Shipping and transportation services make life much more convenient, but they come with a price that often remains unseen by the consumer while shippers experience the impact directly. Understanding everyday expenses such as per diem, detention, and demurrage difference are critical to modern supply chain management. When shipping rates began to rise at the start of the COVID-19 pandemic, the initial hope was that increasing rates and fees would be a temporary and short-lived obstacle. Unfortunately, nearly two years later, shipping disruptions, higher fees, issues with freight visibility, and more complex issues are here to stay, including concerns regarding demurrage vs. detention vs. per diem surcharges.
Everything from rising driver pay rates to detention fees to continued fuel rate spikes impacts shipping rates. On June 6, 2022, a Logistics Management article highlighted that “the spread between diesel and gasoline is nearly $1 a gallon—$5.53 per gallon for diesel with gasoline at $4.62 nationwide… according to the Department of Energy’s on-highway weekly fuel survey. Diesel has risen more than $2.30 a gallon from a year ago.”With global markets shaken due to war and poor economies setting off chain reactions, shippers need to understand demurrage vs. detention vs. per diem expenses as shipping rates increase once again.
While they may seem like simple buzzwords and industry jargon, having a firm grasp on demurrage vs. detention vs. per diem surcharges can help drivers and shippers keep profits as high as possible. There will always be a need for drivers and trucking companies to handle transportation services. There will always be a need for coordinated transport of goods and products with terminal tracking and container monitoring services.
It is an industry that will always be in demand and poised for growth and expansion. Based on findings presented in a June 2022 report from Digital Journal, “Trucking is responsible for most of the overland freight movement in the United States, with the market being worth 732.3 billion US dollars in 2020…[with] over 902,000 truck drivers employed in the US, which is less than the industry requires.” With so much potential growth and opportunity waiting, shippers cannot afford to overlook the D’s of logistics: demurrage vs. detention vs. per diem.
What Is Container Demurrage?
The debate surrounding demurrage vs. detention fees and how to address them often stems from a failure to understand precisely what container demurrage is and why those fees exist in the first place. Demurrage is a charge raised when a container is not moved from the port to an unloading location within a specified time. When ocean containers pile up on the docks, it creates bottlenecks and backlogs that slow the entire process down. The shipping line levies demurrage fees to the importer to encourage them to get their containers unloaded and moved as quickly as possible.
When Does Container Demurrage Apply?
The most common reason demurrage-free options are so rare is that shoppers often fail to keep products moving through the port. After the standard allotted time has passed and containers have not been emptied, transferred, or returned, these demurrage shipping costs usually follow. This balance of challenges and solutions makes demurrage costs difficult to monitor at times.
How Much Does Container Demurrage Cost?
In the demurrage vs. detention discussion among shippers and transportation service providers, the overall financial impact of demurrage fees is often the most impactful. The Journal of Commerce Online stated “the average detention and demurrage charge for containers of all types reached $1,219 by March 2021, a 104 percent increase from the level seen a year earlier.” Continual increases in these fees mean more shippers pay attention to demurrage vs. detention expenses on invoices and are looking for ways to keep things running smoothly and efficiently.
What Is a Container Detention Charge?
The next phase of the demurrage vs. detention discussion comes down to understanding container detention charges and their role in shipping cost fluctuations and increases.
A shipping company incurs detention costsfor using tools, machinery, and equipment belonging to the port or docking authority for longer than agreed. When one customer is slow to return the equipment, it means others wait in line, which only causes even longer delays and wait times.
When Do Container Detention Fees Apply?
While most ports have a set free period for the unloading, categorizing, and moving of containers and cargo, freight detention fees come into play when things take longer than they should. Demurrage vs. detention fees gets charged when the carrier’s equipment is still in use by the shipper or consignee, regardless of whether the containers have been emptied or if they still need to be processed.
How Much Do Container Detention Fees Cost?
The current FreightRight analysis highlights, “The cost of demurrage charges vary depending on carriers, terminals, and contractual agreements. However, they tend to be anywhere between $75 to $300 per container/ per day.” It is easy to see how after several days, these expenses and demurrage vs. detention fees can add up and significantly impact profits and cause shippers to increase the rates quoted to their customers.
What Are Per Diem Charges?
Like demurrage and detention charges, per diem fees and surcharges are applied to shipments when specific criteria are met or not followed accordingly. A per diem charge is a fixed rate per day that a carrier charges against another carrier or customer that uses chassis, trailers, trucks, and other equipment for a set amount of time. Not all companies have access to the equipment needed to unload and move cargo, so they use what the port officials provide. Per diem charades help ensure no one shipper hogs resources or holds up others from unloading their containers as well.
When Do Per Diem Charges Apply?
Per diem charges have existed for some time, but they are becoming more common and expensive as time goes by. Financial repercussions are the best way for port managers to ensure containers get returned promptly. Delays cost time and money, and like demurrage and detention fees, these per diem charges intend to keep ports unblocked and reduce congestion.
How Much Do Per Diem Charges Cost?
Per diem costs, similar to the demurrage vs. detention fees for shippers, can quickly become quite pricey. UWL highlighted that “Per diem detention fees are typically calculated based on when the containers leave the port, terminal or depot through the time they are returned there. They range from $50–$100 per container per day on average until equipment is returned.” It is easy to see how these expenses can add up quickly when a single shipping company might have multiple containers at the port, each incurring these fees daily.
