What features are commonly included in a rail shipment tracking and fleet management system?

RailcarVanIf you are considering a system to help you better track / manage rail shipments and/or a railcar fleet, there are software solutions that do just that. Rail shipment tracking and fleet management systems are offered by several vendors, which offer many similar features. These systems lower administrative costs, improve supply chain performance and increase utilization of railcar fleets. This article summarizes those most common features and then also points out some less common features. Overall, I hope that by reading this you are better fit to make an educated decision. Full disclosure, the company I work for, provides such a solution. However, I have tried to write this article to be generally helpful without slanting it toward a specific brand.

Common Features provided


User Access – how users access the software system

  • Multiple concurrent users
  • Unique user name and password
  • Limit certain users to certain parts of the application
  • Web access through browsers with no software running on the company network

Storage, Presentation, and Delivery of Data

  • Storage of at least one year of railcar movement data
  • Pre-defined reports with easy recall and filtering
  • Copy existing reports
  • User create new custom reports
  • Automated delivery of reports
  • “Hot Group” reporting – the ability to identify a group of hot railcars for quick report filtering
  • Export reports to other file formats such as PDF, Excel, CSV, RTF.
  • Exception reporting (i.e. mis-route, bad order, non-movement)

Supplemental ETAs

Railroads provide ETAs to interchange, so if multiple railroads are the route of a shipment, it is beneficial for the system to provide ETAs to the final destination. Most do this based on averages of historical shipments with some applying advanced statistical process control (SPC).

Measurements

  • Transit time
  • Loading / unloading Time
  • Time on particular railroad
  • Time between any two events
  • Switch performance

Fleet Management

  • Railcar performance and utilization reporting
  • Interactive mapping tool (visual of where your fleet is)
  • Lease and sublease Contract management

Railcar Profiles

  • Detailed description
  • Problem / issue tracking
  • Cargo capacity
  • Manual fleet grouping / assignment
  • Rule based automatic fleet assigment
  • Past service events
  • Scheduled maintenance

Railcar Detention

It is useful to see data and reports that show how long customers hold on to your fleet railcars. Many companies find it useful to give their customers or organizations that they ship to a limited number of days to unload a railcar before daily charges are assessed.

Integration with other systems

  • Inventory Management
  • ERP
  • Truck Logistics
  • Rail Yard Management
  • Transloading
  • Railcar Repair
  • Bill of Lading Transmission to Railroad

Features provided for an extra fee or not very common


 Bill of lading transmission to railroads

Yard management

Railroad demurrage / private railcar storage

  • Estimate railroad demurrage fee’s incurred
  • Real time demurrage reports (demurrage $ the car has incurred before the end of the trip)
  • Ability to enter  demurrage rules based on railroad contracts
  • Automated updating of demurge Rules

Railcar Accounting (Revenue vs. Cost; Freight Contract Management)

Payables (Automated Freight Payments)

Emergency after business hours support

Back office team to resolve shipment / data quality issues

Communication with railroads

  • Order railcars in from serving rail yards or constructive placement
  • Provide switching and other handling instructions
  • Release railcars to the railroad

I hope that you found this article useful. Please share any personal experience or questions.

All the best,

Jim

 

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How a Rail Shipment Tracking System Can Save You Money

RollsOfMoneyIf you are currently tracking a significant number of rail shipments and/or managing more than a handful of railcars, you know the inconvenience of using railroad websites and spreadsheets to assemble a picture of your railcar shipments and/or fleet performance. Having a single system that can track the locations of your rail shipments and/or railcar fleet across railroads is definitely more convenient, but does it really save you money? You may be struggling to quantify the cost benefit of a system like this. If so, please read on.

Reduce Administrative Tasks

Railcar tracking systems not only consolidate all railcar movement data into a single system, they typically offer powerful reports that display only railcars with problems. This enables users to manage by exception. Another customer that I have worked with reduced their administrative tasks related to rail shipping activities in these specific ways:

  • 1.5 hrs/day by running daily reports for railcar locations and managing by exception;
  • 2 hrs/month managing contracts and leases;
  • 2 hrs/week providing information to sales/marketing / corporate management on trends of trip times, customer ordering, and customer unloading times;
  • 8 hrs/month demurrage records and billing reports

What if you only saved one worker 1 hour per day?

