Port Management and Logistics

Topic 4: Connecting Hub Port Gateways to the inland infrastructure

Learning Outcome: Categorize logistics integration of port activities

Basic Concepts:

Ports are major players in the global trade, serving as the transport nodes that facilitate
the flow of cargoes across global supply chains. Hub ports were created pursuant to
a soaring growth of the global trade, which has quadruplicated in the past 40 years in an
effort to connect the seaborne commodities with the inland infrastructure. Some of the
key reasons for this soaring of global commodities include globalization, technological
innovations, and the intensification of trade agreements.

Nevertheless, the obstacle that had to be overcome involved fast turnaround times for
cargo handling and storage. Containerization, which emerged in the 1960s, but has
boomed since the 1990s, facilitated the large-scale carriage of goods by sea, land, and
air, through multimodal/intermodal transportation
Logistics integration of port activities

Logistics integration - may be defined as “the integration of key business

processes from end user through original suppliers that provides products,
services, and information that add value for customers and other stakeholders”
 Integration can be defined as the combining and coordinating of separate
parts or elements into a unified whole.
 Integrated transport involves the combining of different modes of
transport to maximise ease and efficiency for the user in terms of time,
cost, comfort, safety, accessibility and convenience.

Key objectives of integration:

 benefits from economies of scale, based on joint resources;
 visibility throughout the entire supply chain;
 meeting—and exceeding— the final customer’s product needs; and
 strengthening the supply chain’s performance and enhancing their
marketing edge, as they compete with other supply chains.

From a ports’ perspective, integration encompasses three levels:

a. Port operations, that is, from cargo handling to storage

b. Port facilities planning, monitoring, controlling, and maintenance
c. Holistic integration at a corporate level, where the port reaches out to the
entire supply chain for the exchange of information, resources, and corporate
goals.
 Holistic integration - By definition, appropriate technology is designed and
implemented to interact in a positive way with the surrounding natural
environment and society.

Internal integration - therefore means unifying functions and processes within

the firm especially in the areas of warehousing, transportation, inventory
management, purchasing, demand planning and production. It commences from
within a port, or any company within the supply chain.
 In order to integrate internal operations, firms need to have cross-
functional structures because cross-functional inputs necessitate the
consideration of how coordination and integration can be sustained across
this intra-firm relationship. This can be achieved with an appropriate
organisational structure with fewer formalities, more empowerment and
work teams.
 Internal integration in the shipping industry entails the following
key characteristics:
• Corporate leadership and teamwork
• Interdepartmental goals, tasks, and performance
• Getting the credit, sharing the risk
• Exchange of customer information and market knowledge
• Sharing innovation, talent, and resources to achieve economies
of scale
• Efficient IT, interdepartmental sharing of knowledge
• Cross-functional planning

External integration refers to unified control of functions and processes across

trading partners. It expands throughout the supply chain.
 Upstream examples include the sharing of production plans and costs with
suppliers, while downstream examples include the various shared
information and processes associated with collaborative planning,
forecasting and replenishment.”
 External integration in the shipping industry pertains to the
following elements:
Supply chains may collaborate like pools of companies, sharing
compatible goals, ethics, and plans at a micro and macro level.
• IT networks and software that encompass the entire supply chain
and enable visibility, cargo, and carrier tracking
 • Alignment of leadership and strategies within the network
• Exchange of customer information and market knowledge with
selected client
• Performance evaluation to be applied through the entire network
• Performance adjustments to be applied horizontally (supply
chain) and vertically (port authorities)
• Getting the credit, sharing the risk
• Sharing innovation, talent, and resources to achieve economies
of scale
• Cross-functional planning

The Five Stages of Integration for the Maritime Industry

Level I: The supply chain consists of different corporate entities and divisions;
port strategy and operations are formed on the basis of the company’s
resources. Lack of information exchange creates lack of visibility throughout the
logistics process, causing delays and poor outcome. Information breakdowns
cause inability to follow a lean and agile process; lack of cohesion.

Level II: The organization applies internal integration, aiming at profit

maximization and obtaining low-cost factors of production. The company lacks
long-term visibility, and communication is not used effectively in order to attune to
the supply chain’s goals and objectives.

Level III: Corporate integration is focused on the port’s territories. The port
interacts with clients and its supply chain partners only in regard to operations,
time, services, and activities that affect the port. Interdepartmental collaboration
and information exchange have been achieved, and the port has achieved a
holistic strategy. The port’s vision and objectives pertain to annual market
forecasts and growth. Because of the port’s introvert attitude, it fails to reach out
to global market opportunities and fails to deeply comprehend its clients’ strategic
goals and therefore fails to meet them.

Level IV: The port attains external integration throughout the entire supply chain.
This new corporate attitude enables the port to expand its vision throughout
the markets, manufacturers, terminal and liner operators, and other clients. The
port now has a new, interactive approach and information sharing that enable it
to share the risk and resources and benefit from economies of scale. It now
functions as an efficient component of the supply chain that adds value to its
partners’ activities.

Level V: The external integration expands from a supply-chain level to a

regional, national, or global level. The port authorities aim to increase the port’s
bargaining power by designing long-term strategies. With a keen understanding
that the port’s power within the current supply chain may be influenced by other,
competing ports, the port extends its vision and marketing activities to other
supply chains and new clients.

References:

1. Port Management and Operations by Maria G. Burns

2. https://unctad.org/system/files/official-document/sdtetlbmisc20043_en.pdf
3. https://pdf.sciencedirectassets.com
4. https://www.anzam.org/wp-content/uploads/pdf-manager/
1996_SOOSAYCLAUDE_272.PDF