The Importance of Damage Metrics for 3PLs

Executive summary:

• Recording damage metrics gives 3PLs a baseline to judge the quality of their shipments and how the customer experience is affected by reshipments and damaged packages.
• Saving money on each package is important for shippers, but there is a limit to how much you can save on packaging when you are forced to reship and replace damaged products.
• More than one-third of all packaging-related returns are due to damaged products — and consumers expect full refunds for their purchase if it arrives damaged.

Almost 40 percent of consumers will not purchase from a retailer again if they receive defective packaging.

When a product arrives damaged, the negative implications can be measured in more than just euros or pounds. There’s customer loyalty and brand reputation at stake, too — one damaged item has the potential to push a customer to never purchase from a company again. 

When analyzing damage metrics, 3PL’s can get an idea of how many of their shipments are reaching their customers in a weakened state and what they need to do to bring those numbers down. A damage rate of 2 percent is the average, so 3PLs should work hard to keep up with the competition.

What Are Damage Metrics?

To calculate damage metrics, you need data on these shipping factors:

• Customer service costs related to ensuring returns are taken care of, including administrative costs, insurance costs, and freight
• The cost of the replacement unit sent to the customer
• Cost of product inspection once returned to determine if it can be salvaged
• Overhead incurred from storing and shipping returned units, including the cost of maintaining the warehouse space
• Loss of damaged units that can’t be resold or salvaged
• Lost profit from selling returned or refurbished units at a discount

These factors combined determine the total cost of damage per unit. If a 3PL can’t include all of the costs incurred with a damaged product, it’s difficult to find the sweet spot between quality service and saving costs. However, by totaling these factors and multiplying it by the average number of units damaged over a given period of time, you can find your damage rate.

The Impact of Lost Loyalty

With numerous factors to track, it’s clear that damaged products can affect much more than the individual package in question. Collecting this data is the first hurdle to improving damage metrics for any company — but that’s not where the impact ends.

For each damaged product, 3PLs experience lost productivity and potentially damage the relationships they have with their customers as well as the retailers and distributors that rely on them. It’s rarely the primary job of an employee to deal with returns or damages, so the hours spent on making it right are essentially wasted, non-billable time.

Then there’s the concept of lost loyalty. One survey found that 39 percent of online consumers won’t repeat a purchase if their packaging arrives damaged. Another 41 percent reported a negative impact on brand image when their purchases are damaged, lost, or delayed.

Protecting Consumer Loyalty With Protective Packaging

Despite the doom and gloom, damages are part of the 3PL experience. You can’t avoid them entirely. But, the closer a 3PL can get to perfect, the less they have to worry about losing profits or consumer loyalty. To that end, 3PLs must decide how much they want to spend on protective packaging to reduce damages. 

Though each package may be more expensive, damage metrics show that reducing returns and preserving customer loyalty are more important over time. With products like Pregis’ air pillows, paper pads and loosefill chips, 3PLs can protect delicate items throughout the shipment process.

For packages that need a little more cushioning, Paper cushioning and Hybrid cushioning can be quickly packaged together with products to ensure they don’t break during bumps or collisions. These protective packaging solutions are resilient and can be used as wrapping or filling to nail the unboxing experience, increasing customer loyalty with competent packaging instead of losing it to damages.

To learn more about how damages can impact your company and the environment, check out our EcoGauge solution. This app uses a shipper’s own data to determine the impact of their damaged goods. 

Contact Pregis for more insight on how protective packaging can change the way you do business.