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Demurrage and detention are some of the most unexpected incidental costs businesses have to bear. After all, it’s hard to foresee when there might be port congestion or predict when the weather may become unfavorable, causing delays and eventually leading to demurrage or detention.
However, unfortunately, demurrage and detention charges have been increasing over the years. For instance, the global average D&D rose by 39% for standard containers, while the charges almost doubled for about 20 distribution centers, adding to the shipment costs. Also, at the end of 2020, customs brokers in the US, shippers, and members of coalition truckers reported that they paid over $150 million in unreasonable detention charges.
The primary reason behind the increasing demurrage incidents and charges is the lack of a reliable demurrage management software or system and poor visibility into the operations, be it ocean, air, or rail transport. However, if businesses opt for reliable demurrage software, they can minimize the damage caused by demurrage.
In this blog, we discuss how using demurrage management software and end-to-end freight management platforms can help reduce incidental costs. We also discuss the other benefits of using such platforms and how to choose the best demurrage management software.
Demurrage is an incidental cost that merchants have to bear for holding the container inside the terminal for longer than the agreed free days. Merchants usually have a certain time limit within which they aren’t charged a fee. But when that time limit exceeds, merchants become liable to pay.
Demurrage is not only annoying and unexpected but also costly. For instance, the average demurrage fee can range between $150-$400 per container per day. If a business is paying $150 per container and has ten containers sitting ducks for ten days, they’ll have to pay $15,000, which is an exorbitantly high amount to bear.
However, demurrage is not only a cost, and it’s an indication of how inefficiently managed the logistics infrastructure is. Demurrage often happens due to lack of visibility over the shipments, inappropriate documentation, delay at customs, and improper planning, indicating inefficient infrastructure and lack of end-to-end demurrage management software.
Based on the modes of transport, demurrage is of three types:
When shipments full of containers arrive at a port, they’re given a few hours or days of free time during which they can move their container without having to pay anything extra. However, due to any reason, if they fail to move the containers out of the terminal even after the free period has expired, merchants are liable to pay demurrage. And as the major transport mode used for global trade is ocean shipping, which accounts for a massive 90% of the total volume of goods traded, maximum demurrage happens with ocean freight.
As the name says, railroad demurrage or rail freight demurrage is the type of demurrage related to goods carried by rail. When privately owned railcars sit idle atr rail property for too long, or merchants use railroad-owned railcars beyond the free period, they are liable to pay a rail freight or rail road demurrage. This is a pretty uncommon scenario as rail accounts for just 7% of the total global freight transport.
The most uncommon type of demurrage is air freight demurrage, as air cargo accounts for a mere 0.5% of the globally traded volume but a massive 35% in terms of volume. Air freight demurrage happens when the merchant utilizes a storage facility at a cargo terminal for uncompanioned baggage, express parcels, goods, and import cargo, beyond the free period offered by the Airport authorities.
Demurrage management software is a software solution that helps businesses have control over incidental charges such as demurrage or detention. Such software solutions make it easier for businesses to instantly determine when the demurrage has happened so they can tighten the Last Mile operations accordingly to ensure timely deliveries.
Demurrage management software helps manage demurrage via
A demurrage management software offers complete visibility to businesses about the container location right from the source to the destination. This makes it easier to track the container location and effectively predict demurrage or detention.
Demurrage management software solutions consolidate all the container data at one location, making it easier for businesses to manage and draw useful insights from the same. Also, businesses can calculate the real-time monetary impact of demurrage and detention and determine which region is costing them the most.
Demurrage management software sends alerts to businesses, updating them about when the last free day is approaching. This way, businesses can expedite the process of moving the container to save detention and demurrage charges.
Here are some features to help compare demurrage management software and end-to-end freight management solution and determine which one’s better:
Demurrage management software solutions are majorly about informing the shippers that demurrage is either about to happen or has happened, not helping to a great extent. On the other hand, end-to-end freight management solutions offer businesses the ability to control costs at all levels. For instance, with end-to-end management tools, businesses can effectively plan the journey after demurrage and optimize the Last-Mile operations ensuring timely deliveries and the least possible financial loss.
End-to-end freight management platforms offer pretty useful insights to businesses that can altogether reduce the chances of demurrage to negligible. For instance, businesses can compare different carriers based on their previous performance, i.e., how frequently they’ve been associated with demurrage. This way, businesses can choose the carriers with the least risk of demurrage and minimize the risk of this incidental cost right from the beginning.
Another important feature that demurrage management software lack is unified collaboration, because of which stakeholders are unable to communicate, making it hard for them to deal with demurrage.
However, end-to-end freight management platforms allow all stakeholders to communicate and collaborate using a single dashboard. Moreover, they can handle billing, shipment tracking, invoicing, and documentation and manage all the operations from the same dashboard.
Smart end-to-end freight management platforms come with AI and ML capabilities enabling businesses to accurately predict unforeseen events or costs such as detention or demurrage. In case there’s a potential anomaly in the processes or order movement, the system will automatically alert the stakeholders, making it easier for them to handle the situation and minimize the damage.
End-to-end freight management platforms allow businesses to consolidate and track their container movements across all different transit points using a single screen. Businesses can share live updates and send alerts about delays and other notifications to consignees and daily shipment reports for better client engagement.
Shipsy’s AI-powered international logistics management solution offers smart functionalities and intelligent capabilities to control, manage and orchestrate highly efficient international logistics. The businesses can get predictive and automated alerts for incidental costs such as detention and demurrage and manage their shipments in a more efficient manner.
They can also ensure to reduce the spiraling of delays in the last mile and send automated ETA alerts to their end customers as per the real-time shipment movement status. These dynamic alerts also keep them informed and reduce the number of customer query calls as well.
With digital procurement, lower incidental charges, smart workflow automation, and automated carrier rankings, and renegotiations, businesses can save a lot of time and effort spent in freight procurement. They can also get route suggestions & filters, active support for multimodal shipments, real-time container tracking, and daily shipment reports for better control over the freight movements. Smarter compliance management, real-time visibility and reporting, and automated prompts & reminders offer granular visibility into the freight movement and help businesses unlock:
For more information or to get started with Shipsy’s smart international logistics management platform, please schedule a customized demo today!
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