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Traffic problem of a Canadian variety chain store

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Traffic Problem of a Canadian Variety Chain Store
A Thesis
Prepared for the Requirement
of the
Degree of Master of Arts
Gal© Biasingame
University of Western Ontario
Department of Business Administration
London - Ontario - May 1941
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UMI Number: EC53265
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Acknowledgment
The writer wishes to take this opportunity
to thank Professor Walter A. Thompson of the Department
of Business Administration of the
Ifiaiversity of Western
Ontario, under whose constructive
guidance this thesis
was written.
Thanks are also extended to Dr. Eleanor Doherty,
of the Department of English, for
her practical aid, andto
all other persons who have in any way assisted the author in
compiling and presenting this thesis.
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PREFACE
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Traffic Problems of a Canadian Variety Chain Store
Outline.
1.
Preface.
Section 1. General Necessity of Traffic Administration*
1. Traffic Administration Necessary to the Operation of the Business.
2. The Traffic Manager.
3. Savings and Elimination of Waste.
4. Accounting for the Traffic Department.
5. Service.
Section 2. Routing.
1. Routing Function.
2. Former Methods of Routing.
3. Present Routing Plans for Unit Stores.
4. Shipping Guides.
5. Reasons why Shipping Guides are Applicable to Chain Stores.
6. Building the Shipping Guide.
7. Ordering Under the Shipping Guide.
8. Advantages of the Shipping Guide.
9. Disadvantages of the Shipping Guide.
Section 3. Claims.
1. Development of a Clajms Policy.
2. Types of Claims.
3. Bills of Lading.
4. Liability of Carriers.
5. Liability for Loss or Damage.
6. Liability on Released Valuation.
7. Liability of Carriers after Expiration of Free Time at Terminals
or Warehouses.
8. Store Responsibility for Filing Claims.
9. Loss or Damage Claims Procedure in the Stockroom.
10. Head Office Function Regarding Claims.
Seotion 4. Receiving Room Procedure.
1. Receiving Merchandise.
2. Enclosures.
3. Payment of Transportation Bills.
4. Damage to Merchandise in the Stockroom.
5. Receiving Book.
6. Invoice Procedure.
7. Weighing Inbound Shipments.
8. Tracing Shipments.
9. Merchandise Returned and Transfer Shipments
Conclusion.
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Traffic Problems of a Canadian Variety Chain Store
Preface,
The main traffic problem of a Variety Chain Store is to
move, in general, small to medium units of merchandise from suppliers
to the chain's many stores by the cneapest and fastest methods.
With
the development of the hand-to-mouth buying polioy and minimum stock
control, coupled with a large number of units spaced in divers locations,
traffio problems have come to the foreground and are undergoing some
radical changes.
The advent of modern business improvements brought little
change to traffic administration.
It was important at first to effect
economies in buying, selling, warehousing, administration and other
phases of chain store distribution, but to have business productive
to its fullest extent requires the same economies and efficiencies
in all phases of the business; not merely two or three.
Therefore,
after these economies had been effected, scientific traffic management
came under consideration and within the past ten years great progress
has been made in this phase of operation.
In a study conducted by the Twentieth Century Fund it was
estimated that $8.7 billion, or 13% of the total terminal sales and
purchases went for transportation costs.^
Since the traffic depart­
ment is a dead expense it's main function should be that of saving
money, and, through preventive measures, effecting savings for the
company.
With the above aim in view it is the purpose of this
investigation to present an over-all picture of domestic transportation
1.
Does Distribution Cost Too Much?
Twentieth Century Fund.
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for a chain store company.
Particular attention will be paid to-
the functions of routing, filing claims and stockroom procedure.
No effort will be made to consider in detail problems concerning
import shipments, insurance and legal matters, although they are
not entirely omitted.
Although this work is intended to merely
acquaint the reader with traffic problems generally, some thought
will be devoted to developing rules and principles for traffic
procedure.
Variety chain stores, as used in this discussion, will
deal mainly with those limited price chains that handle staple and
style merchandise.
A recent trend, in this type of distribution,
is toward providing junior department store servioe.
be kept in mind when reading the text.
This should
Companies that are direotly
considered here include Zeller's Limited, and the Kresge, Metropolitan
and Woolworth Chains.
The information for this work has come from a coalition
of each of the systems of three or four of the above chains in Canada
and from personal aid by Mr. R. T. Hartt, Vice-President, Zeller's
Limited and Mr. S. Brown, Traffic Manager, Metropolitan Stores
Limited.
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SECTION 1.
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3
Section 1.
Traffic Administration Necessary to Operation of the Business,
Traffic Administration is a general necessity; it is
necessary to the operation of the business; it accomplishes savings;
eliminates waste and renders a service.
Those are the reasons most
often given for having traffic management.
Probably the two reasons,
"it is necessary to the operation of the business", and "to accomplish
savings" are most important in the chain store field than the others.
Picture a chain store company with 30 units scattered over
an area with a length of 3000 miles and a width of from 400 to 500
miles.
These stores are served by three main types of transportation:
freight, express and parcel post.
Fifteen or twenty carriers are
available for service between the many points.
Five million dollars
in merchandise, representing 500,000 separate cartons, packages and
parcels is to be shipped from suppliers located from coast to coast.
There is a maze of tariffs, legislation, rate structures and various
other problems to be unravelled.
have individual problems to solve.
In addition each store manager will
Some of the merchandise will be
lost and some will be damaged; supplies will make mistakes in shipping;
carriers will commit errors in weights assessed and rates charged;
stockmen won*t make claims properly or will make none at all; these
are a few of the problems encountered in moving such a large amount
of merchandise.
Therefore, in the interest of ecomomy, chains have
found it to their advantage to centralize this function under a
oompetent director.
The above is a sketchy outline of the over-all ^problem of
a traffic department.
The following is a list of the functions of
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.
a traffic department (omitting the receiving operation):
1.
Routing shipments from manufacturer's plant to warehouse or
store to insure the lowest transportation charges consistent
with required time.
2.
Furnishing buyers with comparative rates and transit time by
various transportation companies} also a comparison of rates
on the same article from different points of origin,
3.
Supervising orders to make certain they contain specific shipping
instructions.
4.
Checking freight bills to see that shippers complied with shipping
instructions.
5.
Requesting shippers to use as light a shipping container as
practical.
6.
Eliminating avoidable damage to merchandise by notifying vendor
of faulty packing.
7.
Auditing transportation bills for over-charges and under-charges.
8.
Collecting loss and damage claims and settlement of those not
collected.
9.
Overseeing transit, marine and parcel post insurance.
10.
Tracing shipments to expedite movement.
11.
Maintaining co-operation with buyers to better understand
their individual transportation problems.
12.
Assisting buyers with economical transportation of foreign
merchandise; and arranging necessary contact with import
brokers and customs officials.
13.
Assuming responsibility for all communications including
telephone, telegram and mail service.
14.
Supervising returns to vendors and transfers of merchandise.
15.
Eliminating over-charges resulting from improper classification
or identification on the bill of lading.
16.
Setting policy for weighing incoming shipments.
17.
Reporting to management the departments results.
18.
Participating in current governmental and legislative affairs
concerned with traffic matters.
19.
Representing the company on looal traffic clubs.
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The Traffic Manager*
The manager of a traffic department is at the head of a
department requiring a wide knowledge of technical facts, details,
rules, regulations and procedures surrounding the various transportation
mediums.
field.
In Canada few universities will provide training in this
Thus it has become the habit of companies to secure men
versed in some field of transportation, i.e., railroads mainly, and
introduce them to the problems of variety chain transportation.
Since it is a field for specialization and has recently
developed, executives of a concern are not too well versed in the
transactions and workings of a traffic department.
As they have
progressed, however, exectuives have begun to have a better insight
into problems surrounding this department.
Traffic management is a connecting link between individual
stores, suppliers and the various transportation agencies.
Successful
completion of this work requires a diplomatic type of individual with
a great amount of ingenuity and foresight.
The policy of selecting
efficient and capable persons with personality and imagination will
be a wise one in this instance.
After a selection is made, results
can be best obtained by giving the head of the department a free
reign to act as his reason dictates.
General policy should, of
course, be decided by the head executives.
Among those items with which a traffic manager should be
intimate, are listed the followings
1.
Tariffs, interpretation of, so that shipment will be
properly routed, rates made available to buyers and
freight bills audited to determine under-charges and
over-charges.
2.
Rules and regulations concerning consolitation and freight
classification.
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3.
Laws governing loss and dajo.ags claims.
4.
Vendee's right to route shipments and
route them accordingly.
5.
Responsibilities of various transportation agencies.
6.
Kinds of transit insurance and where applicable.
7.
Various transit times for different agencies between points.
8.
Laws governing relations between shipper, transportation agency,
and receiver.
vendor's obligation to
Savings and Elimination of Waste.
Savings made by the traffic department are of two main
types, (1) monetary returns and, (2) non-monetary savings.
two probably the first is the more important.
it is the habit of the businessman to put
operation.
