It has been a trying year for those organizations involved in international shipping. There have been massive delays with port congestion, increased container shortages and external disruptions, like the Suez Canal blockage. According to FourKites data for Q1 2021, there has been a surge in ocean freight and the associated dwell times across North America, Europe and Asia.
Combined, these factors create a perfect storm of increased demurrage fees and transportation costs to these global organizations. Here’s what to know and how to avoid container demurrage and detention charges for your own organization.
If you have worked in supply chain logistics, you have most likely heard the terms detention and demurrage fees.
Demurrage fees are monetary charges to organizations for utilizing containers beyond what is allowed. These are usually fees that are charged per container and per day. Organizations are usually allotted a specific timeframe — called last free day — and then are charged for going beyond that timeframe.
Specifically for ocean freight shipping, demurrage and detention fees can cost up to 20 times the price of the container.
Both detention and demurrage fees are levied by the shipping company, but also allow a certain amount of time as part of last free day.
Demurrage charges are brought on containers inside a port beyond demurrage free days, while detention charges come into play after an importer has picked up and unpacked a shipment.
Detention fees are also assessed on containers outside the port. Last free days for detention are typically a longer timeframe than the last free days for demurrage.
Therefore, both demurrage and detention involve fees for extended time utilizing your container beyond last free day, and can be very costly to your organization.
How can shippers reduce ocean freight demurrage and detention fees when they are shipping internationally?
What are the best practices for reducing demurrage in ocean shipping and achieving a better ROI for your global freight?
Supply Chains seem to be facing more and more challenges each day. Whether you’re dealing with Port congestion in California or facing the increasing costs for containers, it is more important than ever to be proactive and aware of what’s occurring across your routes.
Fortunately, organizations can leverage visibility solutions to overcome these challenges. Ocean Freight Visibility allows supply chain managers to see these potential problems, and adjust accordingly, before they impact the supply chain.
If there’s one certainty in supply chain logistics, it’s that there will always be disruptions, and these are often outside of your control.
These could be disruptions such as your container missing the vessel, transshipment issues or delays in travel, and many others. It goes without saying that these delays can accumulate high costs.
Though there’s always the potential for disruptions, it is actually possible to reduce or avoid unnecessarily high costs by maintaining open lines of communication.
Document management is a crucial aspect of international shipping.
On average, 9-12 documents are required for each international shipment. And these documents can require upwards of 200 emails between parties.
In addition, your shipments could require specific documents based on the region, product or materials in the container. If you do not have the correct documents, or if they are incomplete, or not submitted on time, you risk unnecessary demurrage and detention costs, shipment delays and negative impacts to both customer satisfaction and profits..
Luckily, there’s a solution. Organizations that digitize their document process were shown to significantly improve document KPIs and reduce time completing documents and document errors.
Establishing clear processes for document management also helps you ensure that you are working with the correct parties to complete these documents correctly, on time and accurately.
If your organization is shipping freight internationally, it is critical to invest in a supply chain visibility software.
Managing ocean freight shipments through spreadsheets, long email chains, and untimely phone calls is simply no longer acceptable. The challenges your supply chain faces, especially with external factors disrupting the international supply chain, demand a real-time solution.
International Visibility, or Ocean Freight Visibility, solutions track your international shipments in a number of different ways, allow you to adjust and adapt quickly when delays arise, and even manage your documents all in one platform.
These maritime shipping visibility solutions can even give you insight into track-and-trace, rates, bookings, and document management. Resulting in reduced transportation costs (including detention and demurrage fees), increased customer satisfaction, reduction of safety stock, and many more operational benefits.
Overcoming shipping challenges and reducing demurrage and detention is certainly easier said than done — especially without the proper systems and processes in place. That’s why at FourKites we’ve released new Demurrage & Detention Dashboards and alerts as part of our Ocean Freight Visibility Platform. These dashboards empower shippers to prioritize their shipments and minimize containers that can incur fees.
Shippers are able to prioritize containers that are currently or about to incur demurrage and detention fees from a high-level viewpoint with the Demurrage and Detention Exception Dashboards. Not only will they see the containers to prioritize, but shippers can see dwell time notifications and real-time rerouting alerts that allow you to manage the exceptions in the moment.
With the Demurrage & Detention Analytics, shippers can view performance trends by carrier, lanes, stops and other areas for bottlenecks, cost drivers and other analysis. This can help save on their transportation costs, and it can also increase customer satisfaction.
Get alerted — within the platform or via email — on key ocean milestones or when your loads might start incurring fees. These notifications are customizable by a number of factors so you can be proactive for your shipments and make sure your inventory gets to customers on time and in full.
Why risk an increase in your transportation costs with something that is preventable, such as an incomplete document? FourKites’ ocean customers were able to improve their accuracy of completed documents to 95% — up from less than 50% and accounting for millions in fees — by using a digital hub for document management.
When it comes to international shipping, many shippers cannot get away from eliminating demurrage and detention fees due to delays and port congestion. By using exception management and proactive alerting, shippers can minimize these fees as a way of lowering their transportation costs and maintain a competitive advantage.
