When you hear people talk about port congestion, it’s always about the ships waiting offshore or containers getting stacked higher and higher every day. Everyone’s watching cargo sit still, and, as troubling as that is, it’s not the only thing sitting frozen.
Money’s there, too. When a container doesn’t move, payments don’t, either.
In the meantime, you still have expenses that you need to take care of (crews, fuel, port parking fees, leases, insurance, software, payroll, etc.). This is where pressure starts to build.
Meanwhile, you still have to pay crews, fuel, port fees, leases, insurance, software, and payroll, even though the payment that usually takes care of all that is late. This is where you start to feel a lot of pressure.
Port congestion is usually thought of as a ‘traffic issue’. But that’s a bit misleading to say it like that.
It’s also a problem for the cash flow for everyone tied to those ships, from freight forwarders to carriers, terminal operators, and logistics firms.
Every business needs predictable payments in order to stay stable, and that hidden money trail shines a new light on the way we see congestion.
How Port Congestion Disrupts Cash Flow
Ports get congested for many reasons (e.g., poor efficiency, spikes in the volume of cargo, labor shortages, weather, delays with documentation, global supply chain disruptions, etc., etc.).
Regardless of the reason, congestion breaks the normal rhythm between moving cargo and getting paid. When things go as they should, a shipment moves, the recipient confirms delivery, you issue an invoice, and you get paid.
But when those containers get stuck at the port, the whole chain slows down or even stops. Even if the work is already done on paper, the money doesn’t move until the cargo does.
In logistics, payments are tied to delivery points.
Unless there’s proof that the cargo has been unloaded, transferred, and/or delivered, you don’t get paid. If congestion delays any of these steps, it also means you’re getting paid later than expected.
The real problem is that even if the delay only lasts for a few days, it can push payments way beyond their expected timeline because that same delay is also messing with inspections and scheduling.
At the same time, your costs keep going.
Nobody really cares that your cargo is stuck, which means you have money going out and not coming in. Billing is also harder to finish when you’re dealing with stuck cargo. Charges for storage and demurrage usually change on a daily basis during congestion, and until you have all the final numbers set, invoices stay open.
This situation doesn’t have the same consequences for everyone.
Shippers, for instance, might have significant sums locked in prepaid freight. Forwarders wait on payments from the client that depend on delivery confirmation, and carriers have unsettled freight charges across multiple routes.
What comes out of that is a system where ‘normal’ billing cycles completely fall apart; traditional payment rails simply can’t keep up.
In an environment of this kind, payment structures specific to logistics, like those connected to an Adaptiv Payments logistics merchant account, are built to handle problems with delays and irregular payments that are normal during congestion.
Where Payments Get Stuck During Delays
The money gets stuck in very specific places; it doesn’t just disappear all at once.
Here are those places.
Prepaid Shipments
With prepaid freight, the money is already spent before the cargo gets delivered.
And when a port gets congested, that upfront payment becomes what’s called ‘locked capital’. This basically means that exporters have already paid for the transport, but they can’t complete the actual sale until the buyer receives the goods. When this happens on a dozen products, you won’t even notice the issue. But when it happens for a thousand units, then you have a logistical (and economical) nightmare.
If intermediaries are involved, then they’re waiting on the payment as well.
From a financial standpoint, everything is paused, even if the shipment is only a few kilometers away.
Proof of Delivery (Delays)
A lot of payments in logistics depend on proof that a shipment was delivered, which makes total sense. No proof, no release of funds.
Congestion interrupts this flow.
Containers might be off the ship, but if they haven’t been cleared and handed over, nothing happens money-wise.
Customs/Inspection Holdups
If you’re in a crowded port, then you can expect inspections, since they’re more frequent in those conditions.
And, as you can imagine, inspections take time, which means the container needs to stay in place longer, which in turn delays payout. If you’re 5th or 27th in line, you might have issues. Usually, depending on the port you’re using and where you’re coming from, inspections are already expected. Regardless, these can be quite unpredictable and can cause logistical issues.
Moreover, from a financial standpoint, the longer you have to wait, the more you have to pay in terms of fees (storage, demurrage, etc.), which can’t be finalized before the container is officially released.
This means that invoices are open and balances are unsettled, even though it’s glaringly obvious to everyone involved that costs go up by the day.
Disputes/Chargebacks
Another problem with delays is that they make payments less secure.
When someone misses a delivery window, customers start to question charges. Some will hold back their payment, and others will file disputes and chargebacks.
Even if the reason for the delay is congestion and not poor service, the final impact still falls on the logistics first.
Conclusion
A port is congested. Is there even anything you can do? Turns out – yes, there is. And quite a few things, turns out. So, what can be done when a port gets congested? Actually, plenty of things.
You can reroute a vessel, reshuffle a yard plan, or maybe add an extra shift. But what do you do with frozen cash flow, besides pulling your hair out? Well… You try to stay calm as best you can because all there is to do is wait.
Global trade heavily relies on speed and procedures. But if you add congestion into that equation, then you realize that it isn’t a simple ‘A to B’ maneuver.
Logistics are complicated. Oftentimes, MUCH more than we’d think.