  • $25 per day * 20 working days per month = $500 per month savings

Decrease Demurrage and Private Railcar Storage Charges

If you are not sure whether you are liable for demurrage and/or private railcar storage charges, check out this article that discusses the recent changes in liability for these fees. If you are new to railroading and want to know more about demurrage and private railcar storage, see this article. A customer of mine reported saving $14,000.00 per month by using a railcar tracking system report that estimated railroad demurrage / private railcar storage. They were able to compare this report with the invoices from a short line railroad. Because the report provided the key dates (constructive placement, actual placement, order in, and release), they had the ammunition they needed to dispute the inaccurate charges. Most railroads will not consider accessorial fee disputes unless you have data that proves the prior mentioned dates. Approximate demurrage / private railcar storage fees are $75 per day (it varies by railroad).

What if you only saved 5 demurrage / storage days per month?

  • $75 demurrage charge per day * 5 = $375 per month savings

Reduce Inventory

The financial benefits of reducing inventory are many: improved cash flow; lower interest, storage, handling, insurance, tax expenses; increased return on assets; increased return on invested capital; and higher company valuation. Railcar tracking systems can assist in decreasing rail transit time and rail transit variability. How? Identifying exceptions, such as delayed or misrouted railcars, more quickly. These systems can also provide more accurate ETAs to final destination, which in turn give companies more confidence to keep lower inventories.

What if you could reduce your inventory by only 2%?

  • 10,500 tons of sand (about 100 railcars worth) * 2% reduction = 210 tons worth $25 per ton = $5,250 less capital tied up in inventory. There are several ways to monetize this savings, but just one way is to take the inventory reduction * your company’s annual cost of capital (i.e. 10%) = $525 per year savings

Better Fleet Sizing

Most railcar tracking systems will provide transit time and load/unload time measures. You can use these measures to determine an optimal fleet size. See this article for a simple, easy to use fleet sizing process that uses the transit time and load/unload time inputs. A shipper that I have worked with reported 10% better utilization of his 500, fairly expensive, tank railcars through the use of a railcar tracking system. Another shipper with a fleet of 2,000 railcars said that a railcar tracking system enabled them to “… utilize [their] railcar assets more efficiently.” And to “… determine how many [rail]cars to assign to various points in [their] distribution network.”

What if you only got 3% better utilization of a 30 railcar fleet?

  • $400 monthly lease rate * 1 railcar = $400 per month savings

Collect Detention Fees

Detention occurs when the receiver of the railcar holds on to it longer than the allotted period. Rail shipment tracking systems will show you how long railcars have been at a customer location. Some will even group the report by customer and location and calculate the charges owed automatically. If you ship owned or leased railcars to customers, charging detention can bring you monetary benefits in two ways. You can charge $75 per day for each day that the customer holds onto the railcar beyond the acceptable days. This amount would cover the daily lease cost or depreciation of the railcar. More importantly, it will provide an incentive for your customers to unload and return the railcars in a timely manner. This increases utilization of your railcar fleet and allows a smaller fleet. This article expands on this concept.

What it you only collected 5 detention days per month?

  • $75 detention charge per day * 5 = $375 per month revenue

What if you could reduce the time that your customers are holding on to your railcars by 1 day per shipment?

  • 30 monthly shipments * 1 day detention reduction = 30 railcar days. 30 railcar days is the equivalent of 1 railcar, which is the equivalent of 1 railcar * $400 monthly lease = $400 per month savings

There are certainly more ways that rail shipment tracking systems can save you money and of course results may vary from customer to customer.  Please share any experiences you have had. Thank you for reading.

All the best,

Jim

 

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Railroad Demurrage Liability Changes

On April 9, 2014 the Surface Transportation Board (STB) decided to revise the existing rules pertaining to 1) who may charge demurrage and 2) who is subject to demurrage. The new rules took effect on July 15, 2014. The complete decision and related statements to support the decision may be read on their website here. I have read through the document and would like to boil things down and to provide some summary and commentary that will hopefully be helpful to you.

