Demurrage and detention. Two words that once brought dread to seafaring shippers, but not anymore. Why? Because there are more ways to avoid detention and demurrage costs.

From proactive planning to the use of technology, having strategies in place to minimize demurrage and detention charges better protects your bottom line. This article gives you five proven strategies you can implement today to turn the tide on demurrage and detention fees.

The Difference Between Demurrage and Detention

Demurrage and detention costs stem from delays in container pickup and return. While both refer to charges related to container use beyond the allowed free time, the key difference between demurrage and detention lies in where the delay occurs.

• Demurrage charges apply when containers remain at the port beyond the allotted time.
  
  
• Detention fees rack up when containers are not returned to the shipping line within the agreed timeframe.

Understanding these differences is crucial for implementing strategies that target the root cause of both types of fees. Taking back control of these expenses is key to improving profitability and operational efficiency.

A Bit of Background

In 2021, the average demurrage and detention charge increased by a whopping 104%. Why? Port closures, congested supply chains, and driver/vehicle shortages were just some of the factors driving the increase of demurrage and detention fees, which caught many shippers off guard.

These unexpected costs hit hard, derailing even the best-laid shipping plans. Demurrage and detention costs became a huge financial burden. Thankfully, demurrage and detention fees have dropped significantly since the record highs seen in 2021.

To avoid getting caught out again, many shipping companies have developed strategies to minimize demurrage and detention penalties. These strategies have been so successful that they now play a key part in improving supply chain management and cutting costs.

Here's a closer look at the strategies serving to protect shippers from ballooning demurrage and detention penalties:

Strategy 1: Optimize Documentation and Customs Processes

The Issue: One of the leading causes of demurrage and detention is delays in customs clearance and documentation errors… argh! It's frustrating when paperwork is incomplete or inaccurate when cargo arrives at the port because containers get stuck in limbo, racking up daily charges.

The Solution: Invest in a document management system to minimize the risk of delays. This will help to keep paperwork accurate, up-to-date, and readily available before the cargo reaches the port.

Plus, proactively working with customs brokers can further streamline the clearance process, as they are knowledgeable in local regulations and can preempt potential issues.

Using electronic documentation platforms can speed up processes, reduce manual errors, and improve the overall efficiency of your operations. By keeping documentation error-free, you not only avoid customs delays but also prevent the costly demurrage charges that come with them.

According to a 2022 report published by McKinsey & Co., digitizing the bill of lading process could save $6.5 billion in direct costs, some of which would include detention and demurrage charges.

Many forward-thinking companies have started using blockchain technology to simplify documentation processes. Why? Because blockchain reduces the time spent verifying documents, as all stakeholders have access to a unified source of truth, which helps avoid delays.

Strategy 2: Improve Container Pickup and Return Scheduling

The Issue: Poor container pickup and return scheduling is a major contributor to demurrage and detention charges. Containers often linger at the port or in transit longer than necessary due to misalignment between shipping schedules, port operations, and ground transportation.

The Solution: Advanced scheduling tools can help optimize pickup and drop-off times, ensuring containers are moved quickly and within the allowed free time.

These systems can sync with ship and port schedules, providing real-time updates on container availability and reducing the chances of scheduling conflicts.

For example, implementing a slot-booking system with ports or working with logistics providers who offer precise scheduling tools can prevent containers from sitting at the terminal, saving both time and money.

Plus, regular communication with your drayage providers means that pickup and return plans are aligned with actual port conditions. You're not just guessing.

Strategy 3: Use Technology for Better Visibility and Tracking

The Issue: A lack of real-time data is a common challenge in container management, making it difficult to track the status of shipments and take timely actions to avoid demurrage and detention fees.

The Solution: Container tracking technology has proven to be a game changer for shippers and freight forwarders. Real-time tracking systems equip you to monitor the exact location of your containers, providing early warnings of potential delays. This visibility opens the door to proactive decision-making, allowing for schedule adjustments and contingency planning to prevent excess fees.

