Demurrage and detention fees can increase quickly, costing shippers tremendous money. Profitability is on the line, and it is too easy for cargo to sit and rack up fees when a shipper has many shipments moving simultaneously. Keeping track of everything to avoid fees could be a full-time job leaving shippers wondering how to avoid demurrage and detention charges.
Shippers are successfully turning to tech-enabled solutions to keep their freight moving and mitigate demurrage and detention fees.
What is Demurrage and Detention?
Demurrage and detention are terms often heard but not always understood, yet they are some of the most prevalent fees and biggest headaches in the supply chain.
While both are fees leveraged by the carriers, they both allow for a specific period of free time before racking up charges that could increase in their daily amount after a predetermined time.
- Demurrage fees apply to containers left at the port after their free days. Typically, the carrier will allow for two or three free days, after which charges begin and increase every two to three days. If a container remains at the port unpacked, it is known as “laytime.”
- Detention fees are charged on containers outside the port and not returned within a specific period, commonly three to five days. While that period is generally more extended than the demurrage time frame, these fees are charged far too often due to inefficient trucking.
Both fees are assessed to encourage shippers to get their containers out of the port and return the empty container as soon as possible to keep port operations running smoothly.
Even more critical, some ship lines charge both fees concurrently beyond a given time frame.
Rail is no different, with storage charges and potential equipment fees assessed beyond the allotted time frame.
The Rising Cost of Demurrage and Detention
In the U.S., these fees have continued to rise, making the country the most expensive for demurrage and detention fees. These rising fees are due to unprecedented port congestion, which carriers leverage as reasoning for charges even when the trucker cannot return the container during times of terminal congestion.
The top five most expensive ports in the world are all in the U.S. (costs shown are averages):
- New York: $3,182
- Long Beach: $2,730
- Los Angeles: $2,673
- Oakland: $2,325
- Savannah: $2,210
For reference, the next five highest ports globally are overseas and run from $833 to $1,349.
Three technology-driven strategies can save the day for those working to avoid expensive U.S. demurrage and detention fees.
Strategy 1: Effective Planning and Scheduling
Preventing fees starts with accurate forecasting and planning. Knowing current conditions, having the data to forecast according to past freight movements, and creating alternatives to avoid fees are all crucial considerations.
Forecasting and planning require accurate data and the ability to use it to create actionable analytics. Using big data analytics, shippers making data-driven decisions optimize their supply chains with the ability to identify areas vulnerable to slow freight movements due to congestion or at higher risk for exceptions to occur.
Knowing what is happening across supply chain lines, shippers can communicate with suppliers, carriers, and terminal operators to better coordinate the movement of their cargo.
Accurately assessing supply chain effectiveness at any given time makes it possible to align production with transportation schedules, optimizing cargo flow and reducing inventory holding costs. If port congestion is a problem but looks to clear up soon, the shipper may keep the shipment an extra day or two to minimize demurrage and detention fees—or move the freight through another port.
Shippers reduce costly fees by knowing the state of the supply chain now and how to navigate it effectively.
Strategy 2: Effective Communication and Collaboration
In any business scenario, communication is one of the most crucial considerations. Miscommunication tends to worsen outcomes, whereas effective communication produces positive results.
Being on the same page with other supply chain stakeholders through effective communication fosters productive collaboration. But, traditional communication is time-consuming, slow, and fraught with the potential to convey misinformation.
Technology alleviates the risks and time commitments of communicating with other supply chain stakeholders through phone calls. A digital supply chain solution constantly monitors freight milestones, exceptions, and ETAs and sends push notifications to interested parties. There is no need for a call which is a chance for miscommunication.
Lines of communication are always open when tech-enabled fostering the higher levels of collaboration that create proactive coordination with carriers, suppliers, and customers.
When an issue or exception arises, all stakeholders are immediately on the same page, meaning problems get addressed as soon as they happen, not hours or days later. Everyone is alerted through port container events if a container sits at the port and is in danger of accruing fees.
Shippers using an API to monitor and communicate freight movements can export or interface data compliant with their tech stacks and the tech stacks of their partners. Their APIs foster faster data transfers, are more adaptable, and are not error-prone like EDIs.
Saving considerable time communicating and knowing it is being done effectively through an API allows shippers to dedicate more time to their operations, provide better customer service, and avoid onerous demurrage and detention fees.
Strategy 3: Continuous Performance Monitoring and Improvement
Shippers use past data to analyze their supply chain’s performance and identify bottlenecks. Based on that information, they can implement corrective measures to improve efficiency when managing a newly discovered known issue.
Access to easy-to-understand and sorted data allows shippers to create carrier scorecards, know their KPIs, and explore different routing options. They can see what has caused past demurrage and detention fees and resolve the issues while fostering efficiency throughout their supply chain.
Shippers who leverage data analytics and tech-enabled supply chain visibility make proactive decisions confidently.
As the organization grows and more freight is in the supply chain, shippers need solutions that scale with them to avoid the jeopardy of again incurring unnecessary fees. Their tech must keep up with them and provide crucial KPIs and actionable insights.
Shippers turn to scalable data integration through APIs to utilize a solution that grows with their business.
Tech-Enabled Solutions Mitigate Expensive D&D Fees
A container sitting at or out of a port too long can cost shippers thousands of dollars at U.S. ports. Mitigating these expensive fees is crucial to improving the shipper’s profitability.
Using tech-enabled solutions not only makes a tremendous difference in cutting demurrage and detention fees, but they also foster supply chain resiliency. Shippers transform their entire supply chain through improved communication and collaboration, continuous improvement, performance monitoring, and effective planning. These strategies help freight move faster, cut expensive fees, and elevate customer service.
Shippers cut detention and demurrage fees using VIZION API. With real-time visibility, data analytics, push notifications, and port event notifications, they save money, build supply chain resiliency, make proactive moves, and delight customers. At the same time, knowing their API will continue to scale with them.
Book a demo with VIZION API to see how expensive detention and demurrage charges are a thing of the past for tech-enabled shippers.
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