Demurrage Defined

Demurrage is defined by the STB as, “…a charge incurred when rail cars are detained by the party receiving delivery of the cars beyond a specified period of time for loading or unloading.” This definition may be a little confusing as it appears to apply only to the time that the receiving party holds onto railroad-owned cars. Later in the document, paragraph C ii, it states that the rule applies to privately owned railcars held on railroad property as well. Typically this would be when the receiver could not accept a railcar for delivery, so the railroad keeps the railcar on their property and places the railcar in constructive placement status. For a deeper discussion of this type of demurrage and demurrage in general, please refer to this article.

Who may charge demurrage?

The party that may charge demurrage is the railroad providing a railcar to a shipper at origin or the railroad delivering a railcar to a receiver at destination. The decision clarifies that it construes 49 U.S.C. § 10743, which is a law that states who is liable for the payment of freight charges, to not apply to the assessment of demurrage charges. Why did they include this statement? I think it is because this law ties liability of freight charges closely to the bill of lading. Keep reading for more discussion about this.

Who is subject to demurrage?

The STB is moving away from defining liability of demurrage charges based on the bill of lading. Historically, the consignee (the party that is financially responsible for the receipt of a shipment) was subject to demurrage charges. The new rule places demurrage liability on the party that takes physical control of the railcar regardless of their presence on the bill of lading. This party is called the receiver. However, the rule requires that the assessing railroad, must have provided “actual notice” to the receiver before placement of the railcar. Actual notice is defined as providing a direct communication to the receiver through a mailed letter or email. This letter or email must include at least a summary of the demurrage tariff rule and then a link to the full rule is acceptable. This is opposed to just “notice”, which would be posting a tariff on the Internet somewhere. The letter or email only needs to be sent once. Then if there are significant changes to the demurrage tariff, another letter or email must be sent.

Does this rule override private agreements?

This rule only applies in the absence of other agreements. Nothing prevents any of the parties (i.e. delivering railroad, shipper, consignee, agent, transloader, third party, etc.) to come up with their own rules pertaining to demurrage.

The parties that will be most affected by this new rule change are the companies that provide loading, unloading, or transloading services on behalf of another company. In other words, the companies that provide the services as a third party where their company name doesn’t appear on the bill of lading or it shows as the “care of” party. These companies will most likely have a contract with either the shipper or consignee to load or unload railcars respectively. These agreements should be reviewed to ensure that liability for demurrage is well defined. If demurrage is not well defined in the agreement, then these new rules will take precedence in the case of a dispute and the company that handles the railcars will be paying the bill.

Can demurrage be disputed?

Disagreements relating to demurrage may still be disputed as before. Information regarding arbitration is available here.

Final take away

I like this change. It will improve the utilization of railcars by assessing the charge for non-movement on the party that has the greatest ability to expedite the movement of railcars.

I hope that you have found this article helpful. What do you think of the new rule? Please comment if you would like to add something or have a personal experience to share about how the rule is getting implemented.

 

All the best,

Jim

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How much does a railcar tracking software system cost (Part II)?

In February of last year, I wrote the first part of this series that focused on the cost of data, which is the core cost of any railcar tracking system. I promised that the first part would be followed up with more information about the total cost of this type of system. It has been a very busy year and I apologize for not following it up until now. So here goes…

To recap, in Part 1 we discussed the cost of Waybills (aka EDI 417, shipping instructions) and CLM (aka car location messages, sightings) data. The cost for CLM will range from $0.01 to $0.04 per record. The service that provides CLM at $0.06 per record that was mentioned in the prior article, should not be and rarely is used as a data source for a full featured tracking system. So for this article, I am going to revise the upper end to $0.04 and between $0.08 t0 $0.25 per waybill. A railcar can generate anywhere from 30 to 200 CLM and 1 to 4 waybills per month depending on how and where the traffic moves.

Data

Monthly Per Railcar – Data Fees (assumes and average of 2 waybills and 140 CLM)

Record Type

Low

High

Waybill

$0.16

$0.50

CLM

$1.40

$5.60

Total

$1.56

$6.10

 

Remember that some vendors may be able to provide a limited number of CLM records per railcar per day (1 to 3) thus lowering the data cost. However, this can also limit the benefits that you get from the system. It will lower the accuracy of transit and loading/unloading time measurements.

Software & Support

Railcar tracking software systems are difficult to write because there are many business rules that must be implemented. These business rules are known by relatively few people. Railroad data is not perfect, so it takes an
experienced person to know all of the possible exceptions in the data and how to handle them. Plus, the market for these systems is relatively small. These systems are going to be expensive. Along with the software, there must be staff available to support it. Whether the software is hosted and provided as Software as a Service (SaaS) or is installed on customer servers, both require people to handle issues with day to day usage and maintenance of the application.


