Connecting the process dots
Ports are latecomers to the Enterprise Resource Planning party, as Iain MacIntyre discovers
Traditionally, ports have run separate systems to manage each aspect of their businesses - terminal operations, finance, procurement and inventory, human resource, payroll, management and workforce management.
However, such an approach fosters the opportunity for inconsistencies, inaccuracies and delays in the sharing of information required between the different business units in order to process a given transaction.
Contrastingly, the integrated architecture approach of ERP presents the opportunity for ports to embrace a multitude of performance improvements, says Envecon chief executive Rajesh Nair.
“ERPs traditionally provide an integrated cross-process view of mega processes such as order-to-cash, procure-to-pay or recruit-to-retire and have one common data model,” he tells Port Strategy.
“They also have standardised interfaces to external third-party solutions that enable both batch and real-time integration from systems that deal with front-end processes such as terminal operations, vessel billing and EDI systems.
“Key KPIs for any port or container terminal are operational efficiency and ability to optimise costs across a large labour force, expensive equipment and maintenance operations. ERP systems address these needs well since they have fairly comprehensive features for asset management, complex financial and procurement capabilities, warranty and spares procurement and repairs, and deal easily with large workforce planning and scheduling operations.
“Costing is a key module and the ability to track and report costs by equipment, function and unit enables better planning and control.”
Mr Nair says having one integrated data model means a “single version of truth” is created.
“ERP systems also enable strong automation and workflow processes that make it easier for organisations to streamline existing operations and enable quick turnaround of activities.”
Accenture Greater China products operating group director Fox Chu adds it is time executives embraced developments such as ERP to “revolutionise the port industry”.
“If you analyse GDP forecasts of different countries, you will come to the basic conclusion that global consumption will only go up as consumers become more affluent,” he says.
“This will naturally result in increased trade and with more trade means the demand for cross-country shipping will increase, leading to busier international container traffic.
“ERP on its own cannot solve all problems but it is without a doubt a powerful tool to be leveraged on a port operator’s journey to transform into a high-performance organisation, better equipped to face the increased demands in an ever-changing business and economic environment.”
In terms of cost, complexity and time required to transition to ERP, Mr Chu says that is ultimately dependant on the objectives and vision of each port.
“We will develop a benefit case with the port operator and identify the case for change before nailing down the technical scope of the ERP implementation.
“In some instances, ports envision a roadmap that requires a longer and more complex process when it comes to implementing ERP. For example, a project involving business transformation and deployment of new capabilities would be most complex, followed by operational transformation involving BPR [business process re-engineering].
“On the flipside, technical replacement will take up the least amount of time and is the least complex process.”
Harbour Mastery Inc chief executive George Walters concurs that ports have been “latecomers” to the concept of embracing integrated ERP systems, primarily due to the challenge of configuring for each individual operation.
“They are therefore considered a niche market and off-the-shelf solutions do not really exist,” he says.
However, once port executives have embarked on the ERP path, Mr Walters notes that varying levels of implementation can be undertaken.
“We have one client who went the route of limited implementation with interfaces to legacy systems and it took over seven months to deliver their solution. It works extremely well but they are supporting a lot of costs to keep three separate systems running.
“We have another client who replaced five systems with our one integrated solution and they have greatly reduced costs. The delivery time was about the same, but their accelerated time for delivery of services and the reduction from supporting five systems to one, has brought them the efficiency they are looking for and more than they expected.”
In or out?
Another key decision for port executives is whether they implement an in-house or hosted solution.
“The advantage of in-house is that you can see it, touch it and ‘feel’ like you have more security,” continues Mr Walters.
However, he lists the disadvantages as:
- the entire system potentially being compromised by the first severe natural disaster or terrorist attack;
- the port bearing all cost of personnel, software and networking across its entire operation;
- the solution provider needing to come on premise for most support and upgrade issues;
- and concerns over firewall vulnerabilities, given modern-day reliance on the internet.
“[Additionally] if you host your own Cloud solution, then you are into another set of costs and need for highly-skilled personnel to maintain and manage communications.”
Port Tampa Bay vice president and chief information officer Ken Washington says his port implemented an ERP system in 2007 specifically to improve reporting capabilities.
Deployed company-wide, Port Tampa Bay’s ERP system went live within 18 months of the implementation project commencing.
Mr Washington says his port is not currently considering a Cloud-based offering, but is moving from in-house to hosted “for BC [business continuity] and DR [disaster recovery] considerations”.
Inatech head of marine Alok Sharma, whose firm is a global solutions provider in the shipping and marine sectors, says its Shiptech and Bunkertech offerings also improve interaction with port operators.
“Shiptech is an intelligent, feature-rich and cost-efficient solution designed specifically to address the bunker procurement needs of modern shipping companies,” he says.
“Bunkertech is a fully-integrated, end-to-end solution for managing all essential aspects of bunker trading from risk control and procurement to operations, inventory and sales. This extends to port operations like bunker, pipeline and berth scheduling.
“Shipping and bunkering companies are also able to issue timely communications to port operators in order to ensure smooth bunkering operations. All fuel and emission-related reporting (adherence to Marpol emission regulations for example) can be taken care of.”
In parting, Envecon’s Mr Nair says embracing ERP is “just the beginning of a long journey” to ensuring IT drives major initiatives for an organisation.
“Extending the ERP to implementing organisation-wide BI [business intelligence], enabling mobility access to critical information across management and operations, and providing global supply chain visibility and better optimisation and planning, can drive significant opportunities for both cost and revenue optimisation.
“The port and container industry is still in the early stages of this cycle and building a five to ten-year roadmap with business can ensure significant value and competitive advantage for organisations.”
Cloud planning to reduce costs
One of the newest developments in ERP is the Cloud-based provision of the solution as opposed to ports having their own in-house infrastructure or outsourcing to a host provider.
Harbour Mastery chief executive, George Walters says the advantages of a good ERP solution with a solid server farm and highly-skilled personnel managing security and redundancy backup systems includes the reduction of expensive IT personnel costs; the reduction of hardware, server and networking costs; single point of upgrade (at the host) versus PC level on-premise upgrades; and remote 24/7/365 solution provision compared to on-premise technical and upgrades support.
“We support our clients in Australia and worldwide and have the ability to engage a partner like Cloud ERP in Australia to support any client we have anywhere in the world. from the United States,” he says.
However, Mr Walters does concede a Cloud-based ERP service has the disadvantage of dependency on the internet being available and may need redundancy of services including satellite.
Envecon’s Rajesh Nair sees Cloud-based ERP as delivering a “reasonable return on investment” over three to five years and minimising upfront costs, particularly in multi-tenant implementations.
“Cost savings as high as 40%-50% as compared to on-premise ERP packages are fairly common across most industry segments,” he says.
Mr Nair notes the Cloud offering is ideal for mid-market and smaller businesses who are seeking a quickly-implemented “standard shrink-wrapped solution”, without the need for much customisation.
Accenture’s Fox Chu says the advantages of adopting Cloud-based ERP include decreased time-to-market, better corporate governance and seamless global collaboration.
Although, he questions if the level of cost savings delivered by the option actually meets expectations.
you compare the amount of capital investment ports need to inject
versus the potential cost savings that can come from Cloud adoption, you
don’t necessarily see [cost] as a key driver.”
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