A critical part arrives at the customer's door defective. The reflex is often predictable: an urgent shipment is immediately arranged. It feels like the fastest way to help the customer, and sometimes it is. Together with the University of Groningen, Faes conducted research into the impact of this choice on costs and operational performance. Whereas a regular shipment costs about €150 on average, an expedited delivery quickly runs to about €1,200. That's a cost multiplier of nearly eight times, not counting the additional effects on inventory levels, scheduling and margin. In one case studied, 14 percent of all DOAs were sent by emergency, with a significant impact on the total DOA bill. This $1,200 reflex seems service-oriented, but over time it can put structural pressure on profitability.
A Dead on Arrival (DOA) is a product that proves to be unusable upon arrival at the customer’s or service technician’s premises. The study distinguishes between three categories: completely defective (dead), cosmetically unacceptable (cosmetic) and delivery issues that make the product unusable. These situations lead directly to follow-up actions such as replacement, repair or reshipment of parts.
Transportation is one of the most visible and simultaneously underestimated components within total DOA costs. In many cases it is not a regular shipment, but a rush delivery to reduce the impact to the customer. These urgent shipments are on average eight times more expensive than standard transport, according to the study. Whereas a regular shipment costs about $150, an expedited shipment costs about $1,200. In specific situations, this can make transportation nearly 70 percent of the total cost of a DOA, especially for parts with a relatively low value. This makes transportation optimization and the reduction of unnecessary rush shipments a key lever to reduce the overall DOA bill.
The study shows that transportation at DOAs leverages the overall cost structure. As the proportion of emergency deliveries increases, the balance between different cost items shifts significantly. In some cases, transportation can account for nearly 70 percent of total DOA costs, especially for parts with low replacement value, where transportation costs account for a relatively larger portion of total costs.
The largest cost remains damage repair. In the cases studied, this ranged from 102 to 142 percent of the average part value. These costs include not only the defective part, but also the deployment of field service engineers and the loss of production time. On top of this comes inventory costs. Unexpected shortages and the expedited replenishment of parts increase inventory costs in the study by 2.35 to 9.96 percent, depending on the ratio of inventory to backorder costs (b/h ratio).
The combined impact of these factors means that a DOA costs an average of 135 to 219 percent of the value of the part. Converted to revenue, this represents a loss of about four percent of total service revenue. Thus, the effect of additional rush deliveries is not only visible in the transportation column, but amplifies the entire cost of a DOA.
The study shows that not every rush delivery actually contributes to reducing downtime or meeting service agreements. In some cases, an emergency is deployed when alternatives are available, such as replacement parts in a nearby warehouse or a temporary solution at the customer’s facility. This makes it important to establish in advance the situations in which an emergency shipment is justified and when it is not.
An urgent shipment is especially useful in situations where the continuity of critical processes is immediately at risk. This applies, for example, to medical equipment, safety-related systems or production lines where downtime causes high damage. A contractual Service Level Agreement (SLA) with strict response times may also prompt an urgent shipment. In less urgent situations, a regular shipment or pre-positioning of parts can provide the same customer satisfaction at significantly lower cost.
The research shows that a clear decision structure helps prevent unnecessary rush shipments. Companies that work with predetermined criteria, such as the impact on uptime, availability of alternative supplies and contractual obligations, are less likely to use expensive rush shipments with no demonstrable added value. Structured consideration prevents reflex from prevailing and helps strike a better balance between service quality and cost efficiency.
The study shows that reducing rush shipments is not just a matter of making stricter decisions, but more importantly of eliminating the causes that lead to rush. Three pillars are crucial here: prevention, detection and mitigation.
Prevention
The biggest structural gains come from preventing DOAs. In one of the cases studied, packaging rationalization led to a halving of the number of logistical DOAs, from 0.46 to 0.22 percent. This was achieved by reducing the number of packaging variants from about 600 to 25 and by implementing clear instructions and better protection in the logistics chain. Design modifications, whereby packaging is tailored to transport and usage conditions as early as the development phase of a product, also contribute to lower risk.
Detection
Early identification of defects prevents parts from ending up in the field unnecessarily. Rapid inbound inspections, combined with clear acceptance criteria, make it possible to intercept defects even before shipment or installation. Reducing “No Fault Found” cases, such as through better diagnostic support for service engineers, reduces the number of unwarranted replacements and emergency deliveries.
Mitigation
When urgency is still unavoidable, the impact can be mitigated by alternative logistics strategies. Pre-positioning critical parts in strategic locations reduces response time without always increasing transportation costs. In addition, a unified emergency policy helps to consistently decide on emergency deployment and to bundle shipments whenever possible.
Faes’ role as a 4PP partner
As a Fourth Party Packaging (4PP) partner, Faes tackles the three pillars of DOA control integrally: prevention, detection and mitigation. We analyze supply chain data, perform root cause analyses and translate these into concrete improvement measures. In this way, we not only identify the causes of DOAs, but also provide substantiated recommendations for structural optimization of the underlying processes.
This can range from validating packaging designs and standardizing reusable solutions for prevention, to setting up fast and reliable inspection and diagnostic trails for detection and advising on inventory and distribution strategies that eliminate emergency shipments for mitigation. With this end-to-end approach, we help customers structurally reduce emergency shipments, demonstrably reduce overall DOA costs, and sustainably increase delivery reliability to end customers.
The analysis shows that the so-called €1,200 reflex often costs more than it generates. Rush shipments solve a problem for the customer in the short term, but in the long term increase total DOA costs and thus depress the margin. The study shows that transportation, especially for parts with a low replacement value, can account for a disproportionate share of total costs. Added to this are the additional charges from damage repairs and inventory disruptions, which together can add up to more than twice the value of the part.
Reducing this cost burden begins with analyzing the patterns that lead to unnecessary emergency shipments. By systematically working on prevention, detection and mitigation, the reliance on costly emergency shipments can be significantly reduced. As a Fourth Party Packaging partner, Faes fulfills an independent role by examining supply chain data, performing root cause analyses and formulating improvement measures. In doing so, we implement the three pillars, from validated packaging design and process optimization to strategic inventory planning and chain-wide direction.
The move from reflex to strategy not only delivers cost savings, but also strengthens the reliability and predictability of the service chain. It is thus a structural investment in both customer satisfaction and operating profit. Want to know more about this topic? Then take a look at our extensive knowledge center.
