Detention Fees vs. Demurrage Charges (and how to reduce both with dock scheduling)

Detention fees and demurrage charges are two dreaded terms in the logistics industry. This dynamic duo can eat into your margins. They are additional fees incurred due to using holding up containers or trailers beyond a specified period. These charges are a means through which shippers can ensure containers and trailers are cleared, offloaded, and returned promptly. According to an interim report of the Federal Maritime Commission, demurrage and detention charges rose sharply between 2014 and 2017, with increases as high as 90% in a single year. 

Defining Detention Fees and Demurrage Charges

What Are Detention Fees?

Detention fees refer to a penalty paid for holding a trailer beyond the period specified in the agreement contract. Detention fees are paid on a per diem basis. This means you pay a specified rate for every extra hour the trailer spends beyond the pre-agreed grace period. In some instances, the rates could be tiered, meaning the charge increases the longer the trailer stays with you beyond the agreed-upon appointment time.

What Are Demurrage Charges?

Demurrage charges are penalties paid for leaving a container at the port or terminal beyond the agreed free time. It applies before the container is picked up for delivery. Like detention fees, it is also paid on a per diem basis, and the rate can be incremental to discourage longer delays.

Key Differences Between Detention vs Demurrage

Detention and demurrage are closely related logistics fees. However, each only applies in different situations depending on the container's location. Both terms are tied a pre-agreed grace period during which a container or trailer can be held without penalty, either in a yard or at a port.

• Demurrage applies while the container is still at the port or terminal. If the cargo isn't picked up before the free time expires, storage fees begin to accrue.
  
  
• Detention is the fee charged by a carrier to a warehouse for their trailer being held in the yard for too long. Unloading may be taking too long or may not have begun at all.

Think of it this way: demurrage is like paying for overstaying in a parking garage, while detention is like getting fined for returning a rented trailer late.

It’s important to note that demurrage charges and detention fees are not mutually exclusive. This means incurring one doesn’t automatically mean you’re immune to the other. Without proper dock scheduling and management, you stand the risk of incurring both at different stages of the clearing and offloading process.

The Impact of Detention and Demurrage on Supply Chains

Supply chain workers are always looking to avoid detention and demurrage charges because their impact can be far-reaching. 

Financial Consequences

The most obvious impact of detention and demurrage is the financial consequence. Depending on the specified per diem rate and the number of days overdue, the cost could easily run into thousands of dollars. For instance, ports in Long Beach and Los Angeles charge as much as $173 and $197, respectively, for detention and demurrage on 20’ dry containers. Calculate this rate over two weeks, and the cost incurred runs into thousands. Detention fees can also be steep, with penalties ranging from $50–$100 per hour for truckload, and are often billed in 15-minute increments.

Operational Disruptions

Delays almost always go hand in hand with demurrage and detention. With delays come operational disruptions in the supply chain. Containers that sit longer than expected at the terminal or at the warehouse mean other shipments are held up. For demurrage, it means less space for new cargo to be offloaded at the port. For detention, it means carriers can’t send their drivers to their next appointments and warehouses have backups in their yards.

Long-term Effects on Business Relationships

Demurrage charges and detention fees are designed to serve as financial deterrents to ensure the productive use of shipping assets like containers and terminal space. When one party consistently incurs these charges, it can strain the working relationship. Logistics partners might become hesitant to work with clients who frequently face these issues. This is because idling containers can complicate their own operations and cash flow.

How Dock Scheduling Reduces Fees

Opendock’s online scheduling portal helps prevent delays that lead to demurrage and detention fees in several key ways.

Reducing Detention Fees

• Carrier-Led Scheduling: Carriers can book their own dock appointments online, which eliminates confusion and helps them arrive exactly when they're expected. This reduces idle time spent waiting for a dock to open up.
• Structured Appointment Windows: Facilities can move away from inefficient first-come, first-served systems. Scheduled time slots reduce dock congestion, which improves truck turnaround times and lowers the risk of detention penalties.
• Labor Alignment: Knowing exactly when trucks are arriving allows warehouse managers to allocate staff and equipment more effectively. Ultimately, this ensures faster loading/unloading and minimal downtime.

Reducing Demurrage Charges

• Advance Visibility into Dock Capacity: Opendock’s centralized scheduling system gives carriers and warehouse teams visibility into available appointment windows. This ensures containers can be picked up from the port and delivered without delay.
• Faster Scheduling Turnaround: Instead of spending hours coordinating over email or phone, you can book appointments online. Thus, the movement of goods from the port to the warehouse becomes quicker.

Testimonials of Companies that Reduced Fees with Dock Scheduling

Beverage Packer

Using Opendock, a beverage packer solved its dock congestion and high detention fees problem. Opendock’s carrier-led scheduling helped the company save $36,000 annually in company-wide detention fees. The company also saved 600 scheduling labor hours annually across all facilities and had 90% of appointments self-scheduled by carriers.

3PL Brand

A 3PL provider tackled unplanned truck arrivals, long wait times, and rising detention costs by switching to Opendock. Through carrier-led scheduling, the company saved $144,000 annually in detention fees, freed up 12,000 scheduling labor hours across all facilities, and now has 70% of appointments self-scheduled by carriers.

Ralph Moyle

Ralph Moyle Inc. replaced manual scheduling for 37 dock doors with Opendock, saving significant customer service labor hours. The platform’s reporting tools enhanced visibility into carrier punctuality and detention windows, thereby improving accountability. Opendock also sped up check-ins by creating a clear and structured handoff process that is less time-consuming.

Take Control of Detention and Demurrage with Smarter Scheduling

Detention fees and demurrage charges are large cost centers for many supply chains. These penalties can negatively impact operations and strain relationships with partners. Nonetheless, you can nip this problem in the bud and stop paying extra fees for delays by scheduling smarter. With dock scheduling tools like Opendock, you can bid farewell to detention fees.

Still paying hefty detention and demurrage fees?

Let us show you how Opendock can help lower your costs!