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Are Demurrage Fees a Sign of Supply Chain Deficiency?

When promoting our yard management and dock scheduling systems, I always keep an ear open for those who admit to paying trailer demurrage fees. It’s a clear sign of operational deficiency which our solutions should be able to eliminate, right? I raised the question recently in a LinkedIn group discussion and received some interesting comments.

I initiated the group discussion after a manufacturer admitted to being revolted with the knowledge that they paid $16,000 USD in demurrage fees in January 2014. It was this person’s opinion (which I shared) that they clearly needed to improve their process and planning, all of which will be assisted by one of our solutions. Will this change in culture, process and visibility eliminate the demurrage fees?

The comments which followed my posting were unanimous; demurrage fees cannot be expected to disappear. As one participant suggested, they exist because there aren’t enough containers to go around. Okay, but I ventured that there is also an accountability factor – to the owners of the containers. Does your operation know at any given time what the actual or potential demurrage costs of all the trailers are in your yard? Are you certain that when you unload a trailer there isn’t an alternative trailer in the yard, containing the same type of goods, that is incurring a higher level of detention? One person commented that these fees should have their own expense category because if they are not tracked properly, they can throw out your profitability rapidly. Agreed!

Another participant indicated that at $50-$75 USD per day, demurrage fees can be a wise decision when you need to ease the flow of goods into a factory. As mentioned earlier, the cost might be justified but are we doing everything possible to avoid it?

For some operations, completely eliminating demurrage fees may be utopic and thus a necessary part of doing business. However, they may, in specific circumstances, be a wise choice (the least expensive option in a bad situation). All agree that everyone should track them attentively and monitor the trends. Demurrage fees continue to be an excellent indicator of operational deficiency, but don’t expect perfection. Of course, you won’t know this if you don’t track them.

 

For more information about how C3 Solutions can help you track and reduce your demurrage fees, request a free live demonstration.

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