Last Updated on July 27, 2021
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.
For freight shippers, understanding truck detention is a critical component to protecting your bottom line and keeping up with shipping and delivery schedules. If you want to keep your truckers happy, customers satisfied, and business afloat, getting a firm grasp on the inner workings of truck detention can help you take more control over your logistics.
Here, you’ll find an in-depth guide for new trucking company owners like you 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.
Truck detention is much more common when shipping truckloads vs. LTL freight shipping, which stands for less-than-truckload. While incurring detention fees for LTL shipping is still possible, due to the reduced level of product, the natural time it takes to load LTL vehicles is much shorter and less likely to run over. If it does run over, it will likely be much shorter than if filling a full truck worth of product.
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.
The Financial Impact of Truck Detention on Shipper, Receivers, and Drivers
Truck detection happens because life often gets in the way, unforeseen events occur, or time schedules are not adequately planned. When it happens, the shippers, receivers, and drivers are all negatively impacted, as mentioned above.
The first audience that detention financially impacts is the drivers. Sitting and waiting for their truck can wear on the spirit and lead to low employee morale. Wasting time is not on their to-do list, but detention makes that an impossibility. They’re not making money while sitting there, and they’re also losing additional opportunities to maximize their profits. These losses add up significantly. The Department of Transportation led a study just a few years ago that found that drivers lose around $1.2 billion each year from detention.
For shippers, it’s common to charge a detention fee to suppliers if their shipments are delayed due to detention. These fees can vary, but they range anywhere from $25-100 per hour. While this fee doesn’t fully cover the cost of the lost time and stationary truck, it can at least make the unanticipated loss more manageable.
Finally, for receivers, truck detention can push back timelines and delay their own fulfillment and shipping efforts. This may cost them lost sales, canceled orders, or other unexpected incurred fees. They may offset this by working faster, but they won’t recover from the loss entirely.
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.
How to Correctly Handle Detention
As a shipper or receiver, there are a few ways you can try to minimize detention so you don’t have to charge detention fees and recoup losses in the first place. You can also integrate a few strategies to ensure that, if and when charging a detention fee is necessary, you will guarantee payment.
Here are some ideas to minimize truck detention:
- Stagger Pickup Times – make sure there aren’t a ton of other shipments being loaded at the same time as yours
- Dock Awareness – Make sure the product is ready to go before the appointment is scheduled and communicate beforehand to ensure the process is completed in less than two hours
- Additional Labor – It might be cheaper to pay for more workers to load the truck faster than to pay your detention fees, so inquire about adding more help
If all else fails, put systems in place to ensure you get the detention fee you’re entitled to.
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.
If you’re looking for financing for your trucking business, read our complete guide to freight factoring.