Iain MacIntyre meets South Port, New Zealand’s lean, mean, fighting machine
New Zealand’s southernmost port, South Port, is reaping the benefits of a commitment to the “Lean” production philosophy as well as ensuring the maximum utilisation of its infrastructure, as evidenced by consecutive annual records in both profit and cargo volume.
During the 2015-2016 financial year, the regional port achieved a comparable 13% rise in net after-tax profit to NZ$8.71m, 7% lift in revenue to NZ$36.90m and 7% increase in throughput to 3.05m tonnes.
Driven by woodchips, dairy manufacturing products and logs - the latter rising 27% to a record 475,000 tonnes - the result notably saw the proportion of profit rise by a healthier margin than both revenue and cargo volume, highlights South Port chairperson Rex Chapman.
“This demonstrates that costs are being contained, overall productivity has increased and the company is making better use of its fixed infrastructure,” he says. “This represents overall business improvement.
“Working smarter and more efficiently is important for a business such as ours. We cannot always rely on revenue and cargo growth because to some extent these two factors are not within our direct control and are heavily influenced by commodity cycles and regional growth.”
As well as ensuring investment in resources has been maintained at a level appropriate to accommodate the 50% increase in cargo throughput experienced over the past decade, South Port has profited from a deliberate process improvement programme.
Based on the “Lean” philosophy, which encourages the workforce to put forward suggestions for operational improvements, the approach has led to a definitively-improved turnaround of empty containers, among other benefits.
In the empties example, staff suggested applying five different-coloured stickers to empty boxes over a five-week period, so as to easily determine which boxes in the stack had been in place the longest and which were the most-recent arrivals. While for “Tier 1” ports with automated systems, this might appear quite a simplistic solution, for a small, regional port it has delivered an undeniable operational improvement.
However, South Port has not had everything go its way: a forecast 25% drop in inbound stock food and molasses to 156,000 tonnes occurred during the year in direct response to external decisions made to reduce dairy farming inputs.
In a consequent attempt to diversify where possible and spread its risk, the port has looked to achieve deeper involvement in the supply chain as evidenced by its recent NZ$4.5m investment in an intermodal freight centre in Invercargill.
Although primarily targeted at containerised import cargo, the facility is also expected to attract short-term storage and packing of export cargo, and is both port and transport-operator neutral.
“This means that the port of entry or exit for the container could be Lyttelton Port of Christchurch, Port Chalmers or Bluff, all of which are connected to the site by rail.”
Additionally, South Port has recently acquired a new Liebherr LHM 550 mobile container crane and expanded its container forklift fleet - a combined investment of NZ$6.3m - to strengthen ties with its sole container client, Mediterranean Shipping Company (MSC).
Adding a second crane has enabled MSC’s Capricorn schedule vessels - which South Port views as both main line and feeder callers, given their connectivity to other services - to be turned around in 24 hours compared with 36 previously.
With regards to the current financial year’s outlook, Mr Chapman observes that the country’s economy as a whole is “doing well” and - apart from the impact of the now-recovering dairy sector - the regional economy is also “reasonably buoyant”.
Consequently, it is predicted that South Port’s main export cargoes will remain stable, albeit fertiliser and stock food might be constrained by the dairy situation. However, increased maintenance costs are expected to see overall earnings fall by 15% during the year.
Looking further afield, Mr Chapman believes the “abundance” of 4,500 teu vessels in existence - which is the class that predominantly services New Zealand at present - means larger-sized containerships will not become the mainstay of the country’s port scene any time soon.
“This is likely to mean that for the foreseeable future, there will be a continuation of international container shipping calls at a range of New Zealand ports including South Port.”
He adds that given the relatively small size of the country’s ports, collaboration between those who are not in direct competition will increase “and that is a very welcome trend, especially for a smaller port like ours”.
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