Clock watching port-style

An outsider would probably be surprised to learn that in most countries a passenger train is registered as ‘delayed’ when it is three or five minutes late, whereas 30 minutes is a common margin for ‘delayed flights. However, for shipping, vessels that arrived a day later than planned are considered delayed.

So it is perhaps unsurprising that more attention is being paid to on-time performance and it is a trend that will certainly continue. In particular, two issues regarding on time performance in shipping merit attention.

Firstly, on time performance on a port-to-port basis is in itself not very relevant for port users. These focus on the door-to-door transit time and reliability. In a study, a student of mine at Eindhoven University of Technology found out that cargo from delayed ships often switches from relatively cheap and environmentally-friendly inland modes, such as rail and barge, to road – at higher costs to the end user and generating greater emissions. Shipping lines, when deciding on whether or not to speed up to make up for delays, may not take this into consideration.

Secondly, on time performance may be an ‘and/and concept’. You may never have heard of the term ambidextrous, but it is a new hot topic in strategy research. Strategy research specialist Michael Porter suggested that companies need to choose a generic strategy, either of cost leadership or of differentiation (by quality or value). However, today researchers increasingly suggest that some firms seem to achieve the impossible: cost leadership and more value creation for customers.

How is this relevant for on-time performance? Improved on-time performance may require additional costs, but also yields direct benefits for shipping lines themselves in terms of better utilisation and lower repositioning costs, for terminals in terms of higher utilisation resulting in lower handling costs, and, just as importantly, for inland transport operators in terms of higher utilisation, resulting in lower transport costs.

As an economist, I would assume shipping lines would be able to capture a large share of these benefits, leading to lower transport costs and higher service levels.