Estimate: $1.00 to $2.00 per railcar per month

Data Quality

A certain amount of data will be missing or erroneous. Missing data due to system failures or glitches, erroneous data as a result of human error and more. Based on experience, 1 hour per 500 railcars per day should be enough time. Some vendors provide this service and some do not. Check with them to see if it is included or if there is an extra charge. If the service is included, check to see if you can pull it out to get a discount – if you already have people who can do this work, no sense in paying extra for it. If you are on a budget, eliminating this service can be one way to get a system in the door at a lower cost. The amount of data clean up can vary significantly by customer, so you could use the system for a while and see just how much is needed. Finally, no one knows how your traffic moves as well as you and there are arguments to not outsource data quality.


Estimate: $0.60 to $1.20 per railcar per month.

Other Considerations

– Are there per shipment charges or only per railcar / month charges?
– Are data fees charged separately from the system fee or included?
– Any set up fees?
– Is training included or charged separately?
– What features are included and which are and add-on with extra fees?
– Extra fees for additional user accounts? How many are included initially?


Conclusion

You may have more questions than before reading this article. That is a good thing. You should be asking a lot of questions for an investment like this. Basically you should be prepared to pay between $2.56 and $8.10 per railcar per month. If you have more questions, please feel free to comment your question on this article and I will reply quickly. Happy hunting!

All the best,

Jim


P.S. Your next question is probably, “How much money can a railcar tracking system save my company?” The answer to this question will help you justify the high expense and that is the topic of my next article, so stay tuned!


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How much does a railcar tracking system cost?

This is a very common question. The answer is a difficult one because it depends on a number of variables. This article will introduce some key questions that will help you determine how much a system will cost. If you like to be an informed buyer or are thinking about building a system of your own, please read on…

The major component of a rail shipment tracking system is data. Data is the life blood of a tracking system. There is much to consider, so this article will focus on data. The two main types of data are:

  • CLM (car location messages)
  • Waybills (EDI 417)

How much this data will cost is determined by several questions:

How fast do you need to be up and running?

Quickly (i.e. a few days)? The cost of this data will be higher because it will need to come from a Value Added Network (VAN) that is already getting CLM and waybills from most railroads in North America. They charge a premium for their services. Railcar tracking solution providers must get their data from this source to get you set up this quickly. The cost is going to range from $0.02 to $06 per CLM and $0.10 to $0.25 per waybill. There is a range because some resellers may do higher volume and it enables them to buy at lower wholesale prices and pass along the savings to you. In short, shop around even if you are in a hurry. Buying directly from a VAN is not recommended unless shipping high volume (i.e. more than 1,500 per month) because they typically have high monthly minimum fees ($1,500 to $2,000) and will require at least a one year commitment.

If you can wait several weeks, you may be able to significantly lower the cost of the data component. This is because the vendor will have time to get most of the data from the Class I railroads on your behalf. Most Class I railroads will provide CLM and waybill data for no charge to their customers or their agents. However, it can take from 2 to 8 weeks to get this set up with all the Class I railroads. If you only ship on one or two Class I’s, then it may not take this long. The vendor will probably build in some sort of charge for this service since they have to do significant work for account set up and maintenance. Plus, at least one Class I railroad charges to provide the data through vendors and more may follow – see this article for more information. You could see a 50% or more reduction in data costs: $0.014 to $0.03 per CLM and $0.08 to $0.16 per waybill.

How many CLMs do your shipments generate and do you need all of them?

Based on the type of business (i.e. railcars used for storage) and geographic location, the number of CLM records generated per railcar per month can vary greatly. The typical range is 30 up to 250. If the vendor is wholesaling from a VAN, they are paying either per CLM record or per kilobyte fees. Typically they will be able to limit the number of CLM records delivered per day per railcar to 1, 2, or 3 records. This can be a great way to reduce and control the cost of a solution, while at the same time enjoying the fast setup provided by VAN-sourced data.

What railroads and how many do you ship on?

