How To Handle Shortages on Bills of Lading

June 1, 2004
We are in the welding supply business and operate a classic hub and spoke distribution network to our 22 retail outlets from a central warehouse. The

“We are in the welding supply business and operate a classic “hub and spoke” distribution network to our 22 retail outlets from a central warehouse. The mistake centers around signing a common carrier’s bill of lading. Generally the bill of lading calls for X number of pieces or pallets to sign for. However, in many cases these pallets or pieces contain numerous SKUs within them. Many times we are short on the SKUs but not the pallets or pieces. If the vendor is not agreeable to the shortage, we are basically left to handle the dispute with the freight company. In most cases these are easily handled with the vendor. However, when it is left up to us dealing with the freight company, it refers to the signed bill of lading for X number of pieces/pallets and we are left on the short end of the stick. As mentioned above, this has happened only twice, but has been costly.

Is there anything we should do differently on the bill of lading? Perhaps stamp some kind of notice on it to protect us until all items have been checked in?”

Bill Fennell Jr., director of operations, machine and welding supply company

Before throwing this question to our Board, MHM did some quick research of its own. Our sources suggest the following considerations.

First, was the shipment tendered as SLC (shipper load and count), in which case, the shipper has an accurate count? Or did the shipper tender the shipment to the carrier and accept the carrier’s count? This will help establish the veracity of the count at the origin.

Second, what are the terms of sale — FOB origin, FOB destination, etc.? If the terms of sale are FOB origin, the title to the goods transferred at the shipper’s dock and the loss (and claim) belongs to the consignee. If the terms of sale are FOB destination, the title transfers at the consignee’s dock and the shipper still owned the goods in transit and, therefore, any claim against the carrier is the responsibility of the shipper.

That said, here’s what our advisory board has to say.

Laurie Nauman, Ace Hardware: Our criteria is for all bills of lading to use “said to contain” terminology. The BOL or freight bill must read as “XX pallets stc XX cartons.” In the event we are short any product when the detailed check-in takes place, we file an OS & D form (overage, shortage and damage), which is reconciled when the vendor’s invoice is paid.

Gregg Schwerdt, Procter & Gamble: This is standard “old school” shipping and receiving. There are a couple of options here to try, depending on the size of the shipments. If these are truckloads of material, then move the vendor to shipper load and count, seal the trailer and have a monthly/quarterly reconciliation between the receiver and vendor. This will remove the carrier from the middle. Alternatively, move to customer pickup, which gives control back to the receiver and can resolve shortages at the vendor’s dock.

David Lockman, L.L. Bean Inc.: We at L.L. Bean do not have issues like this for our revenue-generating product. We do, however, see this when we do integration projects where an LTL shipment of parts associated with a project will come in. The best way that I have handled this is to perform a physical inventory on the goods I am supposed to be receiving, then reconcile that with the BOL. It is a pain, and the freight driver usually contests the time it takes, but if you want to limit the bickering and finger pointing, a physical inventory takes care of it for you.

Gregg Schwerdt says this is an "old school" problem. That begs the question, what kind of education are today's material handling managers bringing to the workplace to help them deal with such day-to-day challenges. We asked our board members if they've noticed any changes in whom they've been hiring over the last few years.

Schwerdt: The folks coming out are clearly brighter, and they are much broader in their knowledge in terms of IT and understanding the overall product supply chain. Most of your older folks grew up in it. They worked on the dock and worked their way up into management. The folks entering the job market now are clearly much broader in their understanding.

Nauman: We just recently hired someone out of Princeton with a degree in supply chain management for our Retail Support Center. Five years ago we would not have considered that resource. This person had a couple of internships with other companies so we knew the candidate would bring in some fresh new ideas, and that we could also teach him Ace's way of doing business. I have also seen that our merchandising department has hired people with supply chain degrees at our corporate office .

Huff: We have an extensive relationship with colleges and universities. We want people who are able to manage interfaces with integrators, third-party providers, and within emerging markets, whether in China or India. Some of those skills are learned on the job, but some recruits come with those skills.

MHM Editorial Advisory Board

• Ted Augustine, director of logistics and product supply, Goodyear Tire & Rubber

• Roger Huff, plant operations manager-N.A. Powertrain Operations, Material Planning and Logistics, Ford Motor Co.

• David Lockman, CIT, manager of engineering, Distribution Operations, L.L. Bean Inc.

• Tan Miller, senior director, logistics, Pfizer

• Laurie Nauman, supply chain coordinator, Ace Hardware

• Brian O’Donnell, director of technical operations and planning, Liz Claiborne

• Gregg Schwerdt, distribution manager, Beauty Care, Procter & Gamble