In Nigeria, the quaysides are stacked with abandoned shipments which have racked up more in demurrage than their free onboard value, because of dilapidated handling equipment, inefficient processing and corrupt officials demanding bribes.<\/p>\n
In the US, forwarder Uti said in a quarterly report that management procedures for dealing with demurrage costs were centralised, \u201cbut without local control in place, responsibility disappeared and this, magnified by the problems on the US West Coast ports, led to demurrage costing us $5m-6m in fiscal year 2015\u201d.<\/p>\n
One is an extreme example and the other unusual, but illustrate the increased attention being paid to demurrage and its application.<\/p>\n
The prevalence of 14,000+ teu vessels is one of the main reasons, industry observers say, and is leading to a new approach by shipping lines in their dynamics of negotiations with terminal operators and port authorities. The realisation is that scheduling and supply chain efficiency have to be rethought and take on a new dimension.<\/p>\n
The end users, shippers, are said to be broadening contract negotiations to wring better demurrage concessions, particularly since overcapacity on trade lanes is a fact of life that plays into their hands. Anecdotes abound of terminal operators turning to demurrage and other fees to extend their cash flows, but indications are that they know this will backfire and lead to a loss of customers.<\/p>\n
Industry observers emphasise that congestion and demurrage are related and if terminals start applying penalties rigidly, they are tacitly acknowledging that their processing systems are weak. Terminals\u2019 prime business worry is avoiding congestion.<\/p>\n<\/p>\n
Applied solutions<\/strong> <\/p>\n Logistics and supply chain support and solutions company Cirrus Logistics says shippers can save millions on demurrage through the intelligent use of Applied Modelling Algorithms to plan product and vessel scheduling. Says Simon Shore, managing director of the UK-based company: \u201cMany organisations don\u2019t fully appreciate the challenge of scheduling. It\u2019s a classic mathematical problem with an enormous number of permutations. One of the observations we have made is that the industry spends a huge amount on automation in the yard without considering the time the vessel spends in port \u2013 not just at berth but the time spent anchored outside the port, which can be as much as 50% of the total time. It is that 50% we are concentrating on and can reduce.<\/p>\n \u201cThe prevailing thinking is \u2018We have to get to the port early otherwise we won\u2019t be serviced on time.\u2019 Demurrage is seen as a fact of life but in fact, we can reduce the bill by 12%-20%, depending on how efficient the supply chain is.<\/p>\n \u201cManufacturing has adopted Just In Time,\u201d he continues, \u201cand the maritime industry needs to do the same. The benefits gained will be to everyone, and will not just go into one person\u2019s pocket.\u201d<\/p>\n The company\u2019s SEABERTH scheduling system, which uses Gantt charts, has found particular success in oil and gas shipping. \u201cThis industry involves only a few players, whereas more parties are involved in container shipping \u2013 but the principles are the same.\u201d<\/p>\n What has also become clear to the industry is that shipping lines and terminal operators need to work more closely together. Terminal operating system provider Navis says: \u201cRemoving short term thinking and taking on a paradigm shift in thinking about carrier-terminal collaboration can reduce port stay by between 20%-30%.”<\/p>\n<\/p>\n Thought shift<\/strong> <\/p>\n Drewry also says the industry has to change its thinking, because of increased vessel sizes and the establishment of the shipping alliances, otherwise congestion will get worse. \u201cStreamlining and unifying terminal facilities, ownership and usage by alliances is not a straightforward task,\u201d senior analyst Neil Davidson commented in the Navisworld event. \u201cThis is especially challenging on the US West Coast with its history of each carrier having its own terminal in each main port. The need for enhanced infrastructure and equipment is across the board and not just an issue for ports handling the world\u2019s biggest ships, because ship sizes are increasing across the board.\u201d<\/p>\n The big question, Mr Davidson says, is agreeing on who will pay for this extra expenditure.<\/p>\n Controversy and suspicion over demurrage is more prevalent in the US than Europe and elsewhere, because of much greater involvement of the private sector.<\/p>\n The topic has become more heated in the US following the West Coast congestion crisis. The Federal Maritime Commission\u2019s investigation and report is seen as having resolved little, with the commission implying that no general action can be taken. Shipping lines (via the World Shipping Council) have taken a strong stand, saying that they cannot be singled out for causing delays and that there can be numerous reasons for disruptions. They caution the FMC against issuing a general edict on demurrage policy, implying that it could have dubious legal justification in the Shipping Act.