If you ship on Mexican railroads, short lines and/or regional smaller railroads, this will increase the cost of data since this data must usually be gotten from a VAN at a premium. Very few Mexican railroads, short lines and regionals provide CLM and waybill data directly to their customers.

How many rail shipments will you be tracking?

If you are a large shipper of more than several thousand shipments per month, you may be able to get a volume discount on the data component. Don’t expect much though. If you ship 5,000 per month you may be able to get 10%. Vendors can discount their software more easily than data and I’ll touch upon that in a follow up article. Data is difficult to volume discount because with more data comes more support issues related to the data. This leads naturally into the next question to consider.

Is data quality important to you? If so, will you be ensuring data quality yourself or do you want the vendor to do it?

Railroad data is not perfect. The more you ship, the more data issues you will encounter. For some shippers 90% accuracy is fine, so they didn’t require data quality services or time to do it themselves. For others, absolute data quality is important. For example, if you are going to be feeding data from your tracking system into an ERP system to accrue freight or demurrage charges, you may want to consider data quality services or at least factor in the cost of the time to do it yourself. If the vendor provides data quality services, they are going to charge a premium for that. Their software will have some algorithms to handle and highlight data issues, but human intervention is required too. A very rough guide would be to figure on one hour per 500 active railcars. If the service is off-shored, then figure $15/hour. If not, $30/hour.

Hopefully these questions and answers have given you a greater understanding about how much a solution will cost. If you can think of others please comment. I will continue the series soon to talk about other major components of a solution and their cost.

All the best,

Jim

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Car Location Message (CLM) Event Sighting Codes

 

Code Classification Description
A Arrival Transit Location Equipment has arrived at an in-transit railroad location other than the destination.
B Bad Order Equipment has been reported or received defective at location shown. See this article for extended bad order information.
C Motor Carrier Arrival Motor carrier arrival at initial railroad facility.
D Arrival at Destination Arrival at rail destination.
E Motor Carrier Departure Motor carrier departure from final railroad facility en-route to non-railroad facility.
F Flatcar Bad Order Flatcar has been reported or received defective at location shown.
G Bad Order Release Equipment reported released from bad order status and returned to service.
H

Equipment Delayed
or Held

Equipment delayed or held. See this article for extended delay of hold information.
I

Equipment Offered in
Interchange

Equipment offered to another railroad without any movement from the receiving road.
J Interchange Delivery Delivery from one railroad to another railroad with no intervening highway move. (This code should be followed by an R sighting code).
K Intermodal Interchange Final railroad delivery to another carrier mode for delivery to next railroad in route. (This will be the last sighting code provided by current carrier.)
L Motor Carrier Arrival Railroad controlled arrival on motor carrier from intra-facility move.
M Motor Carrier Move Railroad controlled departure on motor carrier for intra-facility move.
N No Bill Equipment is No Bill at location shown.
P Departure Equipment has departed from an in-transit railroad location other than the destination.
Q

Flatcar Bad Order
Release

Flatcar has been reported released from Bad Order status and returned to service.
R Interchange Received Equipment received by one railroad from another with no intervening highway move. (This should be preceded by a J sighting code).
S Storage Equipment is being stored.
U Ramped Container/Trailer placed on flat car or roadrailer placed on rail.
V De-ramped Container/Trailer removed from flat car or roadrailer removed from rail.
W Released Equipment released by patron at date/time/location shown.
X Pull Car pulled from patron siding at date/time/location shown.
Y

Constructive
Placement/Notify

Railroad notifies customer that railcar equipment is available for placement or that trailer or container is available for highway departure.
Z Actual Placement Equipment has been placed on the patron’s siding.
3 ETA Estimated time-of-arrival of equipment at either an interchange point, rail destination, or customer industry.
6 Lading Transfer To Lading in the reported equipment has been transferred to another railcar, container or trailer.
7 Lading Transfer From Lading in the reported equipment has been transferred from another railcar, container or trailer.
9 Release from Hold or Miscellaneous Date and Time a unit is reported release from hold or storage (event code “H” or “S”).
     
     
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Demurrage charges – trust, but verify.

RailTracksPhotoCroppedRailroad systems – like systems in other industries, can be inaccurate. As one rail shipper realized, it was in their best interest to not only review railroad demurrage invoices, but to compare the calculations with a different system that estimates demurrage. The results were surprising to them: they found $14,000.00 of inaccuracies in one month.