Of the
For obvious reasons
emphasis on this phase of
Non-monetary savings, however, should not be under-rated.
Innumerable sources of savings are present in a business that handles
great quantities of merchandise and has no traffic management.
Usually
the first savings resulting from the instigation of a competent traffic
manager come directly from reduced costs through effective routing and
careful auditing of freight bills.
In one instance a Canadian chain
installed a traffic manager and the first year $40,000.00 was collected
through effective presentation of claims.
This figure represents the
net profit on sales of $800,000.00, or more than the sales of three
units of a chain.
That was only one phase of savings, however,
economies resulting in no monetary returns would have been correspondingly
great.
As the efficiency of the traffic department improves the monetary
returns will go down.
present in other forms.
As they decrease, however, savings will yet be
This makes it quite possible for a traffic
department to be indispensable to a business and at the same time show
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very low oash returns.
Elimination of waste is closely allied with savings.
From the failure to get proper rates on commodities shipped; failure
to check freight bills and failure to make out and properly support
claims against carriers, waste is encouraged.
Hot only is this a
constant source of annoyance but it is a serious economic loss.
Such losses are irrecoverable and a cause of unprofitable work.
By vigorous action, consisting of working with shippers and checking
the company’s own work this waste can be eliminated to a great extent.
The following list presents a fiirly complete enumeration
of sources of monetary returns:
1.
Rate adjustments.
2.
Steamship contracts.
S.
Intercity hauling contracts.
4.
Cartage and warehouse contracts.
5.
Loss and damage olaims.
6.
Interest on claims.
7.
Demurrage olaims.
8.
Switching claims.
9.
Over-charge claims.
IQ.
Freight bill auditing prior to or after payment.
11.
Auditing transportation items on invoices of suppliers
12.
Adjustments on freight allowance.
13.
Adjustments on olassifieatiop.6, rates or tariffs.
14.
Special service arrangements.
IS.
Weighing agreements.
16.
New methods of forwarding advertising.
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17.
Disposition of old containers, packing materials and waste.’
18.
Pooling orders.
19.
Consolidation of truck shipments.
20.
Excess customs duty returned on customs protest.
21.
Insurance for pilferage, fire, and marine risks, etc.
Accounting for the Traffic Department.
This discussion is not designed to provide a system of
•accounting, but generally, it is to appraise the importance of the
accounting for traffic administration and to present its relation
to the traffic department as a whole.
First it is desirable to have records that will be of
value in directing the activities of the department.
Such accounting
and statistical information as the number of claims filed, the number
oolleoted, reasons why some were not collected, volume of merchandise
handled and at what cost, reasons why merchandise was damaged, damages
by differnt carriers and possibly damages by shippers are generalities
of information needed.
The amount and kind of information secured will
be dictated by the demand for and the use to which it is put.
Especially in the field of economy accounting records are
necessary for the department as a unit.
included in the total cost of operation.
Often this•information is
Accounting records would
be a valuable aid in further reducing costs and making savings.
The following will provide a lisb of sources of accounting
records!
1.
Expenditures for carriers hauling freight, express or parcel
post.
2.
Expenditures by the company for the performance of equipment.
3.
Expenditures for storage and warehouse space and service.
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£.
Expenditures for oommunieation via cable, telephone and telegraph.
5.
Expenditure for passenger transportation and travelling.
6.
Expenditures for packing, packing material, containers, loading,
stowing, billing and other shipping room costs.
7.
Expenditures for receiving room operation.
8.
Expenditures for
traffic and transportationadministration,
embracing the management and supervision of all the above
services and facilities and covering traffic activities of
a technical and clerical nature not included elsewhere.
If the department is to have the information it requires
for enlightened management the results of the departments operations
for the year should be fully accounted for and any further statistical
information that would be of value should be provided.
The degree
and extent of such information will depend upon the top executive’s
attitude toward such work, and to a great extent upon the cost of
providing such information.
Service.
Service rendered by a traffic department consists of two
types.
Namely, service within the organization and that rendered
outside the company.
Close co-operation between the buyers and the traffic
department is desired.
Harmony and understanding between these
two departments makes for a more efficient handling of merchandise
and transportation costs.
Since the billed cost plus transportation
costs constitute landed cost; the net profit of a department is
directly related to the cost with which merchandise is moved.
By
co-operation between these two departments, new sources of supply
may be opened, and comparatively lower landed costs may be effected,
thus enhancing the net profit of the company.
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Outside contacts are mainly with the transportation
companies and suppliers.
Here again the service and co-operation
rendered these groups will have an important bearing upon the
good-will developed for the company.
Improvements and co-operation
in traffic problems are important to both parties, thus by mutual
interest and co-operation problems may be encountered and solved
to the satisfaction of both groups.
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SECTION II.
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.Section 2.
Routing Function*
Routing is the function of selecting the type of trans­
portation and the route the merchandise is to travel.
prime considerations, i.e.:
Speed and cost.
Here are two
There is always one
best way of shipping from a standpoint of speed and a best way from
a standpoint of cost.
Quite often in particular lines of merchandise
one is sacrificed for the other.
For instance, in Ladies' Ready to
Wear, style is a dominant factor, and the cost of transportation is
not so important as speed.
But it must be remembered that cost of
transportation in this department, as well as all others, must be
kept at a minimum or else the goods would be handled at a loss.
In Canadian Chains routing, as will be explained later, is the duty
of the traffic manager and the store managers.
This division of
responsibility is the occasion of some difficulty.
The traffic
manager is most qualified for the position because of his knowledge
of the rates, transit time, and responsibilities of the various
carriers.
The store manager, however, knows when he will need the
merchandise and he further has the responsibility of routing it.
Thus, the traffic manager assumes the role of supervisor.
Former Methods of Routing.
The old method of department store buyers routing was to
leave this operation up to the shipper.
In making out shipping
instructions the buyer would place "cheapest", "quickest", "freight",
"as usual", or some other indefinite routing on the order.
This
practice left the men in the shipping room of the supplier in such
a position that they could ship the merchandise as they so desired.
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Being no more expert in this matter than the buyers, merchandise
was routed as they thought bast.
As a result transportation cost
was often higher than it should have been.
Chain stores used
essentially the same method exoept that the various units would
order in such quantities as they saw fit and put the same meaningless
remarks on the orders.
(l)
This type of routing had three major drawbacks:
It caused an unnecessary increase in transportation charges.
Shipments were sent at the discretion of the shipper and often a route
was ehosen that would eliminate local cartage charges even if it
were more expensive for the ouyer.
(2)
The net profit on the sale
of some classes of merchandise was less.
High transportation charges
on merchandise of low cost or on merchandise that carried a low mark-up
would result in either a loss or a no profit transaction.
sales would result.
(3)
Lost
The choice of slow transportation services would
have the merchandise delivered so late that sales would be lost owing
to the extra time required in transit.
Present Routing Plans for Hnit Stores.
With the condition existing as it was in most stores there
developed plans to care for it.
The problem was to devise a system
of conveying routing instructions to the manufacturer.
They could
be inserted in-the order form but the cost of transportation is
based upon the weight of the merchandise.
the order this information is unknown.
At the time of making
Therefore, accurate routing
instructions cannot be set down when the order is sent out.
Since
the shipper can easily ascertain the weight of the merchandise to
be shipped, he therefore, is the logical person to do the routing.
The manufacturer, however, can hardly be expected to look up the
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cheapest form of transportation for each shipment.
In view of this
condition the following two plans have been used:"*1(a)
Each purchase order mailed from the store is first sent to the
traffic department where the complete routing instructions are written
on the order.
(b)
This takes care of the majority of the orders.
In the oase of jobbers or selling agents, where point of shipment
is not known at the time order is placed, it is necessary to issue
the routing instructions in letter form, which instructions remain
in effect with these vendors until revised by the store.
Purchase
orders to jobbers or selling agents should contain no routing
instructions, but should simply refer to filed instructions, except
where it is necessary to suparceed them.
(c)
When buyer is in the market and places an order for shipment
from a plant outside lew York City (buyer knows or should know
routing instructions on orders to be shipped from New York City)
it becomes necessary for the traffic manager to mail the shipping
instructions.
Detailed routing instructions often printed on the
order to cover shipments from New York City.
This plan is probably
used by more stores than any other.
2.
The store writes the vendor to determine the name and location
of the plant or plants from which shipments are made.
Upon receipt
of this information, the routing instructions are prepared and
mailed to the vendor with the request that all shipments be forwarded
accordingly, until further notice.
The manufacturer is notified
■^Manual on Merchandise Transportation,
Association.
by National Retail Dry Goods
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•however, that any routing instructions on the order are to take
precedence over the routing instructions on file.
This briefly, is followed up by records that are wanted
in the traffic office, namely, a vendors file which include the
routing instruction for each individual vendor.
This instruction
is further carried on a rate-routing card which has a list of the
following information:
1.
Shipping point.
2.
Classification description.
3.
Best freight route.
4.
Classification rating.
5.
Weights for use with shipping instructions.
