Efficiency or effectiveness?
What, exactly, do performance indicators measure?
Stevie Knight asks why ports still lag behind the other industry sectors on performance indicators
However, Kuba Szymanski, secretary general of InterManager refutes the idea that there’s a general avoidance.
He tells Port Strategy that although ports are a little behind the other industry sectors on the subject of KPIs, it’s not necessarily the case that ports generally want to evade the subject. “You can’t just make sweeping statements about this, some – certainly those such as Gothenburg, Gdansk and Singapore – are actively pursuing this kind of transparency. It is only those that are not sure about what putting in KPIs would mean for them, or those ports that are not doing so well, that avoid the issue.”
He adds that the biggest problem in setting KPIs for global supply chains is the lack of common performance standards and common measurements of performance: InterManager itself is investing $10m in developing a KPI grid measurement for shipowners.
However, Ben Hackett of Hackett Associates says he doesn’t expect transparency about performance measures any time soon. “I don’t see it happening, even when people ask – as they occasionally do - about a basic comparative analysis of tariff rates, let alone efficiency, it proves almost completely impenetrable. The fact is, there isn’t enough reason for the ports to show their hand in this way. Commercial confidentiality remains important.”
However, there is another way of looking at all this. Mary Brooks, who holds the William Black Chair of Commerce at Dalhousie University explains that measuring effectiveness probably just as much the point as measuring efficiency.
She defines effectiveness as “doing the right thing, not just doing things right”. This, she says, means firstly knowing what your customers need. “You may be efficient – but you could be working on the wrong things,” she points out.
She goes on to explain: “For example, on the test run for these effectiveness metrics we looked at US East Coast ports, and their customers said gate congestion was critical. However, this isn’t so much of an issue for Canadian ports, so putting resources into this area wouldn’t be particularly meaningful."
Therefore, this metric has to start from customers indicating an ‘importance’ score, before providing a port with performance score, the one getting measured in terms of another.
This can give you an analysis of the gap that exists in any port, as perceived by its customers – and a summary of how its doing on important criteria.
She goes on to point out that while this effectiveness metric creates a good measure for best practice, its not particularly useful for public relations exercises as it won’t tell you what other ports score, just let you know what your own score is against the benchmark. However, it can be used to guide investments: “It tells you what is, and what is probably not worthwhile investing in, it can tell you where you will be wasting your money,” she says.
These kinds of metrics are also quite clear about the various kinds of customers, as there are three user groups with differing requirements of a port’s service, says Ms Brooks.
She explains that shipping lines are more concerned about fuel costs, to wit, slow steaming has become the norm. Cargo interests are concerned about reliability and inventory carrying costs, seeking greater collaboration and information. On the other hand, supply chain partners, like rail, truck and warehousing services want issues like gate congestion and communication flow to be addressed.
Therefore port effectiveness is a complex KPI, but as a perceptual metric, it is best measured from the three, separate user perspectives, requiring a port to reconcile service gaps with differing priorities.
The approach limits the pull on the agenda from different areas having differing kinds of tonnage and different issues. Ms Brooks says that while its only been tested on a relatively small number of ports during development, it is a system that could be rolled out across a large number of facilities.
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