Car ordering discipline and inbound pipeline management
Empty return strategies to get empties off your siding fast
How to dispute demurrage charges
Building a demurrage management system for your facility
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Understanding Demurrage
Prevention & Management
Part A
Understanding Demurrage
Know the rules, know the costs, know the trends
What Is Demurrage?
A daily charge applied when a shipper/receiver holds a railcar beyond allowed free time
Purpose: incentivize fast car turns so equipment stays in revenue service
Applies to BOTH loaded cars (waiting to be unloaded) and empty cars (waiting to return)
Clock starts when the railroad places the car at your facility (constructive placement counts too). 'Constructive placement': if your siding is full, the car is placed at a nearby yard — clock STILL starts
Free time is typically 24-48 hours (varies by railroad, commodity, and contract)
After free time expires, charges accrue per car per day — no exceptions
Demurrage has become the railroad industry's most controversial charge under PSR
Demurrage Rates: The Current Reality
Day 1-2 (After Free Time). $75-$150/day. This is your 'warning zone'. Many shippers eat these costs. At 50 cars/month this is $3,750-$7,500. Already enough to justify a process fix. Day 3-5. $150-$250/day. Escalating penalty rates kick in. Railroad wants these cars MOVING. This is where real money bleeds. Weather delays don't pause the clock. Day 6+. $200-$300+/day. Maximum penalty tier. Some railroads go higher. At $300/day x 10 cars = $3,000/day. Annual impact can exceed $100K easily.
How PSR Changed the Demurrage Game
Before PSR (Pre-2017). 48 hours free time was common. Railroad absorbed some delays as 'cost of service'. Demurrage rates lower and flatter. More flexibility on disputes. Yards held buffer inventory of cars. Service was slower but more forgiving. After PSR (Current). 24 hours free time is becoming standard. Every hour of dwell costs the railroad money. Rates up 71% industry-wide since 2017. Constructive placement aggressively applied. Fewer cars in system = less buffer. Railroad views YOUR siding as free storage.
The Real Cost of Demurrage (It's Worse Than You Think)
Direct costs: the daily charges on your invoice
Indirect costs: car shortages because your cars are sitting instead of cycling
Opportunity cost: if your 30-car fleet has 5 cars always in demurrage, you effectively have 25 cars
Fleet oversizing: many shippers lease 10-15% MORE cars to compensate for dwell — that's $80K-$180K/year
Customer impact: if you can't unload fast enough, deliveries back up downstream
Relationship damage: railroads track your dwell performance and it affects future negotiations
A mid-size shipper (200 cars/month) can easily spend $150K-$500K/year on avoidable demurrage
The fix is usually operational, not capital — faster loading/unloading processes
Part B
Prevention & Management
Practical strategies to cut demurrage 50-80%
Car Ordering Discipline
Rule #1: NEVER order more cars than your facility can handle in the next 48 hours
Match inbound orders to your ACTUAL loading/unloading capacity
Track your facility's throughput: cars per shift, cars per day, cars per week
Coordinate with your plant/warehouse: is the product ready? Is labor available?
Don't order 'just in case' — empty cars sitting on your siding burn demurrage too
If you need 10 cars/week, order 5 Monday and 5 Wednesday — not 10 on Monday
Stagger deliveries with the railroad — most will work with you on placement scheduling
Use the railroad's ETA tools to know EXACTLY when cars will arrive
Inbound Pipeline Management
Know what's coming BEFORE it arrives — real-time tracking is not optional
BNSF: myBNSF.com + Car Demurrage Management Tool (CDMT)
Set up automated alerts: car placed, car spotted, free time expiring
Maintain a rolling 7-day view: cars in transit, cars on your property, cars returning empty
The goal: zero surprises
If a car shows up and you didn't expect it, your process is broken
Fast Car Turn Strategies
Loading Optimization
Pre-stage product before car arrives
Multiple shift loading capability
Batch loading vs. one-at-a-time
Equipment maintenance: no breakdowns
Loading checklist for operators
Target: car loaded within 8-12 hours. 📥
Unloading Optimization
Know what's in every car before opening
Pre-position unloading equipment
QC inspection while unloading
Dedicated unloading crew/shift
Pneumatic unloading > gravity (speed)
Target: car empty within 8-12 hours. 🚛
Empty Return
Release empties SAME DAY as unloading
Don't use your siding as empty storage
Notify railroad of release immediately
Clean cars before release if required
Bad-order inspection before releasing
Every day an empty sits = wasted money
Disputing Demurrage Charges
When You Have a Case. Railroad failed to place car on time (late spot). Railroad bunched multiple cars at once (your capacity was known). Weather event prevented loading/unloading (documented). Railroad error in billing or timing calculation. Car arrived damaged or contaminated (bad order). Track maintenance blocked access to your siding. Document EVERYTHING with timestamps. When You Don't. Your facility was simply too slow. You ordered more cars than you could handle. Labor shortage on your end. Your equipment broke down. 'We didn't know the car was there' is not a defense. Weekends and holidays count. Constructive placement is legally valid.
