Delays in freight transportation are not always avoidable and sometimes they do lead to high additional costs. Disruptions to the unloading and collection of containers in the port and delays on the subsequent journey can result in significant surcharges. In our latest article on the blog, we explain the benefits of demurrage and detention management and discuss how it helps to reduce demurrage times, as well as the over-utilization of storage and freight capacity in order to avoid unnecessary charges.
Demurrage and detention – high costs due to delayed processes
Freight forwarders that seek to organize worldwide sea transports for their customers in the Freight Forwarding sector usually conclude contracts with shipping companies for the provision of empty containers. These are available to the freight forwarders for an agreed period of time and must be returned on time after unloading. And yet, the reality of this process can look quite differently: Time and again, events occur that cause the deadlines to be exceeded and thus create additional costs. The terms demurrage and detention refer to the potentially high fees that are incurred when freight containers are left at the port or in warehouses outside the scheduled time frame. The two overstay fees differ as follows:
Demurrage: Demurrage is tied to an agreed time frame that is specified in the freight contract. If a container is not collected from the port or warehouse after gate-in within the demurrage-free period (this period may vary depending on the country of destination), demurrage charges are incurred. The latter are charged per container/day and can vary depending on the location. The charges are intended to promote the speedy movement of freight containers so that they do not unnecessarily block the processes and spaces in the port or warehouse. Delays in unloading or collection can be caused by weather events, logistical bottlenecks, payment delays on the part of the recipient or customs problems during import, for example.
Detention: In the contract for sea transportation, a time window is defined between the shipper, the shipping company and the consignee within which a container must be returned to the shipping company/owner after it has been unloaded at the port. The duration of the on-carriage is usually measured in days. Detention charges are incurred if the container is not returned on time by the recipient after the gate-out. These are intended to cover the costs of unauthorized use and further delays along the supply chain. The detention surcharges are usually high and are intended to motivate to adhere to processes and time slots – this way, the ordered goods arrive at the customer’s premises on time and the containers are quickly available for further use.
Demurrage therefore refers to the agreed period before the container is transported from the terminal and detention refers to the period after transportation until it is returned to the shipping company or the owner of the container.
D&D management for transparent agreements, smooth processes and lower fees
To avoid such additional costs, demurrage and detention management (D&D management) can assist: It helps reduce demurrage and over-utilization of warehouse and freight capacity by creating efficient pick-up and delivery schedules and monitoring them in real time. At the same time, it promotes close and transparent coordination between transport companies, freight forwarders, ports and recipients so that potential delays can be quickly identified and necessary countermeasures taken. This also includes the establishment of monitoring or early warning systems that are activated as soon as discrepancies occur in the documentation of the processes. Hermes International offers such a D&D alert via its SCM tool: Customers are automatically informed as soon as containers go into detention or demurrage and can then react directly in the system to initiate appropriate measures.
After all, the punctual unloading and collection of freight containers has a direct impact on the rest of the supply chain: smooth processes in the port mean that the goods can be transported on time and ultimately reach the customer in accordance with the agreed delivery dates. In addition, containers that are quickly unloaded and returned do not block storage capacity. Instead, they are quickly available for the next transport.
In addition to the organizational aspects, D&D management can include important framework conditions that the parties involved agree on. For example, the duration of the on-carriage depends on various factors. Sufficient time should therefore be agreed in advance for the return of the containers in order to avoid high detention fees. It is also advisable to have the transport contract specify not only exactly when the demurrage and detention-free period begins and ends, but also how high the surcharges per day will be and who will need to pay them if the empty containers are returned late.
The advantages of D&D management at a glance:
- Effective use of resources by avoiding unused containers and blocked storage and port areas
- Cost savings by eliminating or reducing demurrage and detention costs
- Punctual deliveries by adhering to schedules when unloading and collecting containers
- Greater customer satisfaction thanks to the timely delivery of goods
- Greater transparency in processes and consequently improved communication and cooperation between supply chain partners
- Clear rules on when D&D fees are due and who needs to pay them in the event of delays.
Avoiding high additional costs with D&D management
Delays in the unloading or collection of containers can hinder the entire supply chain process. As a result, high charges are incurred via detention and demurrage when deadlines associated with the entry and exit of containers are not met. With a well thought-out D&D management, companies can successfully counteract such misplanning and expensive surcharges: it minimizes the risk of operational disruptions and financial losses, helps to meet delivery deadlines and strengthens customers’ trust in the company.
Due to its strategic and financial implications, demurrage and detention management is crucial for smooth operations along complex, international supply chains and plays a key role in logistical efficiency: After all, excessive D&D charges can significantly increase the overall cost of transporting goods. It is therefore important to manage the containers’ utilization periods efficiently from the outset.