Acme Distribution - Denver, Chicago, Harrisburg, Dallas

May 2010 Newsletter

Message from the CEO



A few weeks back, I returned an item to Costco.  Their return policy is extremely liberal and totally focused on customer satisfaction.  Until a year or two back, this policy even included electronics but was then modified to limit the time frame for such returns.  I suspect that change had to do with the rapid evolution of technology (flat screens and digital A/V particularly) and the abuses that were taking place as a result of an open ended product return policy.

As I waited in line with my item, I noticed the customer next to me who was returning a dozen or more food items.  Most were perishable, and all but one appeared to have been partly consumed.  His items were refunded with no questions as he explained the problem with each item.  The clerk was courteous but seemed relatively disinterested in the various alibis – I had the sense that they see this sort of thing with some regularity and just process the transaction dispassionately.  I found this large return both offensive and abusive but understood Costco’s position and the “bigger picture” mentality that they have so successfully adopted.  Then I remembered their change of policy as regards electronics and realized that even the most service oriented companies have their limits.

So what has this got to do with logistics and more particularly with third party logistics?  Like Costco, customer service is the cornerstone of our success.  Like Costco, we can’t survive without satisfied (if not delighted) customers.  

I’ve been noticing a trend that seems worse with the economy being as challenged as it has been of late.  It has to do with freight charges gone awry.  It also has to do with human error and partnerships and above all, it has to do with ethics.  

While a great many of our customers share data with us electronically, there are still a large number who transmit and exchange information in the more traditional ways – fax, mail, sometimes phone.  In order to convert this into usable and legal documents, we almost always key the data into our WMS (warehouse management system) and TMS (transportation management system).  The accuracy of our key punching is exceptional but there is a very small margin for error and we do make the occasional mistake.

The error that has plagued us most recently is the mis-keying of billing information on parcel shipments.  It’s a very manual process for those who do not provide us with electronic information. When we miscode a collect shipment as a prepaid move, we receive the invoice rather than the consignee receiving it (as the terms of sale require).  Make no mistake, this is our error.  That said, it is important to understand that the product delivers and delivers in a timely and suitable fashion.  It delivers on the same carrier / mode as if it were coded properly.  It’s just a matter of billing and instead of the billing being sent to the consignee, it’s sent to us.  

At first glance, it would seem pretty simple.  Can’t the carrier just change the billing? The answer is no. Can’t we just send a bill to the consignee and explain the mistake? After all, they were expecting to pay the freight charges if billed properly.  Therein lies the problem.  Some of our customers don’t want us contacting their customers to ask for these dollars.  When we are given permission to do so, we’ve rarely if ever had success in collecting for these freight services.  Ironically enough, our freight charges are often less than what the customer would have paid on their contract.  We’ve always made it clear that we would gladly accept their rates if those were more favorable than ours.  Still, no luck.  To the credit of our customers, some have made efforts to help us in this pursuit but clearly they are limited in how much pressure they can or should be putting on their customers as a result of our error.

It’s hard to explain this situation as anything but opportunism on the part of these consignees.  They have a reason not to pay so pay they don’t.  It’s a matter of ethics or lack thereof.

From a pure dollars and cents point of view, these mistakes are infrequent enough that our bottom line is not severely damaged.  Still, there is an impact, and that impact does have rippling effects.  We ask ourselves if we should be considering up charging customers who do not provide us with electronic information. This would likely place an undue financial burden on our smaller customers.  We wonder if we should be more aggressive about pursuing these collections for both financial and ethical reasons.  We wonder if we should alter our contracts to protect us when these sorts of miscues take place, or if we should increase our base rates with the knowledge that some measure of human error is inevitable in a process that still depends on human keypunching.   None of these solutions comes without a price….an unfortunate price that, in my opinion, should not be necessary.

So, I ask you, is this a matter of ethics or am I just having a bad day?    

Jeff Goldfogel


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