Full disclosure: This shipper is one of our customers and they did solve their problem with our product. All the same, I think their experience will be a valuable one to you regardless of whether you are in the market for a system that estimates demurrage, already have a system or haven’t considered a system at all.

Situation

As one of the largest petroleum companies in the Northwest, the shipper does a lot of transloading. They get hundreds of railcar deliveries of ethanol and biodiesel from several major oil companies each month. Much of their transloading and service business is automated using state of the art systems. However, they lacked a system to manage inbound railcar shipments. As a result, they lacked visibility of what was happening to the railcars when they arrived at destination. As the consignee for many shipments, they are liable for delays where railcars sit on the railroad’s track beyond a given grace period (i.e. demurrage or private railcar storage). Much of the shipments are in supplier railcars, so they need to be vigilant in getting those railcars back to the supplier in a timely fashion or face detention charges.

Solution

In 2010, the company began searching for a tool to increase visibility and simplify management of their inbound rail shipments. They also wanted a record of when the railcars arrived at the transloading facility and when they were released back to the railroad after being unloaded to help them audit railroad demurrage and supplier railcar detention charges. Railcar Tracking Co.’s Railcar Management System (RMS)™ was enlisted to help.

Automated acquisition of tracking data and increased visibility

The first thing that RMS provided was an automatic way to acquire the rail shipment tracking data. RMS handles two types of data; CLM (car location messages) and waybills. RMS automatically captures and imports the waybills and CLMs. The system tracks each railcar, building a history and summary of each trip. After signing a one page authorization letter, the data stream was available the next business day. Some of the inbound shipment waybills didn’t list the company’s name as party to the waybill (PTW). Because of Railcar Tracking Co.’s RMS Data Services™, they were able to get visibility of these shipments while complying with the industry’s standard PTW security. By getting an additional letter of authorization from the supplier and through extensive waybill parameter filtering, RMS Data Services is able to provide very tailored data streams with high reliability. If you would like to read more about getting full visibility of rail shipments even if your company is not listed on the waybill, read this article.

Simplified management and significant cost reductions

RMS’ flexible report writer enabled the company to create reports that highlighted exceptions. These reports are automatically emailed to recipients on a scheduled basis as well. Since RMS stores all of the shipment data history including constructive placement date/time, actual placement date/time, order in date/time, and release date/time, reports are available for management to review the time the railcar sat on the railroad’s property at destination (constructive placement to actual placement) and the total time at destination (constructive placement to release empty). Through the creation and use of the reports from RMS, they were able to better identify demurrage calculation errors resulting in a $14,000.00 monthly reduction of demurrage costs. This is an amount that is well over what they are paying for RMS.

Another benefit to using a system that estimates demurrage is that it can help a company be more proactive; it can help identify railcars that are currently or about to incur demurrage.

Conclusion

So are you getting overcharged for demurrage and should you run out and purchase a system to audit the invoices right away? No. If you have large demurrage bills, perhaps consider doing a trial of a system that estimates demurrage and compare it to your demurrage bills and see for yourself if there is a problem. Most system vendors will allow you to trial their systems for at least a month for free or nominal fee.

Note: demurrage estimating systems may not always be able to accurately estimate all demurrage fees. For example, in a case with one of our other customers, they had a track leased with a short line railroad that serviced their facility. They were an “order in” customer, which meant that the short line didn’t try to deliver any of the arriving railcars until the customer requested them. Subsequently, all railcars were placed constructively (CP’ed or PCon’ed) immediately to record the beginning of the demurrage calculation, if a demurrage fee was levied. After the railcars reached the maximum grace period on the railroad track, they were moved to the lease track. From time to time, the lease track was too full. The short line was keeping a separate spreadsheet tally of which railcars would be included on a demurrage bill to the customer. Their operating system, the one used to record the CP/PCon, wasn’t sophisticated enough to handle this situation.

If you would like to learn more about how demurrage is calculated, take a look at this article. If have any comments or personal experience to share, please do so and start a conversation.

All the best,

Jim

 

Suzanne Massie, encouraged US President Ronald Reagan to learn the Russian phrase “doveryai, no proveryai” (trust, but verify). Apparently he used it often when discussing arms treaties with his Russian counterpart, Mikhail Gorbachev.

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