today’s consumers are becoming more and more insistent that the brands they support maintain some level of corporate social responsibility, especially when it comes to the environment. Unfortunately, damaged goods are unsustainable for several reasons; most notably, they waste manufacturing materials and energy, and they waste fuel in transportation to and from customers. Though few businesses may measure the effect of damaged goods on their sustainability initiatives, it is worth noting that shipping damage can have a profound environmental impact.
Shipping damage hurts — it causes stress to customers and business staff, and it puts a company’s bottom line in peril. Fortunately, business leaders can prevent undue damage during shipping by properly packaging their goods, working with high-quality carriers and investing in tools that monitor package integrity during transit.