Throwing Away Money with Demurrage and Detention
Do unexpected bills with high detention and demurrage charges make you scream? Could $35 million of detention and demurrage fees be avoided?
Demurrage and detention fees are more than the incurred costs of doing business. They result in delayed deliveries and payments, lost sales, and lack of product availability and impact cash flow and profitability.
Demurrage becomes a real problem when fees occur during periods when ports are congested. These fees are preventable with better alerts and reporting, clear communication, and proper data management.
In 2014, one shipper paid over $100,000 in demurrage charges, compared to $10,000 in 2013. Average detention and demurrage costs at U.S. ports can exceed $200 per day, making it clear that these costs are more than just carriers looking to “nickel and dime” customers.
Free Time Can Become Very Costly
Some companies see free time as an advantage, so its applied in routing decisions. A company might see free-time a less costly way to store goods in transit or use onsite port facilities.
Free time, however, can add 11%1 to a daily shipment’s cost.
Better visibility of free time can lead to improved transit times, extra time to use somewhere else, and more cost-effective decisions.
Free time contributes to unnecessary detention and demurrage costs up to 25% of ocean freight shipments.
Reduce Costs Before They Happen
If a company is routinely incurring demurrage and detention fees, it’s not carefully monitoring cargo arrival nor have a sound understanding of in-transit cycle times.
There are steps a company can take to decrease these costs.
- step 1. Analyze the overall process to further minimize fees
- step 2. Clarify relationships and responsibilities to optimize the network
- step 3. Automate the process across the entire supply chain
- step 4. Streamline the process, then refine for added cost savings
The Logistics Cash Opportunity: Early Alerts
Start saving on fees with an organized approach and process. Then with technology, receive early alerts to potential at-risk milestones, and support workflows for calculating rates and quotes accurately including free time.
With a robust supplier portal like eonepay’s Global Trade Management, track and trace the process early to manage demurrage and detention, gain visibility, and minimize overall costs. A supplier portal will let companies
- Access data for better decision making across multiple carrier contracts
- Monitor movement of goods at the shipment, order, SKU and container level
- Improve communication within operations and carriers
- Alert and report key and at-risk events proactively
- Expedite resolution by identifying root causes and eliminating recurrences
Better visibility also helps to avoid other expenses such as storage, handling costs, or extra fees the point of pick up or delivery.
Real time visibility and coordination can help reduce demurrage and detention fees by 25– 50%.
Save Money with Better Plans and Processes
Change a company’s culture around new processes to ensure long-term logistics cost savings. Take some added measures to make the new approach to demurrage and detention successful:
- step 1. Research details of fees, calculate cost of extra storage, and understand the real costs
- step 2. Digitize sourcing and operational processes
- step 3. Promote communication at every step of the procurement process
- step 4. Plan all shipments and formalities associated with arrival or departure of those equipment
- step 5. Ensure customs documentation are in place at time of release to mitigate demurrage risk
- step 6. Proactively report on active equipment for better decision making, insights, and actions
Realizing True ROI
Really ROI can be realized with accurate analytics and real-time visibility across the supply chain.
One global shipping line created a rigorous performance-management system to ensure accurate invoicing and expedited collection of detention and demurrage. It also standardized tariffs across different countries and trades.
These two steps lifted detention and demurrage revenues by 15%.2
One eonepay customer is saving over $260,000 in demurrage fees over five years
Summary
Many companies have made strides in demurrage and detention but more can be done.
Congestion will continue to grow as ports get larger and busier, and demurrage and detention charges will continue to be assessed.
Demurrage and detention charges usually occur when planning schedules are out of balance, communication is lacking, and delays in clearing customs occur.
A company must have a sound understanding of its business at every step and in real time to avoid these fees.
To reduce inventory carrying costs and improve supply chain efficiencies, companies need accurate analytics to reduce variability and eliminate dwell time. To optimize trade-lane performance, they also need accurate visibility into individual orders and shipment status.
The right global trade management and logistics solution will help identify and remove inefficiencies, resulting in shorter cycle times and less variability, reduction of transportation costs, and improved service levels and transit times.
About eonepay
eonepay’s mission is to dramatically transform the way companies conduct global trade. As a leading provider of cloud-based global trade management (GTM) software, trade content and training, we help companies all over the world create value through their global supply chain by improving margins, achieving greater agility and lowering risk. We do this by creating a digital model of the global supply chain that enables collaboration between buyers, sellers and logistics companies. We replace manual and outdated processes with comprehensive automation for global trade activities, including sourcing, supplier management, production tracking, transportation management, supply chain visibility, import and export compliance, and duty management. We provide rich data analytics to uncover areas for optimization and deliver a platform that is responsive and flexible to adapt to the ever-changing nature of global trade.