Lithuanian Maritime Academy

Klaipeda, Lithuania

REPORT

Port selection criteria

For the course

Port terminals and operations

Written by:
Diana Baciu, Mircea cel Bătrân Naval Academy, Romania
Кaterina Ruseva, Nikola Vapstarov Naval Academy, Bulgaria

ERASMUS SPRING SEMESTER 2020

 Ports have always played a vital role in international transportation. Port selection
decision is a process that requires consideration of many important and relevant criteria. The
selection of the influential decision-making criteria is also a significant and vital issue which
demands cautious thoughts. In terms of global competition, this report aims to investigate the
following research problem: What are the elements that can be used by port clients in selecting a
calling port?
A number of port selection criteria were identified from the available literature. The main
objective of this paper is to weigh the most dominant decision-making criteria.The major
stakeholders involved in the port choice process along a logistics chain are shippers, consignees,
shipping lines, port authorities, logistics service providers and freight forwarders. This is a
complex process and highly depends on decision makers’ personal preference. The match of
demand and port services characters is the main content for the first stage of port choice and the
second stage for port selection is to filter potential ports by several selection criteria.
After studying and comparing several references, studies and specialized reports the most
important criteria for the assessment of port competition can be classified into six groups. Our
first group is the “ Monetary Category’’ which consists of the main criteria directly related to
the costs incurred by shipping lines in the transshipment process. These criterias are: Deviation
cost, Port cost, Cost in feeder link, Port dues, Cargo profitability and Terminal handling charge
(THC) in the sense that the cheaper the port expenses, the higher the competitiveness level of a
port. Other types of costs which shippers/freight forwarders eventually pay include ancillary
charges such as terminal ownership/exclusive contracts policy, costs of pilotage, towage, lines,
mooring/unmooring, electricity, water and garbage disposal. Previous studies produced varied
findings on the relative importance of port charges as a determinant of port choice.
Second is the “Time Category”.The main time-related criteria of the transshipment
process are described in this category. The levels of significance of the criteria could differ based
on shipping lines’ perceptions although these criteria may have similar characteristics. As an
example, one shipping line may place a higher significance on the waiting time than on the
deviation time, as the waiting time has a higher opportunity cost because the vessel is idle.
Another shipping line, by contrast, may view the deviation time as more significant than the
waiting time due to the high journey cost associated with deviation. Although some of these
criteria are interrelated with some criteria in the monetary category, the levels of significance
given by shipping lines for time criteria could differ from those given for monetary cost criteria.
The factors that influence this category are Deviation time, Vessel turnaround time, Time in
feeder link, Waiting time and Port efficiency(speed of port services and “on-time delivery”).
Third group is the “Port traffic category”.Given the significance of port traffic in the
hub port selection process, this category includes criteria directly related to the hub port’s traffic,
such as: Availability of captive cargo, Frequency of ship visits, Number of services calling at
port. So, greater frequency of ship visits translates into more choices for freight forwarders in
selecting a shipping line for transportation of their cargoes, and hence more competitive carrier
costs. Further, greater frequency of ship calls allows for greater flexibility and lower transit time.
Thus, the more ship visits a port has, the more attractive it is to freight forwarders.
The fourth in our list is the “Location category”. This category includes the criteria
related to the locations of hub ports. Location is significant, as shipping lines attempt to maintain
limited numbers of ports of call with maximum market coverage.Conventional notions of port
choice have focused on geographical location as one of the main determinants of a port’s
attractiveness. The choice of a port is not merely a function of proximate convenience but
derives considerable implications as well from the overall transit costs of cargo trafficking. For
example, the distance between the port and the port user’s premises has a major impact on inland
transportation costs. The factors in this category are Location relative to other hub ports,
Accessibility of hub port, Connected feeder markets, Proximity to import/export areas, to main
navigation routes and Geographical location.
The next group embraces the range of operations-related criteria, called “Operation
Category”, including port management and administration such as: management and
administration efficiency, and port security and safety. They are significant for the port selection
process, as shipping lines expect high operational performance from the port, as the higher the
quality of services and the capacity provided to the port users, the higher the competitiveness
level. As for the examples:

Water draft Port capacity Professional employees Efficiency of navigational

services

Handling speed Berth availability Marketing efforts Efficiency of husbandry

services

Cargo volume Frequency of delays Plot flexibility to Port efficiency (reliability)

shipping line requests

Transshipment cargo Port’s reputation for cargo Financial clearance Adequate infrastructure
volume damage capability

Import and export cargo Port authority/custom Feeder connection IT and advanced
balance policies/regulations technology

Information technology Port infrastructure Scope of hinterland Logistics facilities

ability (large/ small)

Slot exchange with Port superstructure Port productivity

cooperating lines

Finally, the last one is the “Liner-related category”. This category describes the criteria related
to shipping lines, which can greatly influence hub port selection. These criteria are influenced by
characteristics of shipping lines in addition to the characteristics of hub ports,while some of them
seem to be partially interrelated with criteria in other categories. Putting upfront some examples:
Availability of dedicated/own terminal, Personal contacts, Special preferences on shipping lines,
Availability of feeder services, Opinion/preferences of shipper/forwarder, Position of hub port
with shipping line’s services, Easiness of communication with staff, Inland
intermodal/hinterland connection, Port reputation, Service reliability, Convenience of customs
process, Relationship between management and workers, Acceptance of special requirements,
Calling of competitors, Quick response to port user's needs.
Another way of grouping these potential determinants of port choice is calling them quantitative
or qualitative in nature. Quantitative factors are those that can be potentially measured and
compared in an objective manner, such as route factors, cost factors and service factors.
Qualitative factors include subjective influences such as flexibility and ease of use, the port’s
marketing efforts, tradition, personal contacts and the level of cooperation that may be developed
between the shipper and the port. In practice, the distinction between quantitative and qualitative
factors is blurred because a user’s perception of the level of port performance may not be a fair
reflection of the actual performance. In many cases, perceptions can take precedence over actual
performances.
Another important thing to mention is the competitiveness of ports. There are many elements
that should be taken into consideration when assessing the competition between ports such as the
development and new investment in port facilities, the replenishment of equipment, the
classification of the present and potential development of different routes and the improvement
of port efficiency and effectiveness. This is a measurement that is between the ports themselves
and not done by the people making the choice of a calling port. This dwells into its own
economical and operational spiral, that we won’t touch upon more.
In conclusion, these are a lot of factors that influence the choice of port selection. While it’s true
that some ports may have a greater reliability score than others, that is not always the main
criteria freight forwarders should look into.

References and literature used in this report:

 Port choice and freight forwarders, Jose L. Tongzon, Graduate School of Logistics, Inha
University, 253 Yonghyun-Dong, Nam-ku, Incheon 402-751, South Korea
 PORT SELECTION CRITERIA AND ITS IMPACT ON PORT COMPETITIVENESS,
ISLAM I. SALEM1 & KHALED G. EL-SAKTY, Lecturer, Arab Academy for Science
and Technology, Cairo, Egypt, Head of Transport Logistics Department, Arab Academy
for Science and Technology, Cairo, Egypt
 Container seaport selection criteria for shipping lines in a global supply chain
perspective: implications for regional port competition, Liguo Wang, Erasmus
University Rotterdam, MSc in Maritime Economics and Logistics
 Transshipment hub port selection criteria by shipping lines: the case of hub ports around
the bay of Bengal, Chathumi Kavirathna, Tomoya Kawasaki, Shinya Hanaoka and
Takuma Matsuda
 Port management and operations by prof. Patrick M. Alderton
 Ports and Terminals, H. Lingteringen, H. Velsink