Truck detention is something that happens often in the logistics business – it’s common and often unavoidable. However, to make the most of your time and money, there are ways you can plan for detention and minimize detention fees.
Here, you’ll find an in-depth guide for trucking company owners like yourself who want to learn as much as they can about a strict and impactful policy in the trucking business – detention fees.
What Are Detention Fees and Rates?
A company’s detention rate or fee is not random – it’s based on how long it takes a shipper to load the truck before a driver can take it off to its next stop and what the value of that lost time is.
When a truck driver shows up at the loading or drop-off location, there’s an expected window of time that it will take to either load or unload the product onto the truck or into the warehouse. For example, two hours might be reasonable. This amount of time is usually pre-determined by the supplier, delivery destination, or logistics company.
If a driver is stuck waiting for three, four, or five hours instead of the initially agreed-upon two hours, that’s considered detention time. Detention time takes up any of the extra time required to finish loading a shipment or unloading one.
The minutes and seconds of detention matter. Think about it – when a trucker is behind on their route, the product won’t get delivered on time. Then, its stocking will be delayed, as will fulfillment, shipping, and delivery to the final consumer. This is all precious time that translates into lost dollars for all parties involved.
Detention rates or fees aim to cover the lost value of this time for trucking companies.
How to Calculate Your Detention Rate and Payments
Knowing what your detention rate is if your shipping gets delayed is important to help ensure you are financially covered in this case. Once you know this figure, you can easily add it to your invoices to make up for the financial losses caused by truck detention. Learning about truck detention will no longer feel like the end of the world – instead, you can respond quickly and appropriately knowing you’ll get compensated for this loss.
To figure out what your detention rates should be, you need to have a firm understanding of what your typical operating costs are. Operating costs will vary from company to company, but for most freight companies, this includes the cost of truck maintenance, fuel, tire maintenance, truck permits, salaries, and overhead costs such as warehouses, employee benefits, and liability insurance.
Once you’ve figured out a round number of your annual operating costs, it’s time to break it down further into smaller chunks that you can work with. First, divide that by the number of days a year that your operation is running. For logistics, that usually means 365 days a year, but this may vary. Once you’ve broken the figure down into a daily operational cost, go ahead and divide it once again by the hours per day your company is operating. Again, this very well may be a 24-hour operation for your company. So divide that number by 24 and you’ll have the hourly cost of operations for your business.
Each hour that your truck driver is held up due to truck detention, you’re losing that much money. Ideally, your detention rate would cover this full amount to offset the costs, but that’s not always realistic. You may have to eat some of the cost, but that gives you a good position to negotiate this fee and arrive at a number that feels good to you while still being reasonable.
Average Detention Fees
The average cost of detention fees in the shipping industry is usually between $50-100 per hour, but they may be as low as $25 per hour or as high as $250 per hour. It all depends on the carrier and what their hourly operating costs are.
You can also negotiate detention fees to an amount that makes sense for both the freight supplier and the shipper. You might negotiate a higher detention rate, for example, if you can get a commitment from them that they won’t delay you more than 30 minutes to an hour. On the other hand, if you know that, as a supplier, your loading is going to take longer than it usually does, you might be able to bake that into the shipping timeline to adjust for this additional time and avoid detention altogether.
Whether you’re the supplier, shipper, driver, or receiver, there’s always a bit of wiggle room with detention fees that you can use to your advantage, especially if you’re able to plan for the time it will take.
Say a shipping company, John’s Trucks, tends to keep its drivers on highways with a speed limit average of 60mph. To figure out the operational cost of a truck for one hour, John multiplies his cost-per-mile by that average speed of 60 miles per hour.
When he works that out, it comes out to $80 per hour to keep the truck on the road at that average speed. If his trucks are delayed due to truck detention by freight suppliers, he’s losing $80 every hour the truck is idling there. Thus, his detention fee should be $80 per hour or at least around $75 to help him recoup the loss.
Ensuring Detention Fee Payment
Ensure you get your detention fee payment with these tips:
- Use technology to send and track invoice payments automatically
- Log all times carefully to have a detailed written record if needed
- Use GPS coordinates to support findings
- Communicate early and often with the supplier
While none of these are magic fixes, they can create an open channel of communication between you and whoever owes you the detention fee and use technology to your advantage to support your task.
Truck detention is frustrating but often unavoidable. If you understand why it happens and how it happens, you can integrate strategies to minimize detention whenever possible. However, when nothing else helps, knowing your hourly operational cost and tracking your losses will help ensure you get the detention fee you deserve.