6.
Transit time.
7.
Zone numbers for different types of transportation considered.
Sometimes a city file supplements these two.
are classified alphabetically by cities.
The vendors
This is particularly helpful
when a different route is to be made for one city.
A glance at the
city file will show the firms affected in the vendors file.
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Shipping guides.
Within the last 10 years there have developed in the
Canadian Chains what have become known as shipping guides Form 1.
They are a variation of ’’plan 2” as explained in the past paragraph.
Shipping guides are particularly valuable to chains in that the
information that is pertinent to the buyer, i.e., the weight of the
merchandise is not in his hands when the order is routed.
Therefore
he has been obliged to guess at the weight and route the order
accordingly.
This practice was a further cause of delay and cost
to the vendee.
Moreover he had no legal grounds for charge-backs
in most cases.
If the shipping instructions were "fastest" or
"cheapest” and the merchandise was shipped at what the shipper
thought was the better choice and it turned out to be the poorer one
there we*e no charges that could be levied against him because he
has exercized his judgment, and had been wrong.
Only in cases of
gross negligence could the vendee secure charge-backs.
The purchaser of merchandise f.o.b. City of Shipment has
the right to route the merchandise, unless otherwise specified in
the purchase agreement.
When the vendor pays the transportation
charges he has the right to route the merchandise according to his
own wishes.
Often this right is granted the purchase in his interest
in securing the goods as quickly as possible.
Reason why Shipping guides are Applicable to Chain Stores.
There are several reasons that the shipping guide is
applicable to chain stores, among them the following are presented:
(1) With the geographical distribution of stores as it is, it is
almost impossible to secure the best routing when it is done from
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each store.
Such a system would necessitate having a qualified
clerk in each store or educating the manager to do the work.
The
first method would be too expensive and the manager has enough work
to do without adding this responsibility to his duties.
Routing
each order from head office isn’t practical either, because the speed
with which the routing should be completed would slow up the ordering
process.
Then too, the work would require the services of a staff
of clerks which would also be too expensive.
When the order is made out in the store the weight of
merchandise is unknown, consequently, it isn't possible to route
intelligently without this information.
Of course, an approximation
could be arrived at, but a business isn't built on a system of guesses.
The shipping guide eleminates all guess work in this connection.
Shipping instructions are put in the hands of the shipper.
When
the weight of merchandise is known it is only a matter of inspection
to decide how the merchandise should be shipped and through what
medium.
It has proved profitable for chains to develop their
own warehousing function to act more or less as freight forwarders
for their own stores.
The thing that has aided and abetted this
movement is the minimum weight that is attached to most shipments.
In a situation where a truck-transport has a minimum charge of .35^
for any shipment up to 100 pounds, it is expensive to ship, for
instance, a 5 pound parcel direct to a store when it could be
shipped to the warehouse free and included in a shipment of several
parcels totaling close to 100 pounds.
This has led to the develop­
ment of shipments to the warehouse for enclosure with similar ship­
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ments to the individual stores.
The decision as to whether it would
he better to ship d irect to the store or warehouse for enclosure
will be explained later.
The warehousing funotion of forwarding
freight to the individual units depends to a considerable extent on
maintaining a volume for each store.
If this isn’t maintained it will
be more expensive.
The co-operation of store managers is essential in this
instance.
Since it is desirable to keep the investment in stook low
and at the same time have a heavy turnover of merchandise and not
increase the transportation costs, the warehouse can function
economically only when there is enough merchandise for a daily
shipment to each store.
This can be accomplished only if the managers
use the warehouse service, and they will make use of it only if
satisfactory service is provided.
It is particularly fortunate that approximately 15% of
the suppliers of chain store merchandise is located in the two
metropolitan districts of Montreal and Toronto.
Chains have tended
to locate their warehouses in those two cities, thereby taking ad­
vantage of local delivery being made free to their warehouses.
As a result, the smaller shipments are consolidated into
one and a great saving made.
At this point some mention should be
made about the policies that a company can follow in the matter of
warehousing as regards traffio relation.
There are two methods open
to them.
One is to ship in large quantities and save on transportation
charges.
This will necessitate high investment in inventory in all
the units.
The other system is to have a low stock investment and a
heavier turnover of inventory.
This will increase the traffic costs
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but will provide a savings in investments.
In the latter the
extra oosts will be offset by a heavier volume and the added savings
of investments can be used elsewhere.
The development of enclosure points is an added advantage
of shipping guides.
At profitable enclosure points a local warehouse
service is obtained to perform the function of receiving all merchandise
for enclosure and re-shipping it to the individual stores.
The extent to which enclosure points are used will depend
upon the volume originating within a given district.
volume
issecured it willbe profitable to
this function.
Thedecision as to
hire
If sufficient
someagency toperform
whether it would be profitable would
rest on an inspection of the amount of transportation bills from the
given area, for a period of time.
This could be further broken down
by charges for individual stores, thus determining the volume present.
By computing the savings offered by such services and deduoting the
charges inherent in the operation of said services the profitability
of the enterprise will be determined.
As has been partially discussed, the relative cost and
weights of shipments are very important to the traffic department.
It is a general rule that heavy shipments take a comparatively lower
per pound cost; light shipments take a comparatively higher per pound
cost.
This is amply illustrated by costs of shipping Railway Express
within one provinoes
1#
15/
2# 3#
15/ 20/
4#
25/
5#
30/
10# 15#
55/ 55/
20#
60/
25#
65/
Thus it is seen that a 5 pound shipment may be moved for half as much
as a 20 pound shipment.
This, is of course, caused by the initial
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effort in handling the merchandise and not so much by the actual,
weight involved.
Though when larger weights are moved the cost goes
up proportionately.
Building the Shipping Guide.
It will be noticed that the shipping guide has two sections,
namely, Warehouse Enclosure and a column to be used for direct
shipments only.
This division is necessitated by the fact that it
takes a day longer for a-shipment to travel through the warehouse.
Quite often managers are in a great hurry for merchandise and order
it either direct or express.
Construction of the shipping guide consists of collecting
the following information from express companies and the various
freight agencies:
1.
Rates.
2.
Time for transporting merchandise between two points considered.
3.
Services.
This information is published in two schedules by the rail roads.
These are, Freight Tariffs, and Classifiction manuals.
companies also publish similiar documents.
Express
Motor transports do to
some extent, depending upon the size of the company.
Then, by a
process of working on the routing for one store at a time the
information for the shipping guide is developed.
For instance, when
developing a routing for shipments for one store, the rates for 100
pound shipments are determined for the various freight carriers
serving that location.
Taking into consideration the quickest delivery
service, the cheaper one is selected.
He is then given the business
of hauling merchandise that is over the warehouse enclosure limit and
all shipments from the warehouse.
For shipments are made direct to the
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store the rate by express is determined and compared to the minimum
weight that a similiar shipment could be shipped freight.
In other
words a "breaking point" is established between freight and express.
Consider shipments going to London, Ontario from Toronto per shipping
guide (Form 1).
It is cheaper to send parcels ranging in weight from
2 to 6 pounds - by express, over that amount it is more economical
to ship by freight.
individual stores.
Such a procedure is followed for each of the
It is a long and tedious process and where such
guides have to be developed for each shipping point it will require a
considerable amount of work.
Fortunately, as has been mentioned, 75$
of a oompany's suppliers are located in the two districts of Montreal
and Toronto.
The development of shipping guides for districts other
than these two will depend upon the number of shippers in a given
district.
Some companies have developed such guides for almost 90$
of their suppliers covering as many as 85 different shipping points.
Shipments by railroads are subject to a rating by classification.
Such rating being a basis for levying a tariff on the transportation of
the merchandise.
merchandise.
There are approximately 10 different classes of
Some of these have sub-classes.
rates for its transportation.
Each class had different
Ordinarily in shipping merchandise this
should be taken into consideration.
Chain's are interested in speed
of shipment and most of their diipments are in the first class which
has the highest rating.
Therefore, in making out the shipping guide
all selections are made on the first class rating.
by this method.
Little is lost
Essentially the same holds true for shipments by
other carriers.
Carriers under the above system are usually selected with three
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main points under consideration.
(c) service and reliability.
They are: (a) speed (b) rates /
Occasionally a decision has to be
made to sacrifice one of these for another.
Carriers should be
selected that will offer the best transportation service in speed,
providing that is consistent with relative cost,
lhat the chain
stores are after in rates is a flat low rate; however, companies
offering lower rates than others are watched to see that all other
facilities come up to par.
They are not interested in doing business
with bootleg firms that pop up overnight.
be true in the motor-transport field.
This can, of course, usually
That portion of the transportation
business is in the process of development and rates and methods are not
standarized.
Consequently it is possible for small firms to operate
for a time at cut prices.
In doing business at lower rates some part
of the business is likely to suffer.
Insurance will not be oarried,
or insufficient depreciation will be charged, or other expenses will
be out and as a result the persons using such service will suffer in
the long run.
Eventually the company with insufficient capital will
go out of business and the chains will have to secure further services
of companies that have not been helped by this type of competition.
