Shippers urged to proactively reduce demurrage

Bulk commodity platform, Voyager, says that a dramatic surge in port congestion and associated supply chain disruptions have led to longer waiting times and higher demurrage costs.

The issue is particularly severe in the bulk shipping sector, where demurrage costs can exceed 20% of the total freight cost for a voyage.

“However, demurrage doesn’t have to be a substantial burden on a company’s resources,” said Voyager co-founder and chief executive Matthew Costello.

“By implementing three key best practices, companies can significantly reduce the cost of demurrage and streamline their operations.”

Voyager says companies should estimate and analyse demurrage in real-time, automate their statement of fact (SoF) data processing and logically analyse their charter parties.

According to Voyager, many businesses make the mistake of calculating laytime and estimating demurrage claims only after they receive a claim from the shipowner – leaving no room for adjustment.

Instead, companies should take a proactive stance by estimating and analysing demurrage immediately after the first load port to give them a real-time assessment of their demurrage risk at every stage.

By taking into account historical factors such as waiting times, congestion and lineups, operators can gain a realistic estimate of the demurrage risk for the entire voyage. These costs can then be allocated to profit-and loss-statements accurately and any claim can be anticipated in advance.

Voyager also recommends that companies digitise all their SoF events data to provide granular insight throughout the loading and discharging process and urges companies to connect charter party agreements to demurrage logic.

“Demurrage costs due to inefficiencies eventually get passed on to the customers, creating a situation where no one wins,” said Voyager co-founder and chief operating officer Bret Smart.

“Ultimately, automating document processing and laytime calculations can free up valuable time for demurrage teams, with up to 50% of time savings.”