How to Decrease Demurrage Charges Through Efficient Freight Services

June 26, 2023 Logistics back office services

Demurrage fees and similar costs were initially introduced to help reimburse storage, warehouses, and facilities for their usage and equipment. This can be anything from containers to container yards, freight stations, and more. The storage spaces and equipment within are allotted an allowance period of a few days where no charges are raised. If the concerned party overstays their welcome, these charges aim to be an incentive by equipment and space owners to make the facility readily available at the earliest.

However, these expenses are not equally taken in the best terms by all parts of the supply chain. Ocean freight customers, for instance, tend to regard demurrage charges as unnecessary additional costs and would seek to avoid them as far as possible. But this is for a good reason – incurring these charges will add to transportation costs and will tend to cause delivery delays, stoking, degrade sales, and eventually tarnish brand image. Gladly, reductions in these costs can be made possible in a number of different ways using freight services to an advantage.

So, let us consider the different ways in which efficient freight services can help reduce demurrage chargers:

Understand how it is calculated

Shipping lines raise demurrage charges on the basis of one unit of equipment left in their space per additional unit of time. Typically these values correspond to a single container left in the yard per extra day than was allotted. The charges are applicable from the end of the last free day until the container is removed from the premises. Knowing these charges and how they function can help plan out any possible delays in container storage beforehand. For example, if you expect a shipment or container retrieval to be delayed, you can safely plan ahead on these charges or avoid them altogether.

Plan shipments well in advance

Streamlining the shipment process is crucial in reducing additional charges. It is important to evaluate the total amount of cargo, the total valuation, expected time for transport, etc., to make sure that all costs are accounted for. Some ways in which you can plan shipments ahead include:

  • Carefully analyze the route taken by your shipment (and have a “plan B” if required).
  • Dispatch consignments as far ahead of schedule as possible.
  • Account for and implementing a rime buffer (i.e., +/- a few hours/days).
  • Take into consideration possible delays apart from travel time such as loading, unloading, docking, etc.
  • Communicate important information and instructions to all parties involved in the shipment process well in advance.
  • Ensure that the ship captain/driver stays on time.

Try to negotiate as much extra time as possible when setting the initial deadlines.

Assign responsibilities clearly

After having analyzed the possibilities of incurring demurrage charges, you will have better visibility of the supply chain processes involved. The next step is to designate each task’s responsibility to a particular individual and properly optimize your transport network. You can use this to your advantage by choosing individuals who are seasoned and have a lower likelihood of causing delays. Moreover, this designation allows you to keep track of the status of your shipment at all times so you can be intimated of any delays and know exactly where to fix the problem.

Implement automation technology wherever possible

Another brilliant way to ensure minimum operational delays is to incorporate new generation technology to your operations as far as possible. Artificial Intelligence (AI) and Machine Learning (ML) coupled with IoT services have enabled industries to implement a whole new world of robotics and automation into their operations. And logistics is no different – supply chain functions can be automated to a great extent to make processes run as smoothly and rapidly as possible. For example, automation will enable real-time tracking and access of data which will, in turn, allow real-time decisions to be made in case of hurdles. Similarly, the progress of the shipment, location of the vessel, integrity of cargo, and more can be gauged to a high degree of accuracy.

Refine your workflow

Finally, the best thing to do to avoid unexpected delays and expenses thereof is to streamline your process. Implementing the latest digital frameworks into your operational infrastructure will take some time to get used to. But for best results, it is important to take as much as required to properly incorporate them into your processes to avoid any lacking later on. This will both eliminate extra charges due to mistakes and reduce additional charges in the long run.

Newage’s mission is to assist global freight forwarders by streamlining their operations and helping them scale up their business with a state-of-the-art freight management system.