The shipping guide is a combination guide and shipping
instructions sheet.
In most cases there is a detailed list of
shipping instructions and routing instructions.
Among the instructions
generally presented to the supplier are the following:
1.
The guide is applicable to all shipments except as otherwise
noted on the order.
2.
Order number, store number and full address must appear on
all packages and invoices.
3.
Store number and address must appear on all bills of lading.
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4.
All warehouse enclosures must be addressed to the store
concerned and it must be marked “via warehouse enclosure.”
5.
Same and accurate weight of each commodity must appear on all
bills of lading, invoices and warehouse enclosure packages.
6.
Invoices must be mailed along with the original bill of lading
direct to the store for which shipment is intended.
7.
Balances on order must be shipped according to the original
instructions or if no instructions were issued, in accordance
with the shipping guide.
8.
All shipments up to and including the weight shown in
"Warehouse” column must be shipped to the warehouse.
9.
When a shipment is over the weight shown in the "Warehouse"
column it must be shipped direct to the store.
10.
All shipments marked "direct" in the Shipping instruction
column shall be shpped direct to the store in accordance
with instructions shown under, "Use These Columns For Direct
Shipments Only."
(a)
Parcels up to two pounds shall be shipped direct by Parcel
Post. The charges for such service shall be included in the
invoice forwarded to the store.
(b) Parcels weighing over two pounds up to and including the weight
shown in the "Express Column" are to be shipped express by the
carrier indicated under "Express Routing."
(c) Parcels in excess of express weight are to be shipped freight
by the carrier indicated under "Freight Routing."
Order marked "Express" must be shipped express by the carrier shown
under "Express Column", regardless of weight.
IE.
Prepaid shipments go direct to the store. The use of
is optional.
the Guide
IS. All packages and parcels must be securely and solidly packed as
prescribed by Carriers' Regulations. Cartons and parcels must
be tied with strong cord and edges and folds gum taped.
14. Freezable merchandise must always be shipped express when there
is danger of freezing except when made by heated pool car.
15. Suppliers will be liable for any excess charge caused by
failure to follow instructions given or on individual orders.
16.
When more than one order from the same store is on hand at the
same time such orders will be consolidated and shipped as
one consignment.
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Ordering Under the Shipping Guide.
An explanation of the ordering system of a chain will
throw further light upon the use of the shipping guide.
There are two general classifications of orders.
One
is made by individual stores, the other is made by buyers and is
what is known as a general order. Their merchandise is shipped to
the stores without an order from them.
Usually this occurs during
the seasonal changes and is done just before the end of one season
and the beginning of another.
the traffic manager.
The latter type will be routed by
It is with the former one that this discussion
is mainly concerned here.
Order copies have a column for shipping instructions (Form
2).
Some term such as "ship via” or other routing term is used.
This space is filled in by the store manager at time when his "O.K.**
is placed on the order.
From there orders are sent to the head office
for approval by the various department buyers and thence to the
manufacturer.
Three methods of shipping under the guide, are available
to the store managers, namely; (l) "No Instructions” on the purchase
order; (2) orders are marked "Direct”; and orders are marked "Express".
The speed with which the merchandise is wanted is the determining
factor in routing by the manager.
Under the first method orders up
to and including the weight shown in the warehouse column shall be
delivered to the warehouse for enclosure to the store in question.
For instance an order for merchandise of less than 85 pounds for
St. Catherines will be a profitable warehouse enclosure.
Over and
above that amount would be moved direct to the store, inasmuch as
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the same rates would apply on shipments of that weight regardless
of who shipped them.
When an order is marked "Direct” the method of shipment
is determined by inspection of the guide.
All shipments up to and
including 2 pounds are to be shipped via parcel post.
When an order
marked direct is over 2 pounds and not more than the limit shown in
the express column it is to move by express.
Orders over the limit
of profitable express shipments will be forwarded by freight.
It will
be noticed that in all cases the oarrier is shown for each type of
shipment.
All orders marked "Express" are to be shipped by express
regardless of weight.
Carrier will be determined from the guide.
Managers are urged to leave the space vaoant in the "ship
via" section of the order copy and let the shipping guide work.
At
the same time if the need is urgent a direct shipment or one by express
is considered justified.
Such a system relieves the store manager of
the responsibility of routing and yet the control remains in his hands.
Some firms make full prepayment on orders of a certain
minimum.
For instance a firm will pay transportation on 3 cartons
of tooth powder.
The wise orderer will take advantage of this pre­
payment and order the full amount.
It has been found in some stores,
however, that 2 cases will be ordered every other week.
There is
heavy turnover in such items and it would prove more profitable to
take advantage of the savings offered.
When, on occasion, orders are made by wire shipping,
instructions should be oomplete.
The habit of some managers wiring
for merchandise and simply stating "Please Rush", leaves the rushing
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to the discretion of the shipper.
He may rush express or freight.
If the manager wanted the latter he should have sb designated, other­
wise most shipments will be forwarded by express, when freight would
have served the purpose just as well at a lesser expense.
the gross margin is lowered.
Consequently
Correspondingly, from some suppliers to
certain stores there is very little difference between freight and
express delivery time.
The difference in time should be ascertained
in those lines of merchandise where such shipping will be required
and advantage taken of any possible chance of effective saving.
In
the meant;ime a definite shipping instruction should be given in the
wire.
Advantages of the Shipping Guide.
One of the main advantage s of the shipping guide is that
instructions for shipping are put in the hands of the person doing
the shipping.
By giving routing instructions for all weights the
most economical transportation is secured.
For the best operation
from a traffic standpoint the guide should be in operation on every
order.
Shipping guides minimizes the work done by the store managers,
thereby giving him additional time for other efforts.
In addition the
routing is prepared by a person fully competent in that field.
The shipping guide is fool-proof for the shipper.
followed there will be no charges levied against him.
If
Furthermore,
it is easily followed and work involved is at a minimum.
Since routing is definite in any event, the shipper has
no cause for discontent on a charge-back that he may have levied
against him.
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Such a system takes care of a situation that would be
chaos if usual routing methods were followed.
Finally, a system of this type helps to educate the
shipper to the probfems connected with transportation and in its
final analysis will work into reduced loss and damage plus economical
transportation.
Disadvantages of the Shipping Guide.
The advantages of the shipping guide far outweigh the
disadvantages.
Some disadvantages of a minor character are present,
however and are presented following.
Ever changing methods and systems in the transportation
world require revisions at more or less frequent intervals.
This
alone provides a great amount of work for a traffic department.
Upon first installation there is difficulty in securing
the co-operation of both the manufacturer and store managers.
however, is not a major problem.
This,
Authority is held over the manager
and a manufacturer’s co-operation is soon secured when oharge-baoks
begin to be delivered to him.
In addition most manufacturers like
the system once they have become accustomed to it.
Occasionally some
discontent is shown when a buyer has bargained strongly for merchandise
from a new supplier and detailed shipping instructions are imposed upon
him.
This has a bearing upon the public relations job that is ever
present in the traffic department.
A bit of diplomacy upon the part
of the traffic manager usually remedies the cause of complaint.
It is practically impossible to supply guides for all
suppliers because of the wide geographical diversification.
As the
system is in use, however, most of them will be covered by the guide
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'System.
Another factor is the fact that all merchandise shipped
under the routing guide must have a first class rating.
This will
be the oause of some slightly exoessive charges on transportation,
but they will be more than offset by the savings presented.
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SECTION I I I .
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Development of a Claims Policy.
Claims (Form 3) are a source of revenue but as such they
are also a cause of unendingtrouble to the business in that there are
invariably some that prove to be problems in collection, in fact lost
sales are an added expense to the business.
An ideal transportation situation would be one that had no
claims at all.
As a result businesses are working toward a point
where claims are eliminated as much as possible.
serve a purpose before collection.
is a definite aim of claims.
Each claim should
The education of the supplier
If, before collection, a claim against
a supplier points out to, him the mistake made, he will be more accurate
in the future and will increase his effort to eliminate mistakes that
do him no good and certainly does not aid the firm that is making the
charges.
An example of lienenoy in claims comes from the following
instance.
A firm was charged with excess transportation charges of
$4.00 because of the firm’s decision to disregard the shipping guide
and ship by a transportation company other than the one prescribed
by the shipping guide.
When presented with the claim the firm stated
that that particular firm was chosen because all other available
transportation was tied up at the time.
As a consequence the shipper
chose the best transportation at the time and the store secured the
merchandise.
The claim was dropped.
Such collaboration is desirable
from the standpoint of publio relations.
A system of collecting claims should be such that a firm
will have confidence in the company presenting the claim for collection.
This may be achieved by a desire for absolute integrity on the part
of the company presenting the claim.
Claims are for the purpose of
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.protecting the interests of both the firm making the claim and the
interest of the firm against whom the claim is made.
A policy of
presenting only just claims and a not too rigorous prosecution of
them will aid in developing cordial relations with transport companies.