Technological solutions such as IoT-based tracking devices and cloud-based management platforms can help streamline operations by providing instant updates on container movements.

Equally, digital twins and predictive analytics are helping shippers to dodge demurrage and detention penalties.

A digital twin is a virtual representation of physical assets, such as shipping containers. By simulating container movement and potential delays, companies can better manage their fleet and reduce idle times that lead to demurrage charges.

​Predictive analytics helps forecast potential bottlenecks in the supply chain, such as weather disruptions or labor shortages, so companies can take proactive measures to avoid delays.​

With these systems, you can avoid unnecessary storage time at the port or return containers on time, reducing demurrage and detention charges.

Strategy 4: Negotiate Terms and Understand Charges

The Issue: Many shippers and BCOs are unaware of the specific terms and conditions set by carriers regarding demurrage and detention. This lack of clarity can lead to unexpected fees and strained relationships with carriers.

The Solution: Building strong relationships with carriers is essential for negotiating favorable terms. Familiarize yourself with the fine print in your shipping contracts, paying close attention to demurrage and detention policies. Not all carriers offer the same level of flexibility, and some may be open to adjusting their terms based on your shipping patterns.

By negotiating extended free time or more favorable rates, you can lessen the impact of delays on your operations. Plus, it's beneficial to understand the various triggers for demurrage and detention charges so you can take proactive steps to avoid them. Knowledge is power; in this case, it can lead to significant cost savings.

Strategy 5: Proactive Planning and Contingency Management

The Issue: Shipping delays are often caused by unforeseen events, such as weather disruptions, port congestion, or equipment shortages. These events can lead to mounting demurrage and detention costs without proper planning.

The Solution: A comprehensive contingency plan is crucial for managing unexpected delays. This includes having backup transportation options ready to go if your primary carrier is unavailable, as well as understanding alternative routing options that can help you avoid congested ports.

Plus, effective contingency planning involves staying informed about potential disruptions in your supply chain, from strikes to adverse weather conditions.

Monitoring key indicators and maintaining close communication with all parties involved in the shipping process can help reduce the risk of demurrage and detention fees.

Another option is to outsource parts of your supply chain to third-party logistics providers (3PLs). These partners often have established contingency plans and the resources to minimize delays, keeping container dwell time low. Plus, it reduces dependency on a single port or carrier.

By preparing for the unexpected, you can minimize the financial impact of delays and keep your operations running smoothly.

More Than Just Doing Away With Demurrage And Detention Costs

Reducing demurrage and detention fees is not just about cutting costs; it’s about improving overall operational efficiency and giving you a competitive edge in the global marketplace.

Shippers and freight forwarders can significantly reduce the risk of costly delays by optimizing documentation processes, improving container scheduling, using real-time tracking technology, negotiating favorable terms with carriers, and developing strong contingency plans.

Each strategy offers practical steps that can be implemented immediately to minimize demurrage and detention fees. This will lead to more streamlined, cost-effective shipping operations.

Reassessing your current logistics practices and incorporating these tactics equips you to unlock new opportunities for savings and efficiency.

The good news is, demurrage and detention charges are dropping. Plus, the way they are managed has changed too. On May 28, 2024 the final rule of the Ocean Shipping Reform Act (OSRA) 2022 marked a significant shift in the way demurrage and detention fees are handled.

This rule guarantees greater protection against dishonest charges while offering assurances over more transparent invoicing.

Dodge Demurrage and Detention Fees With Vizion

VIZION is helping shippers worldwide avoid demurrage and detention fees with ocean freight tracking. Shippers can:

• Monitor shipments by container number, master bill of lading, or auto carrier identification.
• Track 98% of global shipments.
• See over 7,000 unique events translated into 60 standardized milestones and ETAs.
• Access instant-on data with documentation.

Book a demo with VIZION to learn more about managing demurrage and detention fees.

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