On-time and efficient cargo management is essential for businesses that want to maintain a competitive edge in freight shipping. The last free day is when a shipping container can be stored on the terminal, port, or rail without additional charges. Understanding the role of LFD in shipping is critical for freight forwarders, managers, and shippers, as it directly impacts operational expenses, customer satisfaction, and supply chain efficiency. Shipment delays can cause significant financial penalties and operational disruptions. 

This comprehensive blog will discuss the significance of this last day in freight shipping and the strategies you can use to manage it effectively. 

What does LFD mean in shipping?

The LFD, or last free day, is essential for cargo management and cost control in international trade. It is the day before the port terminal authorities start charging storage fees, called demurrage. It is marked as a deadline for the cargo owners to retrieve items before extra costs or per diem charges apply. A grace period is also granted to the shippers and other stakeholders to undertake smooth intermodal freight transportation. 

Demurrage and per diem charges are critical components of the last free day. This day is critically mentioned in the comprehensive contract between the shipper and the carrier. Also, this is calculated based on the shipment’s expected arrival time and the added time for the item’s clearance. 

Importance of last free day in shipping

The last free day holds significant importance in the shipping and logistics industry. Here are some points stating the importance of this day in shipping: 

1. Cost management: The most significant purpose of the free day is cost management. Exceeding this day results in substantial demurrage charges in shipping for containers and detention for containers being held for more than their assigned time. Adhering to this LFD can help you avoid additional expenses that affect profitability. 
2. Enhance operations: If the shippers are well aware of the last free day, they can plan their functions accordingly. Therefore, companies can coordinate their transport, equipment, and labor more efficiently to avoid shipping detention charges. 
3. Enhanced logistics: The LFD helps enhance logistics by giving shippers deadlines. They incentivize the on-time pickup of goods and also provide buffer time for valid and reliable delays. 

Strategies to manage LFD 

You need to effectively manage the last free day in freight shipping, as it helps minimize expenses and ensure smooth logistics. Moreover, the following are the strategies to manage the last free day in logistics effectively: 

• Proactive planning: Effective planning and coordination among the shippers, consignees, and carriers is essential for cargo movement. This prevents delays, which will consequently help minimize the demurrage and detention charges. You must schedule the pickup and container transportation in advance to ensure the container’s arrival before the free demurrage time.
• Real-time tracking:  You can also use advanced tracing systems to monitor the real-time location of containers and cargo. Real-time tracking will help more efficiently manage operations and suspected delays.
• Clear communication: Clear communication is essential for managing delays and logistics challenges. Open communication can help you anticipate and resolve obstacles or delays before they become more expensive. Sharing every minute of information with the stakeholders and authorities will help you keep everyone on the same page and act swiftly during any mishap during the shipping free time. 
• Customs clearance: Optimize your custom clearance process to prevent delays. This could extend your container’s stay beyond the last free demurrage day. Keep everything sorted so that you can easily enter and exit the ports.
• Effective drayage services: Collaborate with effective and reliable partners who can efficiently transport your containers from one port to the assigned locations. The more effective your drayage services are, the quicker the transportation of your goods, ultimately reducing the shipping times and letting the vessels reach before the container’s last fee day. 
• Negotiated agreements: Negotiating favorable terms with the carriers covering the extended free time allowances. This will bring transparency in fee structures and can offer shippers great agility and expense control by managing the demurrage and detention fees.
• Backup plans: You must have a backup plan to overcome logistics challenges such as unexpected delays, port congestion, and adverse climatic conditions. This will ensure the containers’ timely movement.
• Use technology: For tracking and logistics management, use AI to provide real-time visibility of the shipment status. The technological advancements help recognize the potential delays in time and prevent big losses. Logistics management software integrates various supply chain aspects, allowing better planning and contribution. 

Types of charges when you exceed the last free day

When you exceed the last free day, you must pay certain charges. Let’s discuss the types of charges that you have to pay : 

1. Detention: Detention is the fee that applies when the containers are sustained by the consignee or the agents beyond the assigned time for equipment utilization. The shipping lines compensate detention fees for the expanded use of containers outside the terminals. 
2. Demurrage: Demurrage refers to the charges when the cargo remains at ports after the allotted time for loading and unloading. It applies to the containers or cargo that halt at container terminals and ports, warehouses, and rail yards. They utilize the terminal facilities beyond the agreed time period. 
3. Per diem: Per diem fees are charged to shipping containers or equipment for each day sustained more than the decided free time. These fees can result in container detention fees and demurrage, and the charges vary depending on location, carrier policies, and container types. 

Factors influencing the LFD calculation

Certain factors affect the timings and expenses associated with cargo retrieval. If you want to manage your logistics efficiently, you must understand the factors that affect the calculation of the last free day. So, here are these factors: 

1. Expected arrival time: The expected time for the arrival of cargo at the assigned destination plays a crucial role in determining the LFD. You can easily evaluate the cargo pick-up or delivery times by considering the transit times, vessel schedules, and potential shipment delays. 
2. Ports and terminals policies: Different ports and terminals have ther own policies for the container free time. Local regulations, type of cargo, and operational volumes affect the policies.  
3. Customs clearance: The customs clearance efficiency process directly affects the LFD. The duration of the customs clearance process depends on the cargo types, origin, destination, and regulatory compliances. Customs processing delays affect the cargo availability timing. 

Consequences of inefficient management of LFD

If you cannot manage the last free day effectively, you have to face inevitable consequences on your overall shipping expenses. Here are the consequences of inefficient management of LFD: 

1. Financial compensation: Expanding the LFD results in detention and demurrage charges, which can significantly and rapidly affect the shipping expenses, reducing the profit margins for consignees and shippers. 
2. Resource allotment: LFD’s mismanagement requires labor and additional resources to resolve issues like cargo retrieval, dispute resolution, and documentation errors. This further increases operational expenses and inefficiencies. 
3. Operational disruptions: Inefficient management of LFD in logistics also causes operational disruptions, consisting of delayed cargo delivery, enhanced transit times, and disruptions to supply chain schedules, which impact customer satisfaction and business reputation.

The last free day in freight shipping simplifies and manages the logistics. Not managing the LFD has some consequences. You will have to face the consequences such as detention, demurrage, and container per diem charges. This helps establish a deadline for the shippers, freight forwarders, and carriers. When you exceed the last free day, you will have to face consequences that affect the shipping costs. Implementing the strategies according to the issues incurred will help you distribute your goods quickly and efficiently. 

LOTUS Containers offers services to manage your logistics efficiently. Our portable, sturdy, and compliant shipping containers can accommodate different cargo types and ensure your goods’ safety with their strong nature and compliant features.