Such a policy will aid a company by speeding up acceptance and payment
of claims and it further will provide an added interest in the campany,
transportation prohtems.
Care should be exercised with transport companies that are
the ”fly by night” kind.
They, of course will evade just charges as
long as possible, particularly if their current cash position is in
the doldrums.
If full prosecution for large amounts are delayed over
a period of time it often happens that the firm fails and all claims'
against it are either lost or involved in bankruptcy proceedings.
Claims against such firms should be made similiar to those against
bad credit risks.
The oompany should be presented with the charges,
if the bill is not paid the intensity of the demand should be increased
up to a point where court aotion is threatened and as a final resort
actual court action should be instigated.
The possibility of holding
the threat of giving the company’s business to a competitor isn’t
usually accredited with being in the interest of good business practice
In extreme oases, ho\vever, it will be wise to follow such a policy in
the best interests of a firms own business*
Types of Claims.
Claims are of two classes, (l) claims against suppliers and,
(2) claims against carriers.
The following is a libb of c M m s that a
company usually files during the course of business:
1.
Claims against suppliers for not following shipping instructions
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2.
Claims against
carriers for errors in rates charged.
3.
Claims against
oarriers for damage.
4.
Claims against
carriers for shortages.
5.
Claims against
carriers for lost shipments.
These claims all deal with the transportation end of the
business.
There are claims for shortages (in packing) against the
supplier.
These may be handles in connection with the usual claim
work of the traffic department.
Bills of Lading.
A bill of lading is a contract between the shipper and
the carrier.
It is the acknowledgment of the receipt of a shipment
by the carrier and it determines the respective rights and liabilities
of both parties.
A bill of lading contains the conditions of contract for
which the shipment is accepted.
Permanent features of common law
liability are incorporated on the front and back., Special conditions
are typewritten on the document and a valuation is usually placed on
the bill.
When completely made out it contains shipping instructions,
description of shipment, classification of merchandise and usually
a car number in addition to the above information.
Two types of bills of lading are in use, (l) straight bills
of lading and, (2) order bills of lading.
to a party and is not negotiable.
The first is consigned direct
The latter is consigned "order to",
and is negotiable, being used to secure loans, etc.
The straight bill
is the one most commonly used by chain stores in Canada.
When making
out a bill of lading three copies are made, (l) an original, (2) a
shipping order and, (3) a memorandum.
The original is usually
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forwarded to the buyer; the shipping order is given to the carrier
and the third is maintained for the shipper*s files.
Liability of
the carrier begins when merchandise together with bill of lading
and full shipping instructions are handed over to him.
Liability of Carriers.
Railroads, domestic freight forwarders and motor-transports
are liable for all loss or damage except certain causes enumerated in
the bill of lading.
As a general rule railroads aren’t liable for
loss or damage resulting from:
1.
Riots or strikes.
2.
Quarantine.
3.
Act qf public enemy.
4.
Acts of (Jod (storm, earthquake, li^rfaiing, etc.)
5.
Defect in the merchandise.
6.
Loss or damage when merchandise is stopped at request of owner.
7.
Act of shipper or owner.
8.
Natural shrinkage.
9.
Merchandise taken from railroads by legal process.
When it can be proven by the shipper or receiver that
reasonable care was not taken by the railroad even in events enumerated
above the carrier then becomes liable for loss or damage resulting from
said negligence.
Railroads are not responsible for loss or damage when the
cause is a direct result of error or omission on the part of the shipper.
For instance railroads are not responsible for loss or damage resulting
from shippers:
1.
Failure to mark shipments properly.
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2.
Failure to use containers prescribed by law,
3.
Failure to pack shipments properly (concealed).
4.
Failure to properly load carload shipments.
As a rule railroads are very courteous about claims
against them.
It is a public relations matter that they too are
Up against and competition from motor carriers is pretty keen.
If there are provisions in the tariff which makes the
water carrier liable for loss or damage caused by marine risks; said
carrier is liable for loss or damage to the same extent as railroads
except the water carrier is allowed these further exemptions providing
there is no negligence on the part of the builders or operators:
1.
Bursting of boilers, fire, etc.
2.
Collision, stranding, or peril of seas, lakes or other waters.
3.
Shipments are subject to the General Average (c).
The liability of the Railway Express is limited to $50.00
on any one shipment, unless full valuation is declared and extra charges
paid thereon.
If complete liability is wanted on the total valuation
of the shipments a store may have such protection by instructing vendors
to declare full valuation when making shipments by Railway Express.
There are two other courses open to stores shipping by express, (1)
instruct vendors to declare the maximum valuation, the store can cover
the excess valuation through transit insurance or self-insurance, or,
(2) have vendors declare only a partial valuation sueh as one half, etc.
Essentially the Railway Express has the same liabilities and the same
exemptions as other carriers.
Liability for Loss or Damage.
When merchandise is signed for by the receiver any possible
known loss or damage should be noted on the receipt given the carrier.
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■Known loss or damage is usually noted by the rattling of contents,
broken edges or slats, stove in boxes, water stains on cartons, etc.
If there is any doubt about the matter it should be signed for
accordingly.
Concealed loss or damage isn't detected until the ship­
ment is unpacked.
This type of claim is more difficult to collect
than known loss or damage claims.
As a rule a clear title, signified
by a non-qualified receipt, relieves the carrier of any responsibility,
however, carriers are very good in honoring claims when the integrity
of the company is unquestioned and they are convinced of their
liability.
Liability on Released Valuation.
A released valuation is set at a maximum liability per 100
pounds in the event of loss or damage.
For instance a released
valuation of $20.00 per ewt. for glassware would mean that a ship­
ment of 200 pounds if totally destroyed would be valued at $40.00
and this would be the amount due from the carrier.
The effect of released valuation is to provide lower
tariffs on a few lines of merchandise.
Where possible and the
risks are not too great chains can take advantage of this.
Released
valuation is particularly valuable in the movement of household goods
when an employee is being transferred from one district to another.
Liability of Carriers after Expiration of Free Time at Terminals and
Warehouses.
On shipment arriving by rail carrier a period of 4 days
or 96 hours is given within which delivery should be taken, if not
a charge of .5/ per 100$= per week with a minimum charge of .25/ is
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assessed on merchandise not taken.
After expiration of this free
period carrier's liability becomes that as warehouseman only and
as such he is liable for negligence only.
(a)
Owners of the ship and other owners of cargoes make a contri­
bution to owners of shipment s that have been thrown overboard to
save the ship and other cargoes.
On domestic shipments very little difficulty is experienced
by chain stores because as a rule they are very anxious to get the
merchandise.
On foreign shipments, however, there have been occasions
when charges for storage have been assessed on merchandise "intend"
in the custody of customs officials.
This is usually due to the
failure of arrival of customs invoices or late arrival of proper
invoices.
In such cases claims should be made out against the
shipper presenting full particulars so that this erroror omission
on the part of the shipper won't be repeated.
Store Responsibility for Filing Claims.
Whether the store or the vendor shall file the claim will
depend on the buying terms.
If it is Mf.o.b. City of Shipment'* the
merchandise belongs to the vendee as soon as it and the bill of lading
are handed over to the carrier.
In this instance loss or damage
occurring enroute will be claimed for by the store.
If buying
terms are "f.o.b. City of Destination", title does not pass from
the shipper until the goods are accepted by the vendee.
is the shipper's responsibility to file the claim.
Thus it
However, in
practice most merchandise is bought "f.o.b. City of Shipment" and
there is little need for vendors to file claims.
Furthermore, an
agreement is usually made whereby the store makes the claim on
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"f.o.b. City of Destination" shipments and if unsuccessful the
loss is referred to the vendor.
When loss or damage is discovered there is a fifteen day
period in which inspection should be requested.
is a company rule.
In most cases this
If loss or damage isn’t discovered until this
period has elapsed inspection can be requested, although collection
of the claim isn’t as likely.
Loss or Damage Claims Procedure in the Stockroom.
In most of the chains the receiving room of the individual
store is responsible for claims filed.
important.
Making out a claims is most
If it isn’t filled in properly it is more difficult to
collect damagesand the education of the supplier and transportation
company isn’t fulfilled.
of those filed.
Collection of claims average 75%> to 85^
Consequently it is in the best interests of the
company to see that claims are handled properly.
it
In this instance
isusually the practice of a store to have one individual draw
up the claim.
Training and responsibility can be placed and the
best results secured thusly.
The following rules will present a
clear conception of the practice of handling claims in the stoekroomj
1.
Containers should be thoroughly examined before giving a
clear receipt to the carrier. If there is evidence of
rough or careless handling, rattling of contents, broken
slats evidence of cartons being resealed, cartons with
sides punched in, or any further evidence of loss or
damage the reoeipt given the carrier should contain the
evidence found. Shortages in the number of pieces should,
of course, be noted on the receipt.
2.
When damage or loss is discovered in the process of unpacking
merchandise, cease unpacking and call the inspector request­
ing inspection, then proceed unpacking in his presence.
