Guaranteeing on time arrival can come at a cost

Charterers and brokers often view price negotiation as the primary focus, as it is seen as the most direct way to generate profit. However, one must question the validity of this perspective.

Could it be that timeliness of the barge, rather than cost, is the key to maximising earnings?
Timeliness is a crucial factor when chartering a barge for both the charterer and the broker. For the charterer, arriving on time is a valuable aspect of the service. Similarly, the broker has a vested interest in timeliness, as delays can result in additional costs for the broker, who may have to bear the expense for two days without receiving any demurrage.
On time arrival is important because:

• Products must be picked up or delivered within a specific time frame as agreed upon by the parties involved.
• Land tanks may need to be emptied to make room for new product.
• Products may be required for blending or refinery operations, making timely delivery essential for maintaining efficient production schedules.
• Supply depots risk a stock out.

Timeliness as a factor in Price Negotiations.

The events described above can all result in significant costs if deadlines are missed, making timeliness a crucial factor in price negotiations. While negotiating a discount on the price index may seem attractive, the economic consequences of a late arrival could far outweigh any such savings.

For instance, if a charterer negotiates a price reduction of 0.20 p/t on a 5kt cargo, the savings would amount to €1,000. However, if this barge arrives even one or two days late, the costs to the oil company could be much higher. Wouldn't it be better to focus on which barge has the best calculated ETA? The same applies for the broker, when arriving late with a 6kt barge, missed demurrage cost can accumulate up to 7000,- euro p/d.

Load window

When a barge arrives early, a day ahead of the scheduled load window, the broker is forced to wait at their own expense, as no demurrage is applicable at that point. When the barge arrives late, there is still a chance that it will be loaded promptly. Therefore, there is no incentive to create a less tight schedule, as doing so would incur additional costs regardless. Would an extended load window (1-3 days) like in deep-sea shipping help solving the problem, it probably would increase the on time arrivals, and will save a lot of discussions and re-nominations. But the main problem lies in the available data.

Barge planning

Barge planning can be complex and challenging, particularly in the spot market where brokers must deal with a variety of suppliers and customers. Brokers cannot simply plan trip by trip, as competition in the market can quickly pick up available trips, leaving none left for the broker. Additionally, there is a 48-hour nomination rule in place, which further complicates planning. Pre cargo’s, arriving gas-free and barge sizes are also impacting barge planning.
To address these challenges, it is common practice for brokers to book one, two, or three trips behind each barge. This ensures that the barge is occupied and provides the broker with a good indication of market demand for the coming week.

Premium or part of service

Guaranteeing timely delivery can come at a cost, as the brokers can create a planning which is less tight to accommodate potential delays. However, this approach can result in the broker having a barge idle for a day or longer, which can be expensive, especially if it happens frequently. Brokers have no control over the loading and discharging operations of previous trips, which can impact the timeliness of subsequent deliveries.

Therefore, it is worth to consider whether the cost of guaranteeing timely arrival could be offered as an additional premium on top of the service? In some critical occasions charterers book a barge one day before the loading window and they take the accompanying demurrage hit of an extra day to as such pretty much guarantee the barge being in time. On-time arrival can also be incorporated in the service already, as some brokers could be known for having a high percentage of on-time arrivals, which makes them the go to preferred supplier.

Russian roulette

Barge planning can be unpredictable and risky, similar in a way -though less dramatic- to a game of Russian roulette. Brokers rely on the information they can gather to make informed decisions, but sometimes it can feel like a gamble. In an ideal world, traders would support brokers by providing accurate loading and discharge prospects, allowing for efficient planning and minimising delays. In absence of this information, brokers are left in the dark and may struggle to create a reliable planning schedule.

From time to time this causes a domino effect of delays throughout the market, leading to barge scarcity and increased prices. A potential solution could be for brokers to plan less tightly in general. This would subsequently increase the average transport price as potential idle time would probably be incorporated in the price. Effectively leading to an outcome with less savings per trip on the one hand, but prevention of the relatively costly instances of delays on the other.