4 Strategies to Reduce Rail Demurrage Costs

For 3PLs and shippers, demurrage fees are common and a time-consuming headache to dispute. Demurrage fines are per-day fees that railroads charge on cars or containers that are detained beyond the allowable free time.

Typically, the responsibility for paying demurrage fees is allocated to either the shipper or the 3PL, depending on the terms of their contract. By following these strategies to avoid demurrage fines, 3PLs can go a long way to minimize costs and improve rail efficiencies for their customers:

Adjusting Work Hours

Weather, crossing delays, hazardous material shipments, mechanical difficulties, and derailment are among the types of rail delays.

Align employee work hours to the rail carrier’s schedule and stay flexible to accommodate the inevitable inconsistencies in service times. The number of rail cars and the type of business—whether linehaul or switch—will also determine the priority and level of service you receive.

All of these factors make aligning work hours according to the carrier’s operations hit or miss. Make educated assumptions around the railroad’s posted timetable and recent service history. Schedule workers around time windows, such as four-hour windows to allow for variability.

Scheduling Overtime

Optimize your overtime and staffing levels so cars can be offloaded promptly, scheduling workers during overnights and weekends if needed. Unless by special arrangement with their customer, 3PLs will often cover the cost of overtime for their workers without passing on these costs.

However, proper scheduling of labor doesn’t have to come at the expense of margins. Schedule staff in advance for weekend work without overtime such as by calling in those who won’t accrue overtime for the week (they have missed a day, etc.). Or, use other labor planning strategies like adjusting staffing levels to meet known peaks where appropriate.

Consistent Communication

Be as consistent as possible with your communications and proactive with the rail carrier to prevent delays and misunderstandings.

The majority of our communications with railroads is via email, within the carrier’s portal with their customer service teams, and occasional phone calls with local switch crews. Unfortunately today in the rail industry, shipment volumes speak louder than relationships, and having more volume helps you to get priority on the schedule.

Detailed Documentation

Rail carriers only maintain records for 30 days in their systems, and demurrage bills may be received after 30 days. Once incurred, you only have five days to dispute a demurrage fee. Therefore, it’s critical to keep comprehensive records of all service transactions and associated communication with the carrier to support disputes. From a recent analysis across three of our Texas rail-served warehouses, WSI averaged a 60% success rate.

Keep digital records of all waybills and service confirmations, such as when the railroad releases cars. Demurrage fees will be outlined by car on waybills and designated as AP, CP, or accrued demurrage.

As these strategies show, reducing demurrage fees requires careful planning, flexibility of operations, and detailed tracking. The bottom line is a win-win for the customer and the 3PL.