When it proves too great a delay to await the inspector’s
arrival, continue unpacking, set aside the damaged merchandise
along with the container to await his inspection.
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36
3. Invoices awaiting payment shouldn’t be held in the stockroom
indefinitely. The inspector should be called daily until
inspection is made. If necessary forward the invoice to
head office for payment, the claims report can follow.
4. On import shipments there is a rule that custom’s inspection
must be made within 14 days after delivery. Customs should
be called promptly as soon as damage is discovered in
import shipments. Claims for refund of duty should be made
by the store due to the time limit per above.
5. Claims should be figured on the basis of cost price plus
proportionate charges of transportation costs. For instance
the invoice cost of the merchandise is $200.00; transportation
costs were $4.00. Damage to the extent of $50.00 is discovered.
The claims should be drawn up for $50.00 plus $1.00, which is
one fourth of the total transportation bill and one fourth
of the merchandise. Any trade discounts that the store has
should properly be deducted proportionally from the amount
of the claim. Cash discounting which the store may receive
for early payment of invoice, should not be included due
to the slowness of claims payment.
6.
The claims report should be drawn up promptly. The advantage
of promptness is to answer questions truly and carefully.
Settlement of claims often depend upon the information
represented in them.
7.
A full claims report should be composed of the followings
(1) claims report itself; (2) proper invoices, or certified
copies or portions of copies; (3) transportation receipt;
(4) original bill of lading; (5) copy of Inspector’s Report;
(6) any other papers pertaining to the claim.
8. Claims reports should be drawn up on all legitimate claims.
Claims for „.4Q/ or less, however, shouldn't be made as
it isn’t profitable to collect amounts of that size.
9.
If loss or damage is believed to be due to negligence or
omission on the part of the shipper it should be so
stated. This can be used for two purposes, (I) collection
from shipper in event claim is dishonored by the carrier
and, (2) education of shipper in packing faults.
10.
All claims should be collected by head office. In the event
some are locally it should be noted on the claim and
included in the oash report.
11.
When salvage value is present and the store wants to retain
said value; a reasona&e allowance on a cost price basis
should be allocated and deducted from the total amount
of the claim. If salvage is present and the store does
not want to keep it the carrier should take possesmon of
it, or permit the store to dispose of the salvage. This
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is usually handled by "No Salvage" being written on the
Inspector’s Report.
Head Office Function Regarding Claims.
A division of the work of handling claims is a necessity
because of the chain store type of distribution.
made out in the individual unit.
Claims must be
Audits of freight bills, filing
of claims and charge-backs must be made for all the stores through
the centralized traffic department in head office.
Claims are filed with the Freight Claim Agent of the
delivering carrier.
Most merchandise handled goes through the
hands of only one carrier except warehouse shipments, and shipments
that require cartage at either end of the hauling process.
As a
rule claims are filed against the delivering carrier since he
supposedly gave clear title to the earrier from whom he received the
merchandise.
Stores oheck additions and extensions for freight bills.
These items are not, as a rule, checked by the head office, since the
salary of an extra clerk would be more than the returns would warrant.
The traffic department checks the following;
(l) rates assessed;
(2) cartage assessments, to see if they were to be paid, etc.; (3)
routing and, (4) the relations of the above to transportation terns
with shippers, and the traffic guide instructions etc.
The ideal
situation would be to make the audit before payment of bills thereby
eliminating the procedure of over-charge claims.
The separate functions
of paying bills through the stores and auditing them in head office
necessitate over-charge claims being made.
The traffic department should maintain a record of claims
by indiviual stores.
Information entered in the record should be the
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the following;
1.
Name of shipper.
2.
Shipping point.
S.
Extent and nature of damage.
4.
Name of carrier.
5.
Date.
6.
Store number.
7.
Amount of charges.
Such information may be used to determine what outstanding
claims should be followed up.
Claims should be numbered consecutively.
The traffic department receives the invoices, order copy
and paid freight bill from each store.
As is explained under invoice
handing in the section on Stockroom Procedure, the order copy contains
shipping instructions.
It is then necessary to check the freight bill
against the order copy for violation of these instructions.
Where
routing instructions are left blank and the guide is thrown into
operation it is necessary to check routing instructions from the
vendor's file for each individual store against the freight bill.
On those orders that do not operate under the shipping
guide all shipping instructions are written on the order.
Checking,
in that case, consists of merely comparing the freight bill with the
order copy's instructions.
Invoices covering shipments that are supposed to be prepaid
should have the prepaid arrival notice attached to them.
Therefore*
it becomes only a matter of inspection to determine if a charge-back
is necessary.
In addition to other information a charge-back foaacontains
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reasons for the charge-back.
This is performed by repeating
routing instructions from the order copy and giving the form of
delivery.
A statement of excess charges thus is computed and the
bill sent to the supplier.
In the event of repeated charge-backs
from one or more shippers it is economical to keep a record of all
charge-backs and at the end of the month send the total bill to the
shipper.
Insurance.
Transit insurance may be purchased for two main reasons.
One is to protect the company against a loss which might prove to
be a cause of financial embarrassment.
A second reason is to recover
through claims more than the m o u n t of premiums paid.
Since most
shipments carried are not large enough to cause serious financial
difficulties, this discussion will deal mainly with the latter form
of insurance.
The amount of annual loss should be considered when
deciding upon an insurance policy.
If it is great, possibly some
form of transit insurance is in order.
A comparison of losses to
premiums paid will reveal a necessityibr this type of insurance.
Most shipments are not concentrated.
Although several
thousands of dollars worth of merchandise may be in transit at the
same time, these shipments will be scattered over a wide geographical
area and they will be carried by a great number of companies.
In
addition loss or damage for which the carrier is not responsible will
ordinarily be of a minor character.
Loss or damage may be increased /when a motor transport
doesn't carry sufficient cargo insurance.
This was discussed under
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Selection of Carriers,
The minimum cargo insurance in force for
motor-transports carrying merchandise for the company compared to
the average value of merchandise handled for the chain at any one
time will reveal the necessity of insurance.
If the insurance
carried by motor-transports is found to be too low there are two
possible courses of action open to a company.
It can either carry
insurance, or shift its business to a firm that carries sufficient
insurance to meet the company’s needs.
Motor-transports have, in
the past, purchased cargo insurance with a limited liability of say
$200.00 per shipment.
hauling charges.
This was done in an effort to secure lower
In such instances it would be adviseable to give
the business to a carrier that has sufficient coverage to insure the
shipper against loss.
A decision to insure against losses that may occur leaves
a company open for two courses of action.
or self-insurance may be carried.
Insurance may be purchased,
A self-insuranoe policy may be
profitably followed when premiums paid for insurance exceed the loss
that is recovered.
A decision as to which course to follow will
result from a comparison of the costs of the two systems.
If self-
insurance is decided upon; it is suggested that a credit for the amount
of insurance premiums will be made to a reserve and losses resulting
be written off against that reserve.
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SECTION I V .
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geotion 4,
Receiving Room Procedure.
Although the whole procedure of work in the receiving
roaa is sometimes delegated to traffic administration; this discussion
will pertain only to that portion of work directly connected with
traffic.
The division of layout of stockroom, stock control and
storage and other such problems will not be discussed.
Receiving Merchandise.
Deliveries of packages to one store will average, depending
upon the size of the store, from 15 to 150 to 200 in one day.
A
store with a volume of $300,000.00 will receive on an average about
30 pieces a day.
higher figure.
In the peak seasons this will increase to a much
As a result with such a flow of traffic through one
room to the selling floor certain rules have to be developed and
followed to achieve efficient results.
It is essential that all merchandise including supplies,
shall travel through the receiving room.
There may be tendencies
for local deliverers to deposit merchandise on the selling floor.
This should be avoided.
All receipts for the delivery of merchandise
should be signed by the stockman, receiver or in his absence one who
is fully aware of the procedure of handling incoming deliveries.
Each delivery will have a freight bill which will contain
the following informations
1.
Shipper's name.
2.
Carrier's name.
3.
Store to whom delivery is to be made.
4:.
D&t e ,
5.
Number of pieces.
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6.
Pro number (serial number on the bill for purposes of
identification)
7.
Occasionally the freight classification of the merchandise.
The bill of lading will be forwarded to the office of
each individual store.
carrier.
Sometimes it will be delivered by the
In such cases it will be necessary for the bill to be
taken to the office.
Enclosures (Form 4).
One delivery will often contain two or more separate
shipments.
For instance there may be an enclosure of 30 or 40
pieces from the warehouse and two or three shipments of one or
more parcels from suppliers.
In such cases it is absolutely ne­
cessary to segregate the merchandise by freight bills and check
for the number of pieces indicated on each freight bill.
If there
are shortages in the number of pieces it should be noted on the
receipt given the carrier.
Similiarly any suspected damage, or
loss due to pilferage, should likewise be noted on the receipt.
In
practice the enclosure slip from the warehouse gives the number of
pieces shipped.
These are segregated into two types, (l) orders from
the warehouse and, (2) enclosures of merchandise from suppliers within
the warehouse district.
