Detention and demurrage, the late fees incurred by shippers and brokers when they exceed the allotted time for using a container inside the port and outside the facility, can quickly spiral to more than 20 times the value of the container if left unchecked. Contractual agreements with the carriers or port authorities establish the timelines for getting cleared cargo off vessels on their way to inland locations and returning empty containers to the port. While many factors beyond anyone’s control can lead to missing those deadlines, shippers and their drayage partners can now turn to technology and take a proactive approach to managing detention and demurrage late fees.
This article takes a closer look at how shippers can harness innovative technology to expedite drayage operations to control demurrage and detention charges.
Demurrage and detention work differently but ultimately serve the same purpose. Demurrage is triggered when the shipper fails to clear the container carrying the goods from the ports or terminals within the allotted time, while the detention charge is triggered when the shipper fails to return the container to the vessel operator after taking them out of the ports to unload their cargo. The allotted time is known as Free Days.
While the definition remains the same across every port, the timelines and charges differ. For instance, the Port of Los Angeles calculates its demurrage and detention differently from how Singapore or Houston calculates it. Sometimes, these charges result from the shipper’s inefficiencies, but other times, they result from circumstances beyond the shipper's control. For example, customs delays, loading and unloading delays, poor scheduling, crowded warehouses, chassis availability, high volumes, lack of coordination, and inadequate documentation can trigger detention and demurrage.
Ultimately, the detention and demurrage charges aim to dissuade shippers and sometimes brokers from using the ports and terminals as makeshift warehouses. Authorities want the ports cleared as fast as possible. Otherwise, congestion starts to add up, which no one wants to deal with.
Demurrage and detention fees are typically calculated per hour and may vary for different cargo types. The problem with them is that if they are left too long or allowed to accrue, the costs start to add up. And the longer the days, the higher the rates. Do that enough times, and the business could pay more than triple the shipping costs. Nine carriers collected nearly $13 billion between 2020 and 2023.
The Ports of Los Angeles and Long Beach were rated top of the list for ports with the most demurrage and detention. A big reason is that the ports handle so many containers that it becomes easy to accrue these fees. This means shippers using these ports to bring in goods must take extra measures to ensure they do not fall into those situations.
Beyond the financial cost of the demurrage and detention charges to shippers, they are also at a disadvantage cash flow-wise, which can limit the efficiency of the entire supply chain operation.
Given the complexities and moving parts of port logistics, it’s easy for shippers to lose control of the entire process. In the past, they were left blindsided by delays, and failed deliveries were the order of the day.
However, digitization is changing things. Now, multiple technology solutions enable shippers to have far better control of logistics and drayage, all ensuring the cargo is constantly moving until it arrives at its destination.
What are some of these solutions, and how do they mitigate demurrage and detention fees?
Real-time data and visibility allow for constant monitoring of the shipping process. This enables shippers to initiate the clearance process from the moment the container enters the port or terminals.
With real-time data and visibility, all stakeholders can see the progress and take measures to ensure the entire process is seamless. For instance, drayage service providers like Golden State Logistics can schedule chassis and trucks as needed to facilitate the removal of containers from the ports as soon as the clearance process and containers have been approved.
Although real-time data and visibility solutions allow shippers and stakeholders to see the present, understanding the future could be more crucial to managing exceptions. This makes predictive analytics vital to operations. It enhances the shipper's ability to see the future, such as delays from congestion at the ports or a lack of available chassis that will facilitate the clearance process.
With this information, shippers and their drayage partners can take action to mitigate such risks.
With automated communications, stakeholders such as drayage providers can notify the shippers at every step of the process, from the pickup to delivery of the container. Shippers can also leverage it to track their shipments without having to do that consciously. This way, they are more productive and can prepare better to transition the shipment into the next chapter of the logistics process.
Transportation Management Systems (TMS) streamline the planning, execution, and optimization of freight transportation, while Yard Management Systems (YMS) focus on efficiently managing vehicles and trailers within a facility's yard.
With the TMS, stakeholders can optimize routes, carrier selection, and load planning. On the other hand, the YMS is mainly leveraged by the ports and operators to handle gate management, yard visibility, dock scheduling, and task assignment. Both systems offer improved efficiency, cost savings, enhanced visibility, and better customer service.
Documentation is necessary for shipping operations but is also prone to errors, which can hobble the entire logistics process. However, digital documentation automates the entire process, ensuring zero errors.
Digital documentation ensures that all required shipping documents are complete, accurate, and consistent. If documents are missing, digital systems can search and source them faster than human intervention. This is a game-changer for shippers, as they no longer have to worry about grounded or delayed shipments due to missing documentation.
With digital solutions, stakeholders can collaborate more effectively, improving throughput across the logistics process. This entails critical processes like data sharing and analysis. Every stakeholder can have an input that helps streamline the process and enhance the efficiency of operations.
Digital solutions enable stakeholders to do much more to ensure a seamless process, leading to the following advantages:
Digital solutions help shippers effectively manage free days, ultimately reducing the cost of shipping and helping them save significantly more. This also improves their cash flow, allowing shippers to manage other aspects of the logistics process seamlessly.
Digital solutions reduce manual interventions, leading to fewer errors across the entire logistics operation. This means improved scheduling, fuel management, shorter transit time, and enhanced loading and unloading.
Ultimately, digital solutions optimize the entire shipping and clearing process. From timely deliveries to reduced delays and transparency, digital solutions help enhance the experience for the customer. This allows the shippers to improve customer satisfaction and loyalty.
As an all-round drayage provider, Golden State Logistics stands out with our unique strength in effectively mitigating demurrage and detention costs for shippers, businesses, and supply chains. Using GSL, you can expect robust strategies and a dedicated team for detention and demurrage fee mitigation. Our team of experts provides you with:
Some of our solutions include:
Get in touch with us today to feel the difference in your shipping operations.
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