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Opinion: Late Fees and Supply Chain Integrity

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1/7/2011 8:00:00 AM

By William Feld
DG Transportation Inc.

This Opinion piece appears in the Jan. 3 print edition of Transport Topics. Click here to subscribe today.

Appointment scheduling is common in today’s transportation industry. It allows for the orderly receipt of shipments, reduces waiting time and increases routing and operations productivity. When all goes according to plan, the supply chain flows with optimal efficiency.

Unfortunately, problems often occur and trucks may arrive late for designated delivery times and/or be detained at warehouses, causing a ripple effect of late deliveries.

With increasing frequency, consignees have implemented policies whereby deductions are made from vendor invoices for reasons attributed to carrier performance, that is, “late fees.�

Explanations for the deductions include — but are not limited to — late delivery, early delivery, mechanical breakdown and dock congestion. These “fees� range from $150 to $1,500, occur without the knowledge of affected parties and are often implemented without recourse and regardless of timely communication between carriers, vendors and consignees.

The greatest contributor to this trend is nothing less than fear. Most carriers are reluctant to refute responsibility for these arbitrary deductions when their customers seek reimbursement. In spite of reduced margins, most carriers will compensate their customers — and thereby perpetuate this practice — because of the threat (real or perceived) of partial or complete loss of future business and relationships.

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Similarly, in an effort to maintain market share, most shippers/vendors allow these deductions to continue and simply pass them along to the carriers or rationalize them as a “cost of doing business� without questioning the validity of the charges.

With market forces and a desire to maintain the status quo of all working together in favor of consignees, what recourse is available to help shippers, carriers and consignees work together to effectively eliminate late fees and other arbitrary and wasteful practices?

One important tool is information.

From a legal perspective, any legitimate claim for a late delivery must be predicated on actual damages having been incurred by the consignee. Most products are code-dated, and their shelf-life attributes will drive distribution and promotion. If a product’s life cycle is beyond the acceptable range for receiving, most consignees simply will reject or refuse the order. However, assuming that product arrived in good condition and the carrier did not “absolutely, positively guarantee� a specified dat

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Emil Estafanous, CPA, CFF, CGMA