Communication gap

Maersk Line is 'encouraging and seeking dialogue' with its terminal partners Maersk Line is 'encouraging and seeking dialogue' with its terminal partners

For an accurate assesment of service levels, talk to users, not ports, advises Dave MacIntyre

For a business that is essentially a service provider, do ports really “engage” with their customers? Do they listen to the concerns of the lines who are their direct clients, or the shippers and importers who provide the cargo flows across the wharves?

Port Strategy obtained three diverse views – from a major container line, a shipowner lobby group and a shippers’ body – and the consensus is that port managers need to up the ante on their customer communication.

For carriers, terminal cost is one of their largest cost components. Tommy Nilsson, head of terminals for Maersk Line, says the quality of the product differs from terminal to terminal but it is important that terminal operators gain a better understanding of lines’ requirements and work more towards meeting those.

In doing so, they can differentiate themselves from the competition.

“We are encouraging and seeking dialogue with our key vendors to ensure that there is an increased focus on stability, that the facility is geared with the required asset capabilities and not least that we jointly drive a more aggressive attitude to generate higher efficiency levels and less waste.

“Over [recent] years, the terminal industry has not seen any significant development that has structurally lifted productivity levels. Compared with many other industries, efficiency levels are trailing to say the least.

“Berth productivity has increased over the last years, but not to the same level as the increase in tonnage and the subsequent call sizes. We are therefore experiencing a negative scale advantage. Our vendors continue to increase their charges while we are de facto experiencing value erosion in some locations.”

 

Slow uptake

Mr Nilsson says only some operators are working pro-actively to gear and position themselves for future demand. Some small and medium-sized ports can claim this is due to them experiencing the cascade effect of new tonnage. But others served by more predictable trades may be guilty of reactive behaviour.

“Communication, mutual understanding of the business and stronger partnerships would be three key components to improve within this area,” he says.

However, he finds discussion about service levels are typically subjective by nature — “Often terminals perceive their service levels to be good. But the question is if they are good enough! An open dialogue on requirements and opportunities for improvement is required to maximise the benefits.

“We have a joint initiative with selected terminals with the aim to improve service levels and we are offering resources with port experience as well as analytical support. This initiative has been received positively by the terminals, mainly because it reviews both terminal and shipping line deliverables.”

Larger vessels due to come into commission such as Maersk’sTriple E ships, present terminal operators with a challenge. Those that have the vision to develop future-proof facilities will ultimately have the strongest value proposition, says Mr Nilsson.

“With investment decisions in new terminal infrastructure and equipment typically being done for long periods, it is critical that port and terminal operators become more visionary and take into account anticipated future industry developments. In our view, the opportunity cost to a terminal of being too conservative is extremely high.”

 

Close contact

Mr Nilsson warns: “As most terminals operate in a more protected and stable market, it is important for them not to lose touch with their customers’ requirements.

“Terminals operating in markets with limited competitive pressure typically have no incentive to go ‘the extra mile’ to improve their product offering, and over time may find themselves outpaced by new terminals that offer a game changer.”

Shipowner representative body Shipping Australia Ltd (SAL) can list a number of fundamental problems with ports.

Chief executive Llew Russell says that in the breakbulk trades, SAL has criticised some Australian ports for the lack of adequate facilities such as sheds for coiled and rolled steel (eg. Fremantle), while the main capital city ports (Sydney and Melbourne account for around 67% of Australian total container volumes) have not delivered the productivity that lines require.

“The net teu rate per crane hour has not changed significantly since the late 1990s despite newer and more technologically-advanced cranes being installed. The number of cranes available has been a problem in some terminals …[and] serious port congestion has occurred in Sydney over the last two years now.”

Another problem has been getting sufficient empty container park capacity especially in Sydney, Melbourne and Fremantle, although some progress has been made recently.

 

Good to talk

Overall, however, he feels container ports in Australia have been proactive in discussing their future plans and consulting stakeholders.

Examples include the introduction by Sydney Ports Corporation of the Port Botany Landside Logistics Strategy (PBLIS) which has significantly improved truck turnaround in the terminals; the introduction of weigh-in-motion systems under the NSW Government chain of Responsibility legislation in the container terminals at Port Botany; the development of an inland intermodal terminal at Enfield in Sydney; the proposed transfer of the motor vehicles trade from Melbourne to Geelong and the future development of a container port at Hastings.

Mr Russell says trade facilitation should also be at the forefront of ports’ thinking. “It requires ports to be as productive as possible in keeping their own costs under control and as well as costs being recovered by service providers in their ports.

“They also need to work with State/Territory Governments in terms of the development of the necessary infrastructure to build port capacity and improve land-side connections to and from the port.”

On a practical level, ports can also improve service levels by collecting and disseminating data and information on how the port is operating (e.g. achieving productivity targets) and negotiating leases with container terminal operators that include key performance indicators.

“Land rentals need to be at a level that encourages rather than hinders service providers within the port,” he says.

 

Private aims

One particular issue that has been a hot topic of discussion has been port privatisation in Australia. The Port of Brisbane was sold just over 18 months ago (on a 90-year lease basis) and Port Botany will be sold on a similar basis next year. Ports in South Australia were privatised many years.

“In the case of the container ports of Brisbane and Sydney, there is only competition at the margins and the new owners are/will be in a strong market position. Good governance arrangements around such port operators are essential to avoid the earning of monopoly rents.”

And what about the end customer of the port – the exporters whose goods are the fundamental reason for the port’s existence?

Greg Steed is chairman of the New Zealand Shippers’ Council, which produced a “Bigger Ships” report in 2010 urging NZ ports to progress expansion plans to accommodate large vessels.

He says it is gratifying to see the major port companies take the information on board but what is sometimes missed is the realisation that all four major ports need to be capable of handling ships of around 7,000 teu by 2020. One in the North Island and one in the South Island need to be ready approximately five years earlier.

 

Leader of the pack

Tauranga is leading the charge and has extensive plans costed and funded including berth extension, new cranes and dredging once approved. The Shippers’ Council wants to see other ports moving forward in a sensible and methodical way.

Asked if the council intended for the “Bigger Ships” report to directly influence port management, not just the shipping lines, Mr Steed says it was meant to influence all stakeholders in the supply chain including all levels of government.

He agrees there is a need for ports to have direct interface not just with lines but with the exporter and importer, and feels many already are looking beyond carriers to form relationships with shippers.

Overall, he says the major New Zealand exporters are pleased with the way ports have taken their report on board, and reacted to it.

“Port plans seem to be well-considered and achievable and we have not seen any significant duplication of assets and expenditure,” he says.

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