Building a Demurrage Management System
STEP 1: Designate a demurrage coordinator (person responsible for car management)
STEP 2: Set up real-time tracking with EVERY railroad serving your facility
STEP 3: Create a daily car report: cars on property, free time remaining, status
STEP 4: Establish loading/unloading SLAs with your operations team (max hours per car)
STEP 5: Implement a traffic light system: Green (in free time), Yellow (< 12hrs left), Red (in demurrage)
STEP 6: Track monthly demurrage cost by root cause (late unload, bunching, empties, disputes)
STEP 7: Set reduction targets (month-over-month) and review at leadership level
STEP 8: Negotiate demurrage caps and credits in your railroad contract
Demurrage Checkpoint
✓ You understand what demurrage is and why it's gotten worse under PSR. ✓ You know current rate tiers and can estimate your annual demurrage exposure. ✓ You can implement car ordering discipline to prevent overbooking. ✓ You know how to use railroad tracking tools for pipeline management. ✓ You can identify legitimate vs. invalid demurrage disputes. ✓ You have a framework for building a demurrage management system.
📋 Practical Exercise: Demurrage Audit
Pull your facility's demurrage invoices for the past 90 days. 1
Total demurrage charges paid (loaded cars vs. empty cars). 2
Average days in demurrage per car. 3
Break down by root cause:. - Facility capacity exceeded (too many cars ordered). - Slow loading/unloading (process issue). - Empty return delays (empties sitting after unload). - Railroad bunching (multiple cars delivered at once). - Weather or force majeure events. 4
Calculate: if you reduced average dwell by 1 day, how much would you save?. 5
Identify your top 3 reduction opportunities and assign owners. 6
Set a 90-day reduction target (e.g., cut demurrage 30%)
Demurrage. Daily charge for holding a railcar beyond free time. Free Time. Hours allowed to load/unload before demurrage starts (24-48 hrs). Constructive Placement. Car is 'placed' for billing even if held at a nearby yard. Car Dwell. Total time a car spends at a facility (loading + waiting + unloading). Bunching. When railroad delivers multiple cars at once, exceeding facility capacity. Release. Notification to railroad that a car is empty and ready for pickup. Bad Order. Railcar needing repair; should not incur demurrage while being fixed. Demurrage Credit. Offset earned for fast car turns (negotiated in some contracts). Pipeline Management. Tracking all cars in transit, on property, and returning empty.
Key Terms (continued)
BNSF's Car Demurrage Management Tool (online tracking)
Norfolk Southern's customer portal for car tracking
CSX's customer portal for shipment and car management
Spot / Spotting
When the railroad places (spots) a car at your siding
Pull / Pickup
When the railroad picks up a loaded or empty car from your siding
Traffic Light System
Green/Yellow/Red visual tracking of free time remaining
One complete cycle: load, ship, unload, return — goal: minimize time
Review Questions
1. What is constructive placement and why is it controversial?. 2. How have demurrage rates changed since the adoption of PSR?. 3. Your facility can unload 8 cars/day. You order 12 cars for Monday. What happens?. 4. Name 3 situations where a demurrage dispute would be valid. 5. What is the hidden cost of demurrage beyond the daily charge?. 6. How does a demurrage management system's 'traffic light' system work?. 7. What should the demurrage coordinator do every morning?. 8. If you reduce average car dwell by 1 day across 200 cars/month, what's the annual savings at $150/day?.
Practical Assignment
Step 1: Audit your last 90 days of demurrage charges (or use sample data provided)
Step 2: Categorize every charge by root cause (facility, railroad, weather, process)
Step 3: Calculate your facility's actual loading/unloading throughput (cars per day)
Step 4: Compare throughput to your car ordering pattern — are you over-ordering?
Step 5: Set up tracking on at least one railroad portal (myBNSF, ShipCSX, AccessNS)
Step 6: Design a one-page daily car status report template for your facility
Step 7: Calculate: if demurrage dropped 40%, what's your annual savings?
Step 8: Present findings and reduction plan to your facility management
Key Takeaways
✅ Demurrage is the #1 avoidable cost in rail shipping — most shippers just pay it. ✅ PSR made it worse: less free time, higher rates, aggressive constructive placement. ✅ Car ordering discipline is your first line of defense — never order more than you can handle. ✅ Pipeline management eliminates surprises — know what's coming before it arrives. ✅ Same-day empty release should be your standard operating procedure. ✅ Track demurrage by root cause — you can't fix what you don't measure. ✅ Dispute every charge you have a legitimate case for — document everything. ✅ A 40% reduction in demurrage typically saves $50K-$200K/year for mid-size shippers.