The former will be listed by types of merchandise
correlating to departments, the latter will be listed by the number of
parcels from each company.
As a rule the enclosure slip is sent direct
'to the office of the store and is usually a day or two later arriving
than the merchandise.
There are two procedures that may be followed
in entering the receipt of an enclosure.
The merchandise may be
entered as having received the number of units from the warehouse on
one line.
Thus it becomes necessary to await the arrival of the
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enclosure slip from the offiee.
In such
periods such a policy
will result in overcrowding the receiving roan due to the checker's
inability to check the merchandise without having it fully entered in
the receiving book.
When the enclosure slip does arrive it is ne­
cessary to check each item off the list and enter the individual
packages in the receiving book.
At the time of this entry a notation
is made referring the reader to the original entry.
giving page number and line number.
This is done by
A further disadvantage of this
system appears in entering the amounts of each invoice in the receiving
book and giving the information required on the paster slip (Form 5).
Since the original entry gives the information required on the paster
slip and the amount of each invoice is required on the receiving line
for that particular invoice the difficulty arises from the fact that
a day or two or possibly more has elapsed between the receipt of
merchandise and the enclosure slip.
As a result there are possibly
several pages between the two entries.
Thus, entering the invoices
under such conditions requires endless thumbing of pages back and
forth.
This is even more so when all invoices for the enclosure are
not oheoked at the same time.
There are two possible solutions to this problem.
One is
to enter the merchandise under each enclosure by counting the number
of pieces and entering them by firm name.
house can be segregated by departments.
arrival of the merchandise.
Merchandise from the ware­
This should be done on the
A very prominent objection to this
procedure is that quite often two or more enclosures are received
at the same time.
When this happens there is no way of determining
which pieces belong to each enclosure.
A question presents itself
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here.
Why would two enclosures arrive in the same shipment?
As'
a rule it happens when freight is congested at the terminal and
can not be effected the same day as arrival.
Another possibility
is that shipments congregate over a holiday period.
the only thing that can be done is enter both bills.
In any event
The different
pieces will be entered regardless of the bill shipped under.
The
difficulty with such a system comes from accounting for allocation
of freight costs and possible claims against the carrier.
Such a method of entering enclosure has the advantage of
having the merchandise ready to check as soon as it arrives.
This
system makes for an added effort when the enclosure slips do arrive
and the items have to be ohecked off against the receiving record.
The advantages of the latter form of entering probably
outweight the advantages of the first method but there is one
Simple function that might be done to eliminate all difficulties
in this connection.
Either make the enclosure slips in duplicate
and send one by the transport company or have the carrier deliver
the original along with the freight bill.
Probably the former method
would be the more desirable in that loss of the slip by the carrier
might eventually cause more trouble than ever.
As far as the ware­
house function of making out the slip is concerned it would not slow
the process appreciably.
The effect of having the enclosure slip with the merchandise
would be to render receiving and entering into one operation and at
the same time it would eliminate all delays in checking.
This is
particularly desirable as a day makes considerable difference to a
chain store.
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^Payment of Transportation Bills.
All transportation bills for merchandise delivered to
each store are paid for by the store.
Upon the receipt of merchandise from a carrier the
receiver signs the freight bill and puts on it the page number and
line number of the receiving book.
Some stores have a system of
numbering each package, parcel or item that enters the receiving
room.
This is usually done by numbering consecutively from 1 to
999, with the numbers of the parcels pertaining to the line numbers
in the receiving record.
If this procedure is followed the serial
numbers of the paroels are also noted on the transportation bill.
Thus there is a good check on the relation between invoices and
number of parcels and invoices paid.
After the freight bill is signed by the stockman and
further notations properly made upon it the driver takes the bill
to a payment desk located either on the selling floor or in the
office.
Thus the cashier receives the transportation bill, pays
the charges and the hill is filed awaiting the arrival of the
invoice completely entered and checked in the stockroom.
Such a
system eliminates chances for double payment or collusion.
On prepaid shipments the carrier must be given a receipt
or at least his delivery book will be signed by the stockman.
At
that time the stockman will be given the prepaid arrival notice.
For matter of completeness the same information as is placed on
the freight bill should also be noted on the arrival notice and it
should be handed over to the cashier.
Damage to Merchandise in the Stockroom.
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The same careful handling that is accorded merchandise
during transportation should be continued in the stockroom.
All
efforts should be maintained to eliminate damage after merchandise
is in the hands of the receiver.
Damage resulting from rough
handling, or any other cause, after the merchandise is in the
stookroam will increase the shortage in the store’s inventory.
It is inexcusable and should be eliminated.
All possible causes of damage should be removed.
Parti­
cular attention should be paid to keeping the freight chute d e a r
of parcels.
Any’rough portions of the chute should be smoothed out.
If elevators are used care should be exercized in loading or stowing
parcels on top of one another; thus eliminating the danger of crush­
ing.
Concealed loss and damage claims are more difficult to
collect than known loss or damage claims due to the possibility
of damage being done by other hands than the carriers.
Usually there
is the thought that the damage might have occurred in handling the
merchandise in the stockroom.
This is especially true if the claim
is made sometime after delivery.
During seasonal peaks the time
between delivery and checking can be as much as a week or more.
Receiving Book.
The receiving book (Form 5) is a basic record.
From it
invoices for all merchandise going through the store, are paid.
In
the interests of accuracy all writing in the receiving record should
be in ink.
It is imperative that all merchandise coming into the
store shall be entered in this record and only invoices that are
entered herein shall be paid.
This book is the one record that
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should have absolute accuracy.
For without it double payment of'
invoices or even non-payment can be made.
When a firm sends in an
invoice there must be an entry in the receiving book for that mer­
chandise.
It provides a check on invoices that are sent late.
Say
that a shipment of seven dozen ties was received, checked off by
the invoice and order copy and the invoice paid.
As will be explained
later the quantity of merchandise, the department, date of delivery
and other information would be recorded in the order book for that
department.
Three weeks later an invoice is received that is identi­
cal with the above example.
The only records available to show
whether the invoice had been paid or not would be the order book
and receiving record.
Through correlation of the order book and the
receiving book it is possible to determine if the merchandise was
received and if the bill was paid.
Similiariy it is possible to
check invoices not paid and on non-delivery of invoices, from this
record.
All entries should be made at the time of receipt of
merchandise.
When the number of pieces of merchandise and the number
indicated on the freight bill are the same, then and only then should
the entry in the receiving record be made.
Open entries, i.e., entries for which there is no invoice,
should not be over a month old.
When an entry is two or three weeks
old negotiation should be started through the office to secure the
invoice or a copy from the company for which there is an open entry.
Invoice Procedure.
Orders are made out in quadruplicate.
Routing instructions
along the "ship viaM column are either left open or instructions are
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written in this space.
These orders go to head office for an O.lf.
by the various department buyers.
the supplier.
From there they are forwarded to
Each order along with its copies have a number.
When
the merchandise is shipped the shipper writes in the department number
order number store and store number on the invoice.
In the meantime
a copy of the order is returned to the store making the order and
it is placed on file under the department.
When the invoice is
received from the supplier the copy is secured by means of correlating
the order number on the invoice and the order number on the copy.
In
instances where this number omitted by the manufacturer it is possible
to locate the order copy by means of correlation of contents of the
invoice with the contents of order copys from that particular manufact
urer under the same department.
Upon stapling the order copy upon the invoice a paster slip
or invoice record (Form 6) is pasted on the bottom of the invoice and
this is sent to the receiving room.
In instances where the invoice
arrives with merchandise it is necessary for the stockman to take it
to the office for the above operations.
The stockman, upon receipt of invoices, will check the order
copy against the merchandise and the invoice.
Any shortages or damage
will be noted on the invoice record and a claim made out accordingly.
After the invoice is fully checked it then can be entered in the
receiving book.
The following columns being filled in on first
the receiving record; (1) date checked; (2) amount of invoice; (3)
remarks; (4) checked by; and secondly the paster slip; (l) our
receiving no.; (2) date shipment received; (3) date checked; (4)
received via; (4) Pro. No.; (5) weight; (6) number of packages.
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Invoices that have been checked and entered in the
receiving record are returned to the cashier at the end of the day.
Upon the return of the invoices, the cashier makes notations of
merchandise received, date, amount of the invoice and other inforamtion in the order book.
The transportation bills that are
paid for those invoices are entered in the "Transportation Record"
(Form 7) and then attached to their respective invoices and forwarded
to the head office.
It it simperative that freight bills be included with the
right invoice.
Otherwise it is impossible to check the bills against
the shipping instructions.
Freight bills for warehouse enclosures
should be with the warehouse invoiced and not with enclosures.
In
the case of warehouse hiring to serve only as an enclosure point
the freight bill is stapled on the first invoice of that group.
With all the above operations taking place in a store
it is needless to say that quick and accurate handling is an absolute
neoessity.
Weighing Inbound Shipments.
With the volume of merchandise coming into a store of
average size it would be expensive to check the weight of every
shipment.
