Defining supply chain boundaries
A port authority has to be careful not to come into competition with its own customers
Stevie Knight questions where to draw the line when exploiting port assets that might conflict with existing interests
This is because as a port authority starts to make offerings that reach up and down the supply chain, it will inevitably come into areas where competition with its own customers is an issue. According to Roman Poersch of Wilhelm Borchert, this can and does happen as ports see more value in reaching out beyond their traditional landlord role.
In some countries there may even be a legal challenge as to who was there first offering the service. If an authority expanded its portfolio it could be seen as an entry into a market where they do not belong.
Paul Barker of PD Ports says, “We have to balance the fact that we are a commercial business, with the normal commercial pressures, and our existing relationships are very important.” So, he says, “We need to continuously be aware of the blend, and points of potential conflict.” In fact he adds an important part of making this work is, “knowing when and how we should offer our own skills”.
Mr Poersch adds that it can still work out if either a partnership or a division is agreed, so they do not serve the same cargo or same regions or clients – but before this, it’s important to start talking early. “You can’t hide what you do – and you can’t expect to keep things confidential for long,” says Mr Poersch. The important point about this is that trust is hard to come by, and if it’s threatened, a port will find it loses out. “Adversarial, or aggressive ways of doing things just don’t tend to work. Ports can’t move, while the supply chain can – and does,” says Mr Poersch.
Mr Poersch said there are success stories, despite the dangers. He says “One Swedish port authority had a facility they rented out to a customer which offered transfers of cargo between transport modes. The authority looked at its success, and wanted to do the same – but also didn’t want to lose the client. So, they reached an agreement, and while they offered a similar service they kept to different customers: this meant the facilities were much better utilised. Finally, the port was also able to reduce the costs for the independent logistics provider.
Mr Poersch concludes that ports have an access to information advantage, “For instance, the ports usually know more about vessels and shipments, so a port authority might find it best to trade on this and work on developing the market – after all, everyone wants the same thing, more cargo."
PD Ports agrees. Mr Barker says, We provide a knowledge base – free – for our direct customers or third parties. We don’t want all the revenue and all the profit. The cargo will come through us at some point anyway, we just need to be able to lever in the value.”
Further, the company thinks it has found the golden rule to make it all work – in a word, “options”. “We want it to be like a Chinese take-away menu,” says Mr Barker. “It gives a great degree of transparency, and people can just pick the bits off it that they want and put together their own solution.”
Part of this hangs on a very new, very sophisticated IFS software system that is currently being implemented in stages. This allows a great degree of cargo visibility so that the port staff and customers’ suppliers can all see what’s happening where.
“We have to build it to deal with everyone in the value chain,” explains Marco van den Bremer-Hornsby, also of PD Ports.
He adds that there is a wide skills base embedded in the supply chain and explains that one key for an authority to making a successful entry into the arena is realising it doesn’t have to do everything of value. “We can’t hold all the cards ourselves,” he says, “It’s more important to realise what you can do well, and lever in other businesses’ expertise.”
Images for this article - click to enlarge
Unless otherwise stated, all images copyright © Mercator Media 2012. This does not exclude the owner's assertion of copyright over the material.
