Railroad Proud: Demurrage – Red Flag or Indicator of Opportunity?
One of my best rail career assignments was on the demurrage team. As an industry, we truly believe in the value of the dwell indicator.
So why is demurrage one of the most criticized and misunderstood tools in railroading?
As with so many well-intentioned programs, a lack of clarity in cause and correction can create frustration. Here is how demurrage can move from the flag of pain to the spotlight of opportunity.
One of my best rail career assignments was on the demurrage team. As an industry, we truly believe in the value of the dwell indicator.
So why is demurrage one of the most criticized and misunderstood tools in railroading?
As with so many well-intentioned programs, a lack of clarity in cause and correction can create frustration. Here is how demurrage can move from the flag of pain to the spotlight of opportunity.
In my years on the railroad, I heard shippers’ frustration about demurrage loud and clear.
Having worked on the demurrage team, I understood both the rules and the intent.
At our railroad, demurrage wasn’t a profit center. Success meant:
1. Accurate billing/Timely Bill to Collect Cycle
2. Reduced customer time
3. Reduced billing overall
Each month, senior leaders reviewed “dwell” across the network, not just at customer
facilities, but everywhere on the system where delays occurred. The mission was simple:
improve cycle time and remove obstacles.
When cycle time improves, everyone wins. The same fleet moves more loads; the same
assets carry more payload. Our demurrage system was fair and understandable, with the
proper carrier/shipper communications and engagement. Some private-fleet shippers
even asked us how to create their own demurrage programs to speed unloading at their
customers’ facilities and turn their fleets faster.
And yet, many shippers didn’t see demurrage as a shared benefit. They viewed it as a
punitive system that did not capture all the factors causing “bunching” in car flows. Even
with allowances for railroad-caused delays, untangling the causes is challenging.
If you’re feeling the pain of demurrage, here are four ways to take control:
1. Know Your Network
Map it. Measure it. Understand how freight moves, both in theory/standards and reality. Don’t rely solely on carrier alerts, as they are too slow to mitigate downstream problems proactively. If you lack staff for daily monitoring, invest in tools that give real-time visibility and early warning.
2. Know Your Fleet
Match fleet size to your true capacity. Adding cars to a slow cycle only compounds the problem. Build redundancy: shift some volume to other modes, stage cars on private track, or negotiate service-design-driven demurrage mitigation.
3. Know Your Bottlenecks
Demurrage signals a choke point in transit, frequency, or facility design. Engage carriers and partners to remove or expand the constraints. Explore capital investment agreements with temporary demurrage relief during improvements.
4. Know the Experts
With the right tools, you can:
• Identify and address bottlenecks
• Smooth inbound flows
• Negotiate cost-sharing for capacity expansions
• Plan for and reduce demurrage expense
How PraxiChain Helps Shippers Mitigate Demurrage
At PraxiChain, our team turns demurrage from a penalty into a performance driver. With expertise in demurrage rules and mitigation, fleet management, and monitoring systems, we deliver clear data and actionable strategies. Let us partner with you to optimize your assets. Railroad Proud. Shipper Smart.
For assistance, contact us.
