About Demurrage

Demurrage functionality can be used to review related charges before paying settlement invoices. You can run a report, bi-weekly or monthly, that displays charges. Proactively, you could run it daily or weekly to see what charges are accruing.

Demurrage is the term for fees that are charged by a carrier to a customer for the use of assets beyond a contracted free time for loading and unloading. The concept of a daily charge or "per diem" is an industry standard method to share the cost of ownership or equipment while being used by a customer or carrier other than the owner of the equipment. This method of sharing costs was the basis for "interchange rules" that allowed the use of one carrier’s equipment for a trip that spanned multiple carriers. This allowed cargo to be loaded at a shipper and unloaded at the consignee instead of being unloaded and reloaded at every junction point. The rate that the carriers charge each other is quite different from the rates that the carriers charge the customers. A carrier who is "renting" equipment from another carrier will charge demurrage to customers in the same manner that they will charge customers for the use of their own equipment.

For example, a carrier delivers a railroad car to be unloaded and places it on-site. They give you a day at no charge to unload the equipment. If you need more time, you are tying up their equipment and it is not available for their use. They charge you a per diem or rental charge until you unload it, let them know you are finished and release the rail car for pickup. These charges are handled separately from shipping charges. They are not calculated until the car is released since when it will be released is uncertain until it is released. In this case, the charges start the day after they deliver the rail car and end when you notify them to pick it up.

In order to meet these business needs, OTM has the following high level capabilities. See Demurrage Process Flow for more details.

• Capture Demurrage Transaction (Equipment Movement Record) based on events (for example, CLM/EDI322 etc)
• Calculate Demurrage Charges
• Chargeable Days (Debit and Credit Days)
• Calculate Charges for the chargeable days
• Interim report to manage resources that are accruing charges.
• Financial report for monthly settlement of completed demurrage transactions

Actual transactions are event driven. You can define which event starts the demurrage clock, and which event ends the demurrage clock. These events are captured using the Tracking Event manager.

Sample Flow of Events

Some events start or end demurrage, others are supporting events. Additionally, you can add your own. Here is a simple but typical flow of demurrage events. You can set it up to suit your business requirements. You need to define events that start and end the demurrage clock.

• Constructive Placement (Y): The resource was placed outside of the shipper or consignee's facility because of an inability to deliver the resource. This could be because of a closed gate, or a facility with no physical capacity at the time to handle the resource. Normally, if constructive placement is involved, it starts the demurrage clock.
• Ordered In: The shipper has placed the order for the resource. This could also start the demurrage clock, if used.
• At Destination (D): Arrival message at destination location
• Actual Placement (Z): The resource was physically delivered to the shipper or consignee and the carrier leaves control of the resource. If there is no constructive Placement event, the Actual Event could be used to start the demurrage clock.
• Notify (NT): This is the standard notification process. Generally, only used for inter-modal. A consignee may be notified to pick up the equipment from the carrier.
• Ordered Out: The shipper or consignee notifies the carrier that the resource is defective or dirty.
• Released (W): The shipper or consignee notifies the carrier that the resource (either loaded or empty) is ready for pick-up. This generally stops the demurrage clock.
• Pulled (X): The resource is physically removed from the facility of the shipper or consignee. The clock usually stops when released. If so, this is extra information for the records indicating when the equipment was removed from the site, but not involved with calculating demurrage charges. If you do not receive a Released message, the Pulled event can be used to stop the demurrage clock.