Ocean carriers can use digitalisation to turn DnD challenges into an advantage

In the complex world of ocean freight, every container’s journey holds the potential for profit or loss. One of the most significant financial pain points affecting ocean cargo carriers worldwide is the maze-like landscape of Demurrage and Detention (DnD) agreements – agreements that outline the terms and conditions governing the use of shipping containers and the associated charges for exceeding specified time frames.

With DnDcharges evolving from container management tools into revenue streams for carriers, the landscape has become more challenging. Disputes have significantly increased, up by 7.1% in the US alone, leading to carriers paying stiff penalties.

These disputes often arise due to a lack of clear communication and uncertainty in contracts, fostering misunderstandings and inefficient issue resolution. As a result, logistical inefficiency has a tangible financial impact on ocean freight businesses, with complexities in accurately managing DnD leading to revenue leakage, disputes, and operational inefficiencies that dent the bottom line.

The scale of the impact of an ineffective DnD strategy is also far from trivial. Not only do carriers face financial implications from the delayed return of empty containers, but large clouds are often cast over customer relationships. The knock-on impact of DnD issues is a strained relationship with the customer for ocean carriers. Inevitably there is frequently a disconnect between what customers expect and what ocean carriers can reliably deliver. The result is invoice inaccuracy that often turns into disputes, billing errors, waivers and damaged reputations.

Of course, DnD challenges are not unknown to ocean carriers. A lack of information sharing is one key driver of disputes in DnD agreements. As you can imagine, if the shipper or consignee is not informed in advance of the vessel’s arrival time problems can arise through lack of preparation. But, in recent times we have seen improvements within the industry, with significant reductions in charges. According to Container xChange’s annual Demurrage and Detention Charges benchmark report, average DnD charges declined year-on-year by 25% in 2023. However, it is vital that carriers do not simply look to incrementally enhance existing systems to tackle DnD.

The industry is ready for a bigger, more systemic change – the replacement of outdated technology systems that are so prevalent in the industry and which restrict any company’s ability to innovate.

A highly complex, fragmented, and legacy technology landscape is holding the industry back during a time when digital transformation should be coming first. Outdated messaging standards, processes, and mindsets make it difficult for carriers to modernise their stacks, how they operate, and how they deliver value to customers. With customer expectations for digital experiences growing exponentially, legacy systems are not just an inconvenience – they have a major bearing on a company’s ability to differentiate, grow and innovate.

Ocean carriers that have the vision and tenacity to redesign their legacy systems and adopt a digital-first approach have the ability to completely transform their DnD agreements and turn them into a strategic advantage. Through digital technology, carriers can use advanced automation techniques to streamline DnD processes, reducing inaccuracies and delays.

For example, automation ensures that charges are calculated in real-time, providing a more efficient and error-free system. Track events affecting charges, such as when the free time clock stops and starts, means they can provide accurate assessments of fees, making customers feel secure in their purchasing decisions. Clear visibility into charges and efficient handling of DnD agreements will improve customer satisfaction and trust.

This high level of transparency into cost also benefits business decision-making. Digitalizing DnD processes means that stakeholders across the business have access to accurate information needed to make informed decisions, enabling faster and more efficient contract negotiations. Such negotiations can also be worked on collaboratively, as stakeholders can work remotely to review pricing contracts and instead of working into separate versions of the same contract. With the help of digital, there is no longer a need to work in silos or estimate pricing decisions incorrectly.

The time is ripe for ocean carriers to embrace digitalization in DnD agreements. By doing so, they can transcend the technological hurdles that have long plagued the industry, transforming challenges into strategic advantages. The shift is not just about technology, it’s about maximising profitability, driving efficiency, and creating a differentiated customer experience in an evolving digital world.
Source: By Vijayanambi Subramanian, Head of Products, Ocean Cargo at IBS Software for Hellenic Shipping News