The photo said it all. Taken with a digital camera, it showed what dock workers at a Kraft distribution center saw when they opened a trailer from one of the company's manufacturing plants: A load of packaged dinners had shifted off its pallet in transit and was slumped heavily against the trailer wall. The DC's receivers quickly sent the photo to the plant, where dock personnel immediately worked to prevent that problem from happening again.

This type of visual feedback is playing a key role in a damage-prevention program that Northfield, Ill.-based Kraft implemented five years ago—an effort that has posted some impressive results. According to Senior Director of Transportation Philip Carlson, the program has reduced Kraft's internal loading damage by 70 percent.

In-transit damage is a problem with a big price tag—and not just for Kraft. A 2004 study by the Grocery Manufacturers Association (GMA) and the Food Marketing Institute (FMI) reported that unsaleables (items that can't be sold because of their condition) cost packaged-goods manufacturers and distributors $2.57 billion last year, with 60 percent of those unsaleables caused by damage.

Clearly there's a lot at stake, and a program like the one Kraft developed can save a company hundreds of thousands of dollars annually. Here's a look at Kraft's successful program, as well as advice from experts on how every shipper can reduce in-transit damage.

According to Universal Solutions International, a provider of reverse-logistics solutions, most product damage occurs during handling and distribution, and not during manufacturing or construction. (See the chart, "Types of Damage," on Page 65.) Typically, the three leading causes of product damage are poor packaging, poor pallet configuration, and poor handling and loading practices.

As Kraft discovered, one major cause of damage is having too much void, or empty space, in a trailer. If a trailer has a lot of gaps, says Greg Jones, national sales director for ITW Shippers, a vendor of damage-prevention products, the truck's natural sway and vibration will cause loads or even pallets to shift, fall, or "walk" inside the trailer.

Rick Milligan, director of client development for Universal Solutions, says companies create the conditions for product damage when they eliminate load-stabilization materials or buy them based on price rather than on performance. "Manufacturers generally devote substantial time and money on developing a product, marketing it, and packaging it, but may cut corners when it comes to in-transit load stabilization," he says. "They purchase the least-expensive stretch film they can find, use poor quality shipping platforms, and compromise when it comes to proper pallet fit. Then they load and ship the product without air bags or load restraints, and wonder why the loads shift and their product ends up all over the back of the truck."

In addition to using quality packaging material, shippers need to load pallets correctly. Per Öhström, director of marketing for pallet-rental company CHEP, recommends that shippers distribute weight evenly and not overload the pallet. Placing cases flush with the edge of the pallet also helps prevent product from shifting and being crushed in transit.

Kraft's first step toward reducing damage involved determining the extent and source of the damage. "You need to understand if certain product lines or sites or lanes are an issue, or if anyone in the network is missing an opportunity [for improvement]," says Carlson.

To find that out, Kraft appointed a cross-functional team to conduct a series of warehouse audits and study internal policies and procedures, industry practices, and customer feedback. The team included representatives from operations senior management, plant and distribution center management, finance, R&D packaging, damage-prevention vendors, motor carriers, and railroads.

The team found many opportunities for improvement across the company. For example, Kraft worked with vendors to establish standard specifications for load-protection materials and now requires that new products conform to its packaging standards.

The greatest potential for some quick wins was in handling and loading procedures, which were not standardized. "Everyone thought they were an expert in loading trucks, but everyone had a different way of loading the same load," says Carlson. "People were saying, 'This is the way that I do it, and I've never heard of any problems.' But I would look in the truck and see voids and know that once the truck got out on the road and was subjected to the forces of nature, the load would fall apart."

After analyzing the results of the team's research, Carlson determined that inconsistent loading patterns, training, and feedback were the source of the damage problems. To find a solution, he says, Kraft needed to take three steps: Begin using the right tools and techniques; provide effective training; and establish responsibility for and ownership of loading practices.

One way to get loading dock personnel to use the right tools and techniques was to achieve greater consistency in loading practices. Toward that end, the team worked with ITW Shippers to create standard load diagrams incorporating good load-protection practices for each plant, distribution center, product group, and the more troublesome lanes. For example, the diagrams show pallets placed in a "pinwheel" configuration (alternating straight and sideways), a method that minimizes voids. The diagrams also show loads staggered side-to-side, which utilizes the friction of plastic wrap to keep pallets from moving. Finally, they indicate where to place bulkheads, or wall-like structures, and air bags that fill empty space and lock the loads into place.

The load diagrams even specify the right size and application for the air bag for each load. "If you use an air bag in the wrong application it can cause more damage than if you didn't use an air bag at all," says Jones of ITW Shippers. For example, if the bag is too large to fill the void, the product can get crushed. If the bag is over-inflated, it can explode; if it's under-inflated or too small, it provides little or no protection.

The second step involved developing a comprehensive training program. Kraft not only conducted traditional training sessions, but it also created a 15-minute training video. The video drew on input from various internal functional groups and outside vendors, and included interviews with drivers, loaders, forklift operators, and managers. "Until you understand the forces of nature that freight is subjected to, people have a hard time appreciating that it's not the driver's fault," says Carlson. "The video shows that there's no reason to blame the driver. No driver can prevent bad road conditions, stopping and starting, hills, bumps, and vibration." (The video is available for purchase. See the sidebar, below, for details.)

Training led to major improvements in damage control, but Carlson and his colleagues knew that feedback and incentives would be needed to keep that momentum going. That's where the digital photos came in. Sending digital pictures of damaged loads proved to be a simple but effective method of communicating information about in-transit damage back to the origin loading site.

The final step was to give ownership of loading practices to the originating plant by tying damage-prevention results to financial incentives and performance evaluations. Before Kraft implemented its program, the DC that received the product usually ended up paying the cost of any in-transit damage. The team changed that policy so that the shipping site is charged for any damages that can be attributed to improper loading. Once again, the digital photos played a crucial role by clearly documenting the extent and type of damage.

Damage reduction has also been incorporated into each site's performance incentives and evaluations. These numbers are continuously tracked and are displayed on progress charts. This helps Kraft respond quickly to problems. If a site's numbers go up, for example, managers can immediately determine what is causing the problem—whether it's employee turnover, lack of training, or a new product.

Shippers' attention to in-transit damage appears to be producing results. The GMA/FMI survey referenced earlier found that unsaleables had decreased by $140 million from the previous year's level.

In addition to these financial benefits, shippers may also realize less-tangible gains. ITW's Jones, for example, points out that how your product looks when your customer opens the trailer door has a real impact on that customer's image of your company and product. Keeping that image the best it can be is well worth the typical three-to-one ratio of the cost of damage-prevention measures to the return on that investment.

For some shippers, though, it doesn't matter much what it costs to make sure products arrive in tip-top condition. Says Jones: "I have one customer who told me, 'I don't care if the return on investment is three to one. As long as it's one to one, it's worth it, because I will win with my customer.'"