In recent years per diem fees in logistics have been a huge pain point for shippers. Per diem charges, alongside demurrage and detention fees, exploded during the COVID era as containers were left stranded in terminals for too long because of pandemic-related restrictions and bottlenecks.
Take the Los Angeles/Long Beach port in 2022, where 103 containers were left waiting at anchor. Such delays meant shipping companies started receiving invoices for demurrage and per diem fees six months later. These fees were often forwarded to shippers. The result? It was a costly mess, which saw late charges amount to tens of millions of dollars.
Thankfully, according to Container xChange’s annual Demurrage and Detention Charges benchmark report 2023, late fees have dropped by as much as 25% since 2022. However, per diem, demurrage and detention fees can quickly rack up again. Yet, it is possible to mitigate these fees by understanding them and implementing strategies to combat them.
What are Per Diem Charges in Shipping?
When you hire a container from a shipping company, they tend to sweeten the lease by offering what's known as free time. This means shippers get a set number of days to use a container without extra charges.
If a container is not returned within the allotted free time, the shipping company will add per diem charges to 'incentivize' shippers to return them on time.
Per diem charges apply per container for every day that cargo is not collected (in the case of demurrage fees) or for each day that containers are not returned (in the case of detention fees).
Per Diem Charges in Logistics: Low Performance Bears a High Cost
A poor-performing supply chain is one of the biggest contributors to increased per diem charges. A subpar supply chain can impact per diem costs by way of:
- Delayed shipments
- Unpredictable inventory management
- Inefficient warehousing
- Communication breakdown
- Lack of visibility
Optimizing supply chains for improved performance will go a long way toward helping shippers avoid costly per diem fees.
With Operating Costs on the Rise, Shippers Turn to Technology to Mitigate Per Diem Charges
With operating costs rising, avoiding per diem charges is crucial for shippers in the fight against:
- Increasingly strained budgets
- Reduced profitability
- Delayed shipments
That's why more shippers are turning to technology to combat per diem charges. Specifically, tech is being used to implement two key strategies to reduce costly per diem fees:
Strategy 1: Efficient Inventory Management
Across the shipping industry, tech is transforming inventory management by providing real-time visibility, predictive analytics, and automated reordering. This ensures accurate demand forecasting, preventing stockouts and overstocking, resulting in:
- Optimized inventory levels
- Streamlined order processing and fulfillment
- Reduced storage duration
Strategy 2: Effective Supply Chain Planning
Similar to inventory management, technology is boosting supply chain planning by providing real-time visibility, predictive analytics, and collaborative platforms, resulting in:
- Enhanced forecasting accuracy
- Improved transportation coordination
- Reduced transit times
Implementing Advanced Tracking Solutions
Shippers investing in advanced tracking technologies enhance their competitive advantage by minimizing delays and reducing per diem costs. Advanced tracking solutions offer unparalleled amounts of data in real-time that help to:
- Track container movements and dwell times
- Streamline processes to reduce delays
- Optimize shipping routes
Per Diem Charges in Shipping FAQs
Per diem costs have many impact points in logistics, each of which significantly influences overall cost structures and the efficiency of shipping operations. With this in mind, here are 3 FAQs answered about per diem charges to help better understand them.
How are per diem charges calculated?
Per diem charges are often calculated by multiplying the daily rate set by a shipping line or container provider by the number of days a container is held beyond the free days.
Are per diem charges on the rise?
Per diem charges can fluctuate based on the factors that influence supply and demand dynamics in the shipping industry. According to recent research done by Container xChange, per diem charges are dropping by 25% year-on-year.
What’s the difference between per diem charges & demurrage/detention?
Minimize Per Diem Costs with VIZION's Container Tracking API
It's evident that real-time visibility is key to keeping per diem costs down. This stretches to complete container visibility as part of a broader strategy. VIZION's industry-leading real-time API overview solution allows for complete supply chain transparency and enables organizations to schedule and manage operations confidently, eliminating delays and the fees they cause.