Managing ocean freight logistics has long been an expert-led service as it is a highly-specialized shipping method with its own unique set of challenges. The unprecedented level of disruption and upheaval during the ongoing COVID-19 pandemic has forever changed the supply chain. The increased need for imported goods from e-commerce sales and shipping orders has led to record-setting ocean freight rates.
With these high freight volumes come the issues of offsetting per diem charges of ocean containers and balancing profits vs. expenses for ocean freight. As of March 3, 2022, Drewry's "composite index decreased by 2.1% this week, but remains 81% higher than a year ago." Understanding the question of what are per diem charges are can help shippers better manage their loads, routes, and shipping schedules.
Defining Per Diem Charges in Ocean Freight
Per diem charges of ocean containers are special fees related to ocean freight and cargo transportation that directly correlate to costs and delays. It’s a fee that an ocean carrier charges to a shipper for each additional day a container remains away from the port for unloading. Essentially a port will allow -a certain number of days for a container to be unloaded and returned for reloading. Every day past that allotted time will result in a flat fee. So, for example, a container gets assigned a per diem fee of $100 per day that is three days late getting returned. The delay will cost the shipper an additional $300 along with any other expenses incurred.
Why Do Port and Terminal Operators Charge Per Diem?
The reason why per diem charges of ocean containers exist to help reduce backlogs and bottlenecks at ports. When shippers take longer than necessary to return cargo containers, it slows down the process of other shippers using them for their loads. This delay causes backlogs and significant congestion that can impact the entire supply chain. The per diem fees and surcharges are a way to force shippers to return containers sooner rather than later so the ports can keep the flow of loading and unloading running as smoothly as possible for supply chain managers.
What's the Difference Between Per Diem and Detention Costs?
While the per diem charges of ocean containers focus on encouraging shippers to return cargo containers as soon as possible, detention costs serve the same purpose but are related to equipment. The loading, unloading, and moving containers to different warehouses and loading centers often requires specialized equipment. When these pieces of equipment are not returned within the agreed-upon time frame, the shipper can incur another fee per day for each piece of equipment. These detention fees underscore the importance of container tracking and monitoring.
Tips to Avoid Per Diem Costs
Here are some ways to avoid per diem costs on regular ocean cargo shipments:
- Know real-time container location and status and communicate this information with customers and team members.
- Increase the use of dual transactions to return empty containers faster and reduce chances of per diem charges of ocean containers.
- Avoid overscheduling your trucks to eliminate the risk of missed returns due to slight and unavoidable delays that start a ripple effect.
- Integrate ocean carrier data streams within your TMS and ensure all team members have access to the information at any time.
- Know when containers are supposed to return to port and what each ocean container’s going rate for per diem charges are at that specific time.
- Implement automated tracking and monitoring services to notify about container delivery status changes in real-time.
- Work with reliable drivers and 3PLs to avoid frequent delays and issues with slow loading and unloading of cargo containers.
- Monitor per diem charges of ocean containers when they occur and look for practical ways to offset them and prevent them from recurring.
Understanding what are per diem charges and how to avoid them is critical for shippers to maintain practical and affordable shipping services. Improving ocean freight visibility and insight can help shippers avoid these standard fees and accessorial charges.
Gain Control Over Per Diem Charges With OpenTrack
Per diem charges of ocean containers are a necessary evil and simply reflect the ongoing recovery and struggle that is gripping the supply chain today about ocean container backlogs. Working alongside industry experts makes it easier for shippers to track and monitor per diem charges of ocean containers and keep expenses low and profits high. Contact OpenTrack today to learn more about managing shipping fees and keeping ocean freight transportation profitable for you and affordable for your customers.