Tips to Reduce Risk of Demurrage, Detention, and Per Diem Costs
Dealing with demurrage vs. detention vs. per diem fees and expenses is critical to managing budgets and maintaining high profits. As more people continue buying online and require fast and reliable shipping from domestic and international sources, the need for a clear budget and financial management is more critical than ever. An early 2021 article from Supply Chain 24/7 highlights that “before the pandemic, consumers made 32% of their purchases online. During the pandemic, that number has shot up to 58%. And much of this increase is likely to be permanent.” Without proper insight and management, it is easy for shippers to overlook critical points such as detention demurrage differences, how to avoid detention fees, and how to maintain demurrage-free shipping options. Shipping companies can better manage their expenses and keep track of demurrage vs. detention vs. per diem payments by following these tips to reduce risks associated with current shipment fees and surcharges:
Increase Visibility and Insights With Real-Time Data Collection
When addressing the demurrage vs. detention vs. per diem fee dilemma, it is essential to remember that improved container visibility and insight into company operations often paint the most precise picture of strengths and weaknesses. Real-time data collection, analysis, and application make it easier for shipping companies to scale and adapt to market shifts.
Use Personalized APIs to Track and Monitor Container Movements
Many freight detention and other accessorial fees stem from poor tracking and visibility while containers are moved throughout the port. APIs and personalized tracking systems can help management know where every container is and which pens are close to incurring additional fees and surcharges. Personalized insights improve overall productivity.
Take Advantage of Innovative Technology for Faster Communications
Demurrage and detention charges often arise due to delays with container unloading and moving goods at congested ports and docks. Shippers and freight forwarders equipped with the latest technology and communications can avoid many of these delays by providing real-time access to status reports and near-instant responses to issues.
Implement Internal and External Metrics to Monitor Shipping Processes
Monitoring systems, performance rates, productivity, and other critical metrics can help shippers balance demurrage vs. detention vs. per diem fees more easily. Management must know what internal shipping teams’ performance levels are as much as they need to understand how 3PLs and other parties and partners are influencing their shopping process overall.
Enable Automated Processes Such as Push Notifications and Alerts
It is a digital day and age, governed by automated processes and technologically-backed systems. The shipping industry is no different and unraveling the issues around demurrage vs. detention vs. per diem expenses is more straightforward with technology adequately integrated into existing systems. Automated alerts and status reports keep everyone on the same page.
Focus on Predictive Planning and Analytics to Improve Current Services
Detention costs are often the result of poor planning and a lack of insight into future market trends and consumer demands. Predictive analytics and pepper planning can help shippers anticipate potential delays and associated fees and allow them an opportunity to plan ahead of time to offset them. Current shipping services drastically improve with proper planning insight.
Coordinate Team Members and 3PLS for Improved Industry Relations
Improving partnerships and industry relations can help shippers avoid high demurrage shipping expenses and related fees. Having talent pools to pull from and experts to get advice and assistance from can help shippers meet deadlines and stay on track more easily without as much risk for surcharges and fees related to delays and problems during shipping.
Maintain Open Lines of Communication With Customers and Clients
The final tip for dealing with demurrage vs. detention vs. per diem concerns is to keep open lines of communication going at all times. Everyone must be able to share data with customers, clients, team members, and third-party partners. Software tracking allows members to communicate, discuss issues, and work out solutions together quickly and efficiently.
According to the U.S. Census Bureau, “the U.S. shipments of goods in 2017 reached 12.5 billion tons, an increase of 1.2 billion tons or 10.4% since the previous Commodity Flow Survey was conducted in 2012… the total value of shipments nationwide over the five-year span increased $0.7 trillion or 4.8% to $14.5 trillion.” As impressive as figures like these are, the following review is likely to show an even bigger spike in growth due to COVID and e-commerce trends.
While eliminating demurrage and detention charges might not be feasible, there are many ways to lower these fees and avoid extensive bleeding from unexpected costs and issues stemming from delays, cargo rolls, and other shipping problems. Implementing these tips can help shipping companies and providers handle demurrage vs. detention vs. per diem costs. It can also give them a better idea of what impacts their shipping costs and operational expenses.
Know Your Demurrage Vs. Detention Vs. Per Diem Costs and Keep Them in Check With OpenTrack
Shipping and transportation services rely heavily on a keen understanding of current demurrage vs. detention vs. per diem fees and rates. Access to reliable data and industry insights regarding current shipping fees and expenses makes life much easier for shippers. As consumers continue to rely on fast and reliable shipping services, customers and shippers alike need to be aware of the costs involved. Understanding everyday expenses such as per diem, and the detention-demurrage difference is critical to modern supply chain management. Increases in rates and fees, seen nearly two full years ago at the start of the COVID pandemic, continue today and impact shippers and transportation service providers in powerful ways.
Juggling everything involved with demurrage vs. detention vs. per diem fees, ongoing shipping issues, supply chain disruptions, higher shipping expenses, and more complex transportation will likely be ongoing for years. Contact OpenTrack today for a free demo and to learn more about managing costs and expenses with better demurrage detention and per diem fee insights and control.
