Why is demurrage important for logistics companies using container terminals? An analysis of the determinants of demurrage and its impact on firm performance

Abstract

During the COVID-19 pandemic, severe demurrage in shipping and container terminals has led to a global logistics crisis and supply chain disruptions. Although the situation is gradually stabilizing, discussions persist on strategies to reduce volatility in container freight transportation. Demurrage imposes unnecessary costs, delays deliveries, and impedes the efficiency of container terminals. This study analyzes the factors influencing demurrage from the perspective of logistics companies, specifically, based on the characteristics of logistics companies and the attributes of the cargo owners they serve. Additionally, it explores the impact of demurrage levels on firm performance and investigates how this relationship may be moderated by container terminal characteristics. The empirical findings indicate that advancements in information systems within logistics companies, along with improved collaboration and contract compliance among cargo owners, can significantly reduce demurrage. This reduction in demurrage can enhance firm performance. Furthermore, credibility management and digitization of shipping documents also play a crucial role in minimizing demurrage. Building on previous research and empirical insights, this study emphasizes the importance of sustained long-term investment and policy support from the government for the digital transformation of logistics processes, complementing the efforts of both logistics companies and cargo owners.

Keywords

• Demurrage
• Container terminal
• Logistics company
• Structural equation modeling
• Korea