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Demurrage: Making Smart Decisions to Minimize Costs

Demurrage fees are a significant expense for shippers that can cut into their profits. These fees are incurred when cargo exceeds the allowed free time to load or unload at a port, and they can add up quickly. However, by taking proactive steps and making smart decisions, shippers can avoid or minimize demurrage fees.

One way to avoid demurrage fees is to know in advance that you are going to incur them. While this may seem counterintuitive, it allows shippers to assess the situation and look for ways to mitigate the costs. For example, if a crane is taking longer than expected to repair, shippers may be able to exchange their position and go to a different port or take a different vessel. These decisions will have consequences that may impact demurrage fees, but they could also create value or prevent costs from being incurred in a smart way.

The after effect of demurrage

At this point in the maritime industry, demurrage fees are usually handled after the fact. This means that the process is reactive, and the focus is on dividing the costs or risks incurred rather than finding ways to prevent them. This approach is not ideal, as it can lead to additional costs and delays in the shipping process. Therefore, it is worth considering whether there are ways to make the demurrage process more proactive.

Become more proactive in preventing demurrage

One way to proactively prevent demurrage is by using real-time data and analytics to monitor the shipping process and identify potential delays or issues before they occur. This approach would allow shippers to take corrective action before the vessel leaves the port, thus reducing the risk of demurrage fees being incurred. For example, if a delay in cargo loading is identified, shippers can work with the port and vessel operators to find a solution and avoid the delay.

Another way to make the demurrage process more proactive is by involving all parties in the shipping process. This includes shippers, port operators, vessel operators, and other stakeholders. By working together and sharing information, parties can identify potential issues and find solutions that benefit everyone. This approach requires a collaborative mindset and a willingness to share information, but it can lead to significant cost savings and improved efficiency in the shipping process.

Furthermore, technology solutions such as blockchain and smart contracts can help to automate the demurrage process and make it more proactive. By using blockchain, all parties involved in the shipping process can have access to real-time data and documentation, reducing the risk of disputes and delays. Smart contracts can automate the demurrage calculation process, making it more efficient and reducing the likelihood of errors.

Teqplay is a strong supporter of digital solutions that allow maritime stakeholders to always be in control of their operations, and reduce costs and risks to a minimum. Demurrage is an important consideration for many maritime actors, and understanding what needs to be done to prevent incurring costs is undoubtedly crucial. Digitalization is the step that needs to be taken to achieve optimization of maritime activities, which will in turn save maritime actors time and money.

Mai Zaki | Account Manager at Teqplay

Passionate about #portcall, #supplychain, #optimization, #digitalinsights, and the #maritimeindustry.