In a working paper, my co-author and I are investigating the issue of intra-port capacity planning by considering the differences between two container terminals within a major U.S. port. We focus our attention on empty container management to gain insights regarding capacity management. Specifically, using data spanning one year, this study investigates the difference between full and empty containers at a new and a relatively older terminal. The study also examines how a new and an older container terminal differ in terms of the reuse of empty containers for exports.
Ports play an important role in global logistics by acting as a node for a network of parties engaged in shipping and receiving goods. In its role, ports facilitate material transfer and associated information flow and thereby contribute towards efficient and effective global supply chain management. Ports serve as logistics platform and coordinate the requirements placed by several stakeholders, such as shippers, ocean carriers, terminal operators, and forwarding companies. To provide services as a business partner of choice to these stakeholders, ports fulfill three key functions – the regulatory function, the landowner function, and the operator function. In its regulatory role, ports ensure that statutory requirements are fulfilled. The landowner focuses on managing and planning the real estate, implementing policies and strategies for development of infrastructure, coordinating marketing and promotional activities, and providing access for road and rail based transportation. Finally, in its operator role, ports engage in physical transfer of goods between sea and land. In our study we focus on a port’s landowner and operator role and examine how it utilizes its available capacity to manage container traffic.
Port container traffic is given in terms of TEUs (twenty-foot equivalent units, a standardized maritime industry measurement used when counting cargo containers of varying lengths). According to the data compiled by the World Bank, major trading regions have witnessed tremendous growth in the container port traffic. For instance, from 2000 to 2008 the United States container port traffic grew by an astounding 42.56%. Containerization is increasing at the rate of ten percent per-annum and the number of TEUs has increased from 39 million in 1984 to over 356 million in 2004. With larger vessels that are currently used for maritime transportation, each vessel transport nearly 14,000 TEUs, which is putting pressure on capacity requirements at ports and their abilities to contain costs at approximately $65,000 per ship. Capacity planning issues at the port can result in various forms of operational inefficiencies such as ship delays, missed feeders, extra manpower, yard congestion, re-handling, increased idling times for trucks and emissions, and longer lead times for shippers.
To manage this growth in global logistics, port authorities utilize several strategies and tactics to ensure that they have adequate capacities in place. Physical expansion of the port facilities, the use of container terminals, and efficient resource utilization are some of the strategies that port authorities employ. Container terminal management is typically faced with issues such as lack of planning and lack of a systems view. Studies have emphasized the role played by organizational structure as a determinant of container terminal performance. Container terminals have typically been organized in terms of various planning subgroups such as, ship planners, yard planners, and resource planners. With this departmentalized orientation, the holistic goal of enhancing container terminal performance by simultaneously impacting ship turn-around time, reliability of service, cost efficiency of operations, and enabling adaptive shipping line schedules becomes difficult.
The integrated decision process becomes even more challenging when the port authority is required to manage multiple container terminals, synergizing their efforts towards overall performance of the port. The competitiveness of individual container terminals and the ability of a port to coordinate capacity and operations of multiple terminals play a significant role in reducing the total cost of shipping goods. Approximately 55 percent of port related costs can be reduced by improving ship turn-around times and cargo handling speeds. In essence, the terminals are the real adversaries in the competitive struggle between ports. Terminals (between ports as well as those within a single port) compete for tangible assets such as port infrastructure. Their competitive strength stems in terms of provision of services that add value within the supply chain for its users.
Port authorities managing multiple container terminals develop strategies to balance the capacity such that the imported and exported containers could be managed efficiently while maintaining high customer satisfaction. Container terminals are primarily managed by means of operational planning and control. In this regard, the research focus in the area of container management has primarily been on sub-systems within container terminals. In this study we consider the overall port system comprising of multiple container terminals. Containerization and advances in logistics has resulted in a change in a terminal’s role from one of being a facilitator of synchronizing goods between transport modes, shippers and logistics service providers to that of a buffer or consignment storage point. For a port maintaining multiple terminals, it behooves one to examine if there are systematic differences between the roles (i.e. synchronization vs. buffer) played by different terminals. This issue has not received adequate attention in research literature. In this paper we specifically focus on this issue and examine if a newer container terminal differs from an older container terminal in terms of their role in global supply chain management. Differences in the role played by the terminals will manifest in terms of differences in operational planning and control. Some of the aspects that are likely to highlight the difference include: the number of full imported containers coming into the terminal, the number of full exported containers shipped from the terminal, the number of empty imported containers coming into the terminal, the number of empty exported containers shipped from the terminal, and the number of empty containers resulting from the full imported containers at the terminal. Our study undertakes a closer examination of how a port manages its capacity by utilizing a portfolio of container terminals, especially when these terminals differ in terms of their age and consequent technological capabilities.