The ideal situation would, of course, be one wherein every
shipment could be weighed, but as a rule stores operate in such a way
that it would be unprofitable and much too slow a process to weigh
each shipment.
It has been the experience of the business that rail
carriers are generally more accurate in their weights than motortransports.
The railroads have a 10 pound minimum rate.
All
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weights are scaled on 5 pound increases.
If a shipment is over fj
pound it goes to the nerarest ”0"; if it is under 5 pound it is
dropped and the weight is considered the next lowest figure ending
in "0".
This factor should be considered in weighing shipments
carried by the railroads.
Motor-transports have not, in the past, been too con­
scientious about the weights assessed on merchandise.
This is
occasioned by the fact that shippers have not scaled the weights
and the carriers don’t find it convenient to do so.
This however,
should be cared for in the shipping instruct ionsj wherein the
shipper is instructed to weigh the merchandise.
On "guide" and
"direct” shipments it is necessary to weigh the merchandise to
determine the route it is to follow.
Usually a spot check every two or three weeks will
suffice in weighing inbound shipments.
necessary to weigh each shipment.
On those days it will be
If it is found that all carriers
don’t make delivery that day it should be continued until every
transportation medium has been checked.
When over-weights exist
the attention of the carrier should be drawn to this and he should
at least sign to the effect that the freight bill was over-weight.
The better method would be to have him return the over-charge imme­
diately.
Unless a carrier’s representative signs the over-charge
slip it is usually diffioult to effect re-payment.
When a shipper is a consistent offender in over-assessing
the weight, it should be drawn to head offices’ attention and let
them handle the situation.
As a rule it will suffice to call the
carrier’s attention to the offense and if he is interested in main­
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taining the company’s business the practice will be stopped.
I'f
not, there are always other transportation companies that are anxious
to secure new business.
Candy and other sweets bought on a pound basis should
be weighted as they are received.
This division of the business
can have shrinkage from so many other sources that it is hardly
fair to assess it with short weights also.
Companies, in practice
are fairly accurate in the weights given.
Tracing Shipments.
There are two reasons for tracing shipments.
is to provide a check on overdue shipments.
The first
The second is to
expedite the movement of merchandise that the store needs immed lately.
In a chain store system the former is probably more im­
portant since most merchandise is ordered in comparatively small
quantities and dependence is placed in fast economical delivery.
When it is believed that a shipment is overdue ( a
reasonable allowance must be made for contingencies) the cashier
will first write or wire the vendor for information concerning
their merchandise.
It may develop that the vendor was unable to
fulfill the order immediately and has awaited two or three days
until he can do so.
If the merchandise, however, was shipped
and is overdue the matter is referred to the traffic department.
Detailed inforaufcion concerning route of shipment, carrier, pro
number of freight bill, date of shipment and classification of the
merchandise is then secured from the shipper and action is insti­
gated with the original carrier.
Sometimes it is sufficient for
the store to get in touch with the local agency for the carrier
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.and direct action will then be taken.
!
There are two possible courses available in tracing
lost or overdue shipments.
One is to leave the work up to the
carrier and this method will usually produoe satisfactory results.
If, however, it does not the traffic department can work with the
officials of the carrier and possibly more productive results
will follow.
Expediting shipments because of an urgent need for the
merchandise isn’t too important for a chain store.
Usually ship­
ments are handled by one carrier and there is little chance for
great delays.
On occasions it may develop that merchandise is
delayed at transfer points.
In such cases action on the part of
the vendee will produce effective results in eliminating delays.
The number of days required to transport shipments between origin­
ating and destination points can be checked by means of the date
of the freight bill and the receiving date placed upon the bill
by the stockman.
When the time required for such transportation
gets out of line action can be taken by the traffic department.
Merchandise Returned and Transfer Shipments.
Individual stores make comparatively few shipments.
Therefore it has been considered inadvisable for shipping guides,
similiar to those placed in the hands of suppliers, being developed
for outgoing shipments.
As a result the shipments that are sent
out from stores are governed ny the judgment of the store manager
or the stockman.
The same method of determining the routing as
is used in the development of the shipping guide should be followed.
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It is the duty of the store to ascertain the cheapest method before
shipping the merchandise.
This can be done by calling local agents
of the carriers.
Transfer shipments between stores are generally prepaid.
Therefore it is in the interest of the store doing the shipping
to ascertain the cheapest rate consistent with economical use of
time before shipment is made.
Excessive costs on such shipments
are usually noted by the traffio department and should be called
to the attention of the store doing the shipping.
Returned merchandise is usually transported at the expense
of the supplier.
Consequentally it is equally imperative that the
cheapest method be used.
The goodwill of suppliers is at stake.
As a result it hardly seems good business practice to impose charge­
backs on them for overcharges and then not practice economy of
shipping merchandise back to them.
Constant efforts in reducing loss and damage due to
ineffective packing on the part of the suppliers should be carried
over to the packing merchandise by stockmen.
Receivers are more
expert at unpakcing than pakcing but knowledge gained in such
work should be carried over and put to use when packing merchandise
for outgoing shipments.
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CONCLUSION
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Conclusion.
The ultimate goal of a traffic department should be
quick and relatively cheap transportation coupled with a minimum
number of claims.
With the development and perfection of the traffic guide
routing probelms of Canadian Variety Chain Stores are practically
solved.
There will, however, be additional work to be done.
The
ever-changing tariffs and legislation dealing with transportation
will result in continued revision of shipping guides.
This work
will form an important part of the traffic manager's duties.
In
addition, there will be a continual check made on freight bills
and shipper's compliance with shipping instructions.
As the traffic department becomes more and more effi­
cient there will be a decrease in the number of claims filed,
nevertheless, there will have to be a vigorous supervision of
this division of the work also.
Much can be done in educating suppliers in packing
and general co-operation with the traffic department, which should
do a great deal to make for an amicable relationship between supplier
and purchaser.
As the department gains in efficiency and the rougher
more elementary work of organising and developing the department
is finished, attention can be devoted to such problems as perfection
of existing methods, making new improvements and co-operating with
buyers, shippers and traffic clubs to develop the organization to
a point of perfection.
In such cases much can be done with other
outside persons such as the various carriers, cartage agents, etc.
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In addition, improvements in the stookroom procedure is a problem
to which the traffic manager should devote more of his time.
Under the direction of a capable manager the traffic
department of a chain store company can effect a real saving^ and,
in addition, provide an unmeasurable service for this type of
distribution.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
fo rm m i i p i’i m
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in s t iu c h o n s
T< 111* INTI >
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Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
f o r m -3
mi-: y r . \ M i
CLAIM REPORT
convcutively from 1 up)
Dat e of cl aim .
<rehamlise was
SHORT—OVER—DAM AG ED—OVERCHARGED
I > i ‘ i ■: : re h audise recoi vt d
\ - =■ hr
. D e liv e ry ca rrie d
I1're ig h t o r express b ill date .
>f
()!■ packages received .
tankages
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C o n d itio n ........................................ ........................
........... ......................................
Were packages fa il................................................... ............
......................
..........................
renailed in tra n s it.....................................................................................................................................................
< \ .o - u u counted
U ta
’.................
.................
W r,.- '•ascr or [oic;kfivr/ a c a re fu lly packed
W i1; >:
. f r o . N o................... .....
...
. .
. tim es b y
.
.
.
.
.....................
km d o f p a ckin g was used....................................................................................................................................................
D id i a.- m .'T package bear evidence o f briny, tam pered wit.}]
h o v.ai W in k goods short. were o m itte d by s h ip p e r ......................................................
W li ii ami by w hom was sim riage discovered (D a te )
Ndum-
.........................................
........
.........................................
.
19
P o s itio n ......................................................................................
W as c a rrie r n o tifie d ..............................................( D a t e ) ......................................................................
A
19 .. .
sh ip m e n t im -peek’d by ca rrie rs re p re s e n ta tiv e ...............................................................................................................
Hy whom
. . . .
( D a t e ) ......................................................................
19
( A tta c h r o p y o f r e p o r t)
is e htii.i .against
S h ipper • R a ilro a d 0 > tn p a n y---E x p re s s (Company.
( S tr ik e o u t w o rd s n o t a p p lic a b le )
T h e f o llo w in g lis te d d o c u m e n ts m u s t b e a tta c h e d i f c la im is a g a in s t c a r r ie r :
(a) O rig in a l b ill-o f- la d in g
ib ) O rig in a l p aid fre ig h t or express b ill
Signed
(c) ( ’oneealed damage c la im ( i f any)
id ) R e p o rt o f c a rrie r's representative
Signed ......................................................................................
S to c k m a n
M anager
INSTRUCTIONS
Answ er a ll questions above unless c la im is fo r overcharge.
A tta c h com plete set to the In vo ice and b rin g fo rw a rd the a m ou n t to the In v o ic e sticker.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
FORM 4
KN
'rHhi f.LIP
D« 11
Res '«etful1y , yours
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Form - 7
TRANSPORTATION RECORD
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission
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