<\/p>\n Anne Marie Kapell, vice president of the council, says: \u201cThe assessment of detention or demurrage charges by a particular carrier for a particular container will depend on the individual carrier\u2019s rules and contract terms. Similarly, requests for relief from those charges will depend on the particular circumstances of that shipment. These are commercial issues that have to be addressed by the parties as is the case with any issues relating to prices for services.\u201d<\/p>\n In support of the council\u2019s view, container lines have privately accused some shippers of treating yards in Southern California as \u201copen air warehouses”.<\/p>\n On the other hand, a coalition of more than 20 exporter and importer groups has complained formally to the FMC that they are undoubtedly being victimised for circumstances beyond their control.<\/p>\n The FMC is caught between a rock and a hard place and the industry realises that it has the means to solve the problem, not the central government.<\/p>\n<\/p>\n Demurrage concerns a joint issues Accusation and counter-accusation over demurrage has been put in perspective by Paul Bingham, vice president of EDR Group consultants. \u201dThe US port industry tradition of using container yards as warehouses is long-standing, going back to early days of containerisation where yard space was not at the premium it is today.<\/p>\n \u201cAs port terminal throughput volumes have increased and physical terminal space has not kept pace in the US, the dwell time and demurrage issue has become a point of contention, amplified by the shift to terminals operated by for-profit terminal operating companies instead of by carriers themselves or carrier-controlled terminal operating companies or not-for-profit public port authority terminals,\u201d says Mr Bingham.<\/p>\n But it could be difficult to change shippers\u2019 perceptions. \u201cWhen terminals become congested and shippers can\u2019t efficiently get access to their containers, shippers are understandably upset being charged demurrage in cases when they couldn\u2019t immediately get access to their container if they tried. That severe congestion access issue was relevant to only a very small minority of containers moved in the year, however. Many of the complaints of terminals being used as warehouses stem from the fact that this practice is made affordable for shippers if demurrage isn\u2019t charged consistently and offers of free time are not minimised.<\/p>\n \u201cFree time and demurrage can also be competitive non-pricing factors,\u201d continues Mr Bingham, \u201cand it is understandable that shippers try to take advantage of that when it suits them operationally and financially. As carriers are less frequently able to offer free time or demurrage themselves because they don\u2019t directly or indirectly control the terminal operations any more, they have less interest in providing for shipper container storage, especially when it costs them operational efficiency or money to the terminal operators.”<\/p>\n Carriers are also part of the problem. \u201cChanges to the policies are made more difficult when planning on the part of shippers is made harder due to poor schedule reliability. Shippers are justified in saying that if demurrage and free time don\u2019t take into account variance in vessel schedule performance, then they are being penalised for factors beyond their control. That means if carrier on-time performance was improved, shippers would have less basis to complain about tightened demurrage policies and enforcement,” says Mr Bingham. <\/p>\n<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":" Industry has the means but not the will to sort out demurrage, explains Martin Rushmere<\/p>\n","protected":false},"author":8,"featured_media":2152,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[38],"tags":[],"sponsor":[],"class_list":["post-2151","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-bulk-handling"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/posts\/2151","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/comments?post=2151"}],"version-history":[{"count":1,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/posts\/2151\/revisions"}],"predecessor-version":[{"id":2153,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/posts\/2151\/revisions\/2153"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/media\/2152"}],"wp:attachment":[{"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/media?parent=2151"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/categories?post=2151"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/tags?post=2151"},{"taxonomy":"sponsor","embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/sponsor?post=2151"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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