Who’s Responsible for Demurrage? Addressing the Costly Blind Spot in Cargo Operations

Having seen firsthand how costly demurrage can be and why it frequently slips through the cracks in cargo-owning organizations, Jean Paul’s deep knowledge of maritime law, contract terms, and operational challenges offers valuable insights into why demurrage remains an unmanaged expense. His experience as a consultant and educator allows him to share practical approaches that companies can use to bring demurrage under control and improve operational efficiency. 

Jean Paul highlights that this perception stems from demurrage cutting across organizational silos, touching procurement, logistics, legal, and finance without a clear owner. Fragmented ownership and a lack of coordinated efforts result in limited accountability, leaving demurrage as a reactive issue rather than one that’s proactively managed. 

Common Misconceptions About Demurrage 

Jean Paul highlights some prevalent myths: 

• Demurrage Can’t Be Budgeted: While unpredictable, proactive planning and process improvements can significantly mitigate demurrage risks. 

• Demurrage Costs Are Minimal: On the contrary, overlooked demurrage charges can erode margins and even jeopardize deals. 

• Demurrage Only Affects Shipping: Often, its impact extends to sales agreements, influencing profitability and relationships. 

The Impact of Neglected Demurrage 

When demurrage isn’t effectively managed, the bottom line suffers. Jean Paul provides examples where misaligned operations between procurement and logistics have turned profitable deals into losses. Neglecting port congestion, storage capacity, or even seasonal weather can result in delays that ripple across the supply chain, tying up working capital and straining partnerships.  

Who Should Manage Demurrage? 

Jean Paul emphasizes the need for clear ownership: 

• A dedicated role or team within the supply chain or logistics department. 

• Cross-department collaboration to monitor contracts, manage risks, and align stakeholders.

• Ownership ensures accountability and fosters a proactive approach to minimizing delays and disputes. 

Strategies to Reduce Demurrage 

Jean Paul outlines several strategies for effective demurrage management: 

• Improved Communication: Foster collaboration between all parties in the shipping process. 

• Monitoring KPIs: Track port congestion, weather conditions, and storage capacities in real time. 

• Contract Clarity: Negotiate precise laytime and demurrage terms. 

• Staff Training: Equip teams with the knowledge to handle laytime proactively. 

• Technology Integration: Use AI-driven tools and real-time analytics to anticipate delays and optimize decision-making. 

Emerging Trends in Demurrage Management 

Digital platforms are transforming demurrage management. Tools for visualizing and tracking shipments, coupled with advanced data analytics, help predict delays and optimize laytime efficiency. Jean Paul notes that AI-driven solutions are on the horizon, promising even greater precision in managing complex trade lanes. 

Advice for Companies Struggling with Demurrage 

Jean Paul advises companies to start with a root-cause analysis, identify bottlenecks, and assign clear ownership. By leveraging automated systems, renegotiating ambiguous contract terms, and embedding demurrage awareness into the organizational culture, companies can reduce costs and unlock new value. 

Turning Demurrage into an Opportunity 

Managed correctly, demurrage doesn’t just save costs—it creates value. By optimizing operations and fostering stronger partnerships, companies can enhance their reputation, secure better service agreements, and gain a competitive edge in the market. 

To gain more insights from Jean Paul, follow him on LinkedIn or visit his website for more information, where he regularly shares valuable knowledge and updates on industry trends and best practices.