Action Plan on How to Avoid Demurrage Fees!

Demurrage is a term used in the maritime shipping industry that refers to the delays shipping companies take when loading or unloading containers from vessels into or from terminal yards in ports. Each maritime port defines a time period in which the operation should take place and when that period is overrun the shipping company should pay a fee (if you want to know more about Demurrage, please read our Demurrage FAQ).

To be prepared to avoid any demurrage fees you should create an Action Plan with, at least, the following:

1 – Cargo readiness

A well succeed logistic operation starts with the cargo. Be sure that the cargo is ready at the warehouse to be loaded into a container.

2 – Well planned operation

A logistic operation is like a dance choreography: it will only work if all the players know their part and are in sync. Guarantee that all the involved parties are ready (trucks, ships, trains) and will work on schedule. A break in a supply chain will compromise the entire operation.

3 – Paperwork

Supply Chain and specifically logistic operations require paperwork to be in order.

From import licenses and dangerous goods documentation to commercial invoices, missing documentation can delay your operation. Verify all of your paper documentation beforehand.

4 – Calculate your demurrage risk

Assuming everything will work smoothly can turn out to be an unpleasant surprise. Proactively inquire about the ports you plan to use about demurrage fees and calculate the risk. Create scenarios with those fees and evaluate how much it would increase your costs.

5 – Negotiate fees and slots

Open communication channels with port authorities and try to negotiate demurrage fees and time slots. Not all delays are created equal and not all operations are transparent. Give the most information possible to all stakeholders and create open and trustful relationships with them.

6 – Real-time cooperation with all stakeholders

While managing an end-to-end logistic operation have a communication hub with all updated information about the real-time location of cargo, real-time location, and readiness of all stakeholders in the chain (trucks, trains, crane operators, etc.). If there’s a delay in one of the operations, let everybody know about it so all are prepared to recover from the delay.

7 – Have a plan B (proactively re-plan)

Design your logistic journey and pinpoint your critical path. For those potential critical situations design a backup plan. E.g.: have another truck in standby mode if needed.

8 – Know the ecosystem

Most of your logistic operation is part of an ecosystem that is not controlled by you. However, you should get too much information about it as possible. Learn the most about the maritime ports you will use, the local weather conditions and daylight hours, or the common customs and border issues. Do you need help with your Action plan? Sensefinity has a platform that monitors the location and conditions of cargo in all types of transportation. You can visualize in real-time where the cargo is and where all the stakeholders are. The platform integrates with external data such as weather and traffic conditions. All data can be shared with 3 rd party stakeholders in a Supply Chain Blockchain.

If you want to know more about how Sensefinity’s Demurrage Solution works, please visit sensefinity.com/demurrage