Chances are you’ve encountered freight subject to demurrage charges. And demurrage has made headlines in the news since the catastrophe of the Suez Canal blockage earlier this year. Unfortunately, the global supply chain is strained under current resources, and it’s important for shippers to recognize and be able to answer, what is demurrage, and how will it impact landed costs? Let’s take a closer look at why a connected ocean freight ecosystem is extremely important.
What Is Demurrage: Its Meaning and Implication for Overall Freight Flows
When asking, what is demurrage, the first thing to consider is the state of ports. Demurrage describes the state of an ocean freight container that has not yet moved from the dock. Demurrage is usually used in tandem with detention charges. However, demurrage might not be avoidable. Port congestion, limited supplies, customs exams, and other factors can impact the risk for demurrage. Ultimately, the longer the freight sits idle, the greater the risk for demurrage. And while it is unavoidable at times, there are a few ways to plan for and manage it.
What Is Demurrage: Visibility Technology Enables Better Drayage Planning to Avoid It
Demurrage charges average $200 per container, reports Supply Chain Dive. The charges are assessed by port authorities and carriers with the goal of reducing delays and avoiding congestion at ports. The irony lies in the fact that port congestion itself may lead to delays in moving freight and the assessment of demurrage. Without a careful eye on the full view of your supply chain, demurrage and detention become self-propagating problems that are difficult to avoid. However, insight into current and changing conditions helps shippers plan drayage.
As further explained by Hellenic Shipping News, “Demurrage fees, which are based on the number of containers and days the cargo remains in place after the free period, can happen for a number of reasons:
- A warehouse may be unable to accept the cargo until after the LFD.
- Documentation might not have been prepared in time
- A port strike could make pick-up impossible.
Making matters worse, some terminals increase the daily fee after a certain number of days, so without prior planning, importers can quickly accrue substantial additional costs. And while demurrage and similar fees can’t always be completely avoided, the good news is that they can be seriously mitigated with an experienced, customer service-oriented freight forwarder.”
In other words, it’s all about the ability to use technology to increase visibility and reduce the risk of demurrage that makes a difference.
What Is Demurrage: Added Ways to Apply Technology to Reduce Risk of Demurrage
Shippers must be prepared to respond when faced with questions over what is demurrage and its total costs to each container. Rather than waiting for the proverbial shoe to drop, it’s better to take a strategic approach and apply technology as follows to reduce the risk of demurrage:
- Track real-time ocean container status prior to sailings.
- Know which containers have rolled and why.
- Stay apprised of changing conditions, such as weather, that could impact sailings.
- Standardize container tracking systems and management.
- Use freight forecasting tools and analytics to adjust schedules on the fly.
- Plan your shipments as far in advance as possible.
- Diversify your drayage planning network to account for risks.
- Work with an expert in drayage to reduce the risk of demurrage.
Increase Your Use of Technology by Choosing the Right Software to Track Ocean Freight Visibility
The best-laid plans for managing demurrage always go back to the absolute need for better visibility into intermodal transportation. Remember that intermodal includes both ocean and rail transit, and drayage can include moving freight from the port to nearby distribution centers, planning moves around warehouses and more. Rather than becoming another statistic and getting stuck in a rut of demurrage and added drayage costs, shippers need to start using technology to isolate ports at risk for demurrage and intervene accordingly. Above all else, waiting to find out what is demurrage until container arrival is planning to add extra costs and leaving money on the table. Find out more about how your team can bolster drayage planning and help reduce the risk of demurrage charges by connecting with OpenTrack today.