To undertake our research, we obtained data from two different marine container terminals from a major U.S. port that is ranked in the top 10 ports in terms of cargo volume. The port is a complex of diversified public and private facilities. Terminal 1’s six berths provide 6,000 feet of continuous quay. Thirteen wharf cranes ensure efficient and reliable handling of containers. The facility also includes a roll-on/roll-off platform, a LASH dock, a cruise terminal, 230 acres of paved marshaling area and 255,000 square foot of warehouse space and acres of open marshaling and storage area. A computerized inventory control system tracks the status and location of individual containers. The terminal also features electronic data interchange capabilities. A comprehensive refrigerated food warehouse is located near the terminal. Combined with competitive tariff rates, this facility's efficiency makes it an ideal port of call for shippers with cargo originating from or destined for the US Midwest, Gulf Coast, and West Coast. Terminal 2 was built to meet marketplace demand with an investment of about $1.4 billion. When fully developed, the terminal will have a total of seven container berths with the capacity to handle 2.3 million TEUs on a complex which includes 376 acres of container yard and a 123-acre intermodal facility.
I presented the preliminary findings of this study in the recently concluded CSCMP conference (Supply Chain Management Educators' Conference) at Philadelphia, PA. Overall, the results of this study present some interesting findings pertaining to differences between terminals within a port. We find that terminals within a port show systematic differences in terms of their focus and role. A newer terminal receives more numbers of imported empty containers and ships out higher numbers of exported full containers. The results provide evidence that these newer terminals are focused on throughput and thereby contributing to the revenues earned by a port. In contrast, older terminal carry a larger proportion of empty containers resulting from full imports and ship out more numbers of empty containers than newer terminals. The results suggest that these older terminals focus on the warehousing role, which also contributes towards the financial performance of ports.
This systematic difference between newer and older container terminal could be a result of conscious managerial decision or it could be simply be a result of an adaptive process within the port, whereby, the terminals focus on their relative strengths. The new knowledge, routines, work processes and technological capabilities within a new terminal allows them to take a fresh look at the synchronization role. Since a new terminal is not constrained by existing routines and business relationships, new inter-organizational relationships could be formed and the services offering could be better orchestrated. The older terminal focuses on the existing real estate asset and starts apportioning a larger portion of this asset for providing storage facilities. In contrast to our earlier assertion, the results of this study indicate that for the specific port studied in this paper, the throughput capabilities of the two terminals are not significantly different. This suggests that while there are systematic differences between the terminals pointing towards a gradual shift in role, the older port still fulfills the two important roles of synchronizing goods/information as well as providing warehousing related options.
There are a couple of reasons for the above results. Upon completion of terminal 2, the port had to decide which services to move to terminal 2. This decision came down to (1) move the biggest services to terminal 2 to justify the need for building terminal 2, and (2) main throughput balance between the two terminals since both terminals are managed by the set of staff (terminal manager, operations manager, vessel services superintendents, logistic associates, customer service, billing, etc.). Unlike other U.S. ports, this particular port handles more exports than imports (60% export vs. 40% import). Thus, the bigger services at terminal 2 contribute to higher numbers of exported full containers. Terminal 1 also has nearby empty container depots. Lastly, with this port being an operating port, it strives to balance the workload between the terminals for its staff and thereby providing equal level of service for its customers. Otherwise, there will be challenges from the staff and customers.
We are currently running various scenario-based experiments using a simulation model. The simulation results will shed further insights into the underlying issue of capacity management among multiple terminals in ports.
Source: Nair, A. and Huynh, N. 2011. Intra-port container terminals: A comparative investigation of their role in global supply chain management. CSCMP Supply Chain Management Educators' Conference, Philadelphia, PA.