Logistics and Port Management

April 2004

C. Bert Kruk

Senior Port Specialist

The World Bank

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Logistics

Military origin: Getting the right supplies in the right place, in the right quantity, at the right time

In transport: Getting the right goods in the right place, in the right quantity, at the right time at the least possible costs

Essential: Price / Quality Ratio Possibility of choice is essential

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Port Competition

Inter-port competition Within-port competition Intermodal competition Competitive ports should offer selection of

choice of hinterland connections Example: Dedicated Freight Railway line in the

Netherlands

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Trade Facilitation

Commonly accepted definition? Logistics of moving goods through Customs or

more efficiently processing documentation associated with cross-border trade

Indicators can be useful

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Trade Facilitation Indicators

Basis for development of further Indicators for analysis of impact of Trade Facilitation

Guide for project preparation, supervision and evaluating logistics project performance

Benchmark for regional comparisons Track effectiveness of domestic reform processes

associated with accelerating Trade Facilitation Assist in shaping policy-oriented empirical

research in sectors which suffer from lack of data

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Need for effective Customs and EDI

In ‘just in time’ manufacturing, outsourcing and global production sharing, firms cannot afford delays with complex and inefficient Customs rules and lack of modern systems of information

Reduction of trade-related transaction costs can expand trade and create employment opportunities

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Some figures

Hummels (1999): Exporters with 1% lower shipping costs enjoy 5 to 8% higher market share

Limao and Venables (2001): Infrastructure quality accounts for 40% of variation in transport costs for coastal countries and up to 60% for landlocked countries

Fink et al (2001): Liberalization of provision of port services and regulating exercise of market power in shipping could reduce shipping costs by nearly 33%

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Port Management models

Public Service Port Private Service Port Tool Port Landlord Port

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Basic Port Management table

Model Infrastructure Superstructure Cargo handling

Public Service Port

Public Public Public

Private Service Port

Private Private Private

Tool Port Public Public Private

Landlord Port

Public Private Private

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Examples

Public Service Port: common model of ports in developing countries

Private Service Port: usually industrial types of ports

Tool Port: French model Landlord Port: Larger, developed ports

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Introduction of Containerization

Difficult for many developing ports:• Lack of funds• High investment costs• Lack of skilled labor• High risk investment

Change in management structure was option

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Other reasons for change

Higher labor costs Higher ships’ costs Globalization of commerce Introduction of EDI and ICT Pressure of shipping lines regarding turnaround

time of their vessels Intermodal and multimodal requirements Bureaucracy Possibility to decrease staff and / or labor force

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Sharing the Commercial Risks

A method often applied is introduction of (usually) private and often foreign partner

Partner has required skills and often also sufficient capital

Process is Commercialization, not Privatization Privatization requires transfer of ownership

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Commonly used methodologies

Concession: usually leasing of facility to operator (Joint Venture or single operator)

Management Contract

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Concession

Operator leases plot for long period of time Lease is amount of money to be paid per m2

per year (Flat Rate Lease) Combination of land lease and performance

hardly applied (Shared Revenue Lease) Lease usually indexed Long period (> 15 years) to allow operator to

develop business and get return on investments

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Equipment existing terminals

Operator may buy existing from Port Authority / Government

Usually at second hand price Operator will provide new equipment, systems

and facilities from his own resources Former staff may be contracted by Operator Operator takes Commercial Risk

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Operator existing facility

Private single operator, or Joint Venture of new operator and previous operator (Government / Port Authority)

Joint Venture: Sharing of Commercial Risks

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Operator new facility

Option 1: Government invests in infrastructure and new operator or Joint Venture in superstructure

Lease can be Flat Rate of Shared Revenue Other options: BOT or BOO

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Build-Operate-Transfer (BOT)

New Operator develops new facility (infrastructure and superstructure) from his own funds

Operates terminal Income used to get return in investment After agreed period, terminal operator hands

over terminal (infra- and superstructure) to public sector

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Build-Operate-Transfer (BOT) - 2

BOT period at least 15 years Handover usually at written-down value BOT for container terminals hardly used:

income insecurity (competitive market) If operator is linked to major shipping line more

chance of success

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Build-Own-Operate (BOO)

Basically same principle as BOT, but No pre-determined date of handing over of

facility to Government / Port Authority

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Management Contract

Experienced operator provides expertise (staff and means) to existing or new terminal

Operator is paid agreed Management Fee Possibility of Contract:

• Under-Performing: Penalty• Over-Performing: Bonus

No Commercial Risks for Management Contract party

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Regulatory Function

In all options some form of Regulation essential High level authority to control articles of

agreement between public and private parties Not complying: Penalties Involves intervention in functioning of markets in

terms of setting or controlling tariffs Also deals with control of market and fair and

competitive behavior and practices Regulation essential in case of monopoly or

significant market power

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Port Performance Indicators

Useful tools to obtain insight in performance of port or terminal on comparative level

Definition of Indicators important for comparison Most commonly used Indicators:

• Ship Productivity• Ship Waiting Time• Cargo Dwell Time• Cargo Handling Charge

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Ship Productivity

Total number of moves (containers) or tons (break-bulk and bulk cargoes) divided by total number of ship hours in port

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Average Ship Waiting Time

Total number of hours or days vessels wait for a berth (buoy-to-berth time) divided by total number of hours ships are at berth

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Average Cargo Dwell Time

Product of cargo handled and period of time (hours or days) between moment of unloading of cargo and time cargo exits port or terminal (for export cargo) divided by total quantity of cargo handled

Import cargo: vice-versa

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Cargo Handling Charge

Total charges for handling of given quantity of cargo in units or tons divided by total number of units of tons handled

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Examples of Container Ship Productivity

Average container gantry crane productivity for multi-berth terminal and Berth Occupancy Factor (BOF) in range of 50%: 60 to 70,000 moves per year

PSA record 2000: handling of 1,375 moves in 6 berth hours, or 234 moves or 376 TEU per berth hour

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Top 5 Operators 2002

Hutchison 37 mio TEU Port of Singapore Authority 26 mio TEU AP Moeller 17 mio TEU P&O Ports 13 mio TEU Eurogate 10 mio TEU

Total: 103 mio TEU, or 37% of world total

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Hutchinson Whampoa Limited

March 2004

Cbk/wb

FREEPORT

BALBOA

CRISTOBAL

ROTTERDAM

FELIXSTOWE

HARWICH

THAMESPORT HONGKONG

RANGOON

JAKARTA

LAEM CHABANG

KWANGYANG

BUSAN

KARACHI

PORT KLANG

DAMMAN

DAR ES SALAAM

BUENOS AIRES

VERACRUZ

MANZANILLO

ENSENADA

LAZARO CARDENAS

SHANGHAI, WAIGAOQIAO, YANTIAN, BEILUN, JJIANGMEN, NANHAI, SHANTOU, XIAMEN, ZHUHAI

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APM Global Terminals

TACOMA

OAKLAND

LOS ANGELES

ROTTERDAM

PORT SAID

BALTIMORE

GIAO TAURO

ALGECIRAS

SALALAH

KAOSHIUNG

YOKOHAMA

KOBE

CHARLESTON

JACKSONVILLEMARCH 2004

CBK / WB

HOUSTON

SAVANNAH

KINGSTONPORT EVERGLADES

MIAMI

NEW ORLEANS

PORT ELIZABETH

PORTSMOUTH

BUENOS AIRES

AARHUS

BREMERHAVEN

CONSTANTZA

LAEM CHABANG

PELAPAS

PIPAPAV

SHANGHAI

ONNE PORT

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Port Reform Toolkit

Comprehensive document produced beginning of this century

Update of practical examples in FY 2004-2005 Download from web:

www.worldbank.org/transport

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Trade Logistics Agenda

Trade Facilitation and Competitiveness Transit Logistics and Ports Border Crossing and Clearance Management Customs Reform Multimodal Transport Transport Security

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Trade Facilitation and Competitiveness

Economic Benefits of Trade Facilitation Logistics Costs and Export Earnings:

Geography, Competitiveness and Poverty Facilitation Performance and Competitiveness

Index

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Transit Logistics

Port Efficiency Bilateral and Regional Transit Agreements Landlocked Developing Countries Access:

Corridor Agreements Transit Guarantee Systems :

Customs/Insurance/Operators (TIR, TIF and similar)

Cost/Benefits of Transit Trade for Transit Countries

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Border Crossing Management

Single Window Environment Adjacent Border Posts Border Monitoring Systems Inland Clearance Facilities

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Customs Reform

Streamlining and Harmonization of Procedures Information Technology and Electronic

Processing Risk Assessment Methods: Security with

Facilitation Integrity Programs Training / Capacity Building : Customs

Officials / Private Operators

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Multimodal Transport

Legal Aspects Regulatory Framework Liability Regime of MTO Implementation/Amendments of/to MTO

Regimes

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Transport Security

US Regulations: CSI, 24 hour-Rule IMO Revised Standards: ISPS Code Supply Chain Security Concept Security with Facilitation

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Thank you for your attention