By R. Bruce Striegler
JOC’s case for new metrics to accurately determine port productivity
In July, the U.S.-based Journal of Commerce (JOC) released details of its five-year study, the Port Productivity White Paper to acclaim from the ocean shipping industry. The message it delivers seems clear; marine terminal operators must do a better job of delivering the vessel productivity required by ocean carriers and cargo shippers. Authored by Dean Davison and Andrew Penfold, of Ocean Shipping Consultants, the report focuses on berth productivity achieved at ports and terminals worldwide. That is, the measurement of the speed at which container ships are unloaded, loaded and sent back to sea.
Ocean Shipping Consultants, a respected shipping and economics consulting firm, is part of Netherlands-based Royal HaskoningDHV and Principal Consultant Davison points out that the report is based on new data and a new approach for the industry. “The traditional approach to port productivity is based upon benchmarking throughput by metre of quay or by crane.” He says the traditional method offers some general value, but asks, “Does it really reflect the true productiveness of a port or terminal?” Mr. Davison expanded, “These typical regional benchmarks help as guidance, but more depth is now needed, we need more anecdotal evidence, greater verification of what is actually happening at the port and terminal level.”
He says that an empirical approach is the way ahead and their white paper includes data about the time ships arrived and departed, the number of containers moved at the terminal as well as individual vessel size. The information collected for the study is comprehensive with the participation of 17 global shipping companies (which control about 70 percent of global capacity), along with confidential data from more than 100,000 port calls at about 400 ports and 650 terminals. “Our sample is in-depth, although not all-encompassing, but it is substantial and these data do represent a breakthrough for our industry.”
Although JOC will introduce additional data elements later, they’ve started with measures of gross berth productivity between a ship’s arrival and departure from berth. A broad definition of productivity, the data does not adjust for labour or equipment downtime, regardless of the reason.The Port Productivity White Paper makes distinctions on a regional basis, accounting for wildly different labour costs and practices, as well as between ports which principally handle transhipment traffic and those that are gateway facilities. The report has also taken into account the average size of a vessel since this has a direct impact on the number of cranes assigned to vessel calls.
In the white paper summary document, Peter Tirschwell, JOC Group Inc. Executive Vice-President, agrees the research is a breakthrough considering there’s never been an ability to compare ports and terminals globally on any measurement other than known factors such as volumes. He adds that the release of the data also makes a larger point: Marine terminal productivity in individual scenarios isn’t an unalterable reality based on local circumstances of labor, capital, management, infrastructure and politics. Rather, productivity is elevated to a larger imperative, as ports themselves factor into trade facilitation, where effectiveness in productivity translates into spinoff benefits or bottlenecks in supply chains, affects the availability of goods on store shelves and impacts employment.
The rationale for independent benchmarking and real time performance analysis
Andrew Penfold, Ocean Shipping Consultants Project Director says that while the pressures on container terminal productivity have always been an issue, they have intensified sharply in recent years. “The global financial crisis is an excellent marker between when these issues could be lived with, and the current situation where these problems have become critical.” Pre-crisis, container terminals globally relied on year-upon-year growth to support their demand profile and Mr. Penfold suggests that under those conditions, even the relatively poor performers saw high usage levels.
“Quite frankly, I think some terminals were offering a ‘take it or leave it’ approach. In other words, they had low productivity and they also understood that shipping lines had little choice and would have to live with it. In our view, this is no longer good enough. Poor productivity cannot be tolerated if you want to have a long term position in the market.” Mr. Penfold says that weaker growth and a more competitive balance between supply and demand of container terminals coupled with the introduction of much larger vessels and consignments has now thrown the issue of relative productivity into stark relief.
Penfold says that in the post-financial crisis period, development is more uncertain and over-capacity localized. Terminals need to be more competitive as each stage of the transport chain is under financial pressure, making vessel turnaround time-critical. He also noted that land use is an important criterion, as it has become an increasingly important factor in developing new port capacity, adding that while the regional assessments offer some general value, they don’t really reflect true productiveness or performance. “In the current market there’s a need for independent benchmarking and real time performance analysis, the industry must move away from relying only on the high level regional averages.”
“We think that seeking useable performance benchmarks that can be judged and reviewed over time and built into contracts is a reasonable request. It’s reasonable for shipping lines to expect to see greater depth of analysis and understanding as well as greater verification of what is actually happening at ports and terminals.” Penfold notes that Asian terminals tend to be much more productive by all measures compared to European and North American facilities, and while there has been an improvement in each region in recent years, he says the regional gap has actually increased.
He emphasizes the need to ensure comparisons are ‘like with like’, not only in terms of facilities but also in terms of regional averages. Comparing like-for-like provides an initial indication of where ports and terminals sit in comparison to each other, but what is the point he asks, of comparing a gateway terminal in North America with a trans-shipment port in Asia?
Penfold goes on to explain that some facilities are very productive but they’re not always open or don’t offer 24 hour services, and existing productivity measures fail to differentiate between operational or managerial productivity. “The Port Productivity White Paper approach seeks to offer direct comparisons of ports in a range and with other global benchmarks and also between terminals.” An example of the analysis that can be undertaken using the JOC port productivity formula can be seen using trans-shipment ports. “We can chart average moves per hour, compare hubs in different regions, and over time, we can monitor performance consistently.” Mr. Penfold says that the key deliverable is not looking for a ranking, but to chart changes in performance.
Massive ships and their capacity create a cascade effect
“We’re all aware of the revolution taking place with the size of container ships,” says Penfold. Expansion of container ship fleets in recent years has made yesterday’s deep-sea vessels today’s feeders and the role of 10,000-plus-TEU size (twenty foot equivalent unit) ships has increased dramatically, driven by economies of scale and competitive pressures. Container capacity per ship in the 1950’s ranged between 500 and 800. Through the 1980’s ships designated Panamax or post-Panamax began carrying between 3,000 and 4,500 containers. Today’s new Triple-E ships, which will come into service this summer, will be able to carry 18,000 TEUs, more than three times as many as the biggest container ships 15 years ago. “This means the role of the 10,000-TEU class vessel has increased very rapidly in the past few years and will continue to do so.”
Mr. Penfold says there’s no way that the major shipping routes (trans-Pacific and Asia trades) can absorb all the new fleet coming on-stream. “We’re already seeing what we call cascading of those vessels on to what, in the past we would call secondary trades. “ He says the cascade effect on the secondary trades is much larger than anticipated and this has terminal implications. “At the same time, fuel is much more expensive, creating pressures to slow steam vessels and to drop port calls. This places even greater pressures on terminals to reduce turn-around time so schedules can be maintained.”
From the JOC data, it seems clear that in order to handle these larger vessels and their increased consignment sizes, terminals must expand as well as make better use of existing facilities. The JOC port productivity data has elicited some controversy from U.S. port and terminal interests because it is based on gross container moves per hour with the clock ticking during the entire time the vessel is in port. A terminal’s productivity, then, is lower if it doesn’t work nights. Berth productivity is a more common measurement in Europe and Asia, where terminals operate round-the-clock with little downtime. So while U.S. ports receive criticism for their perceived lack of efficiency (not least from U.S. shippers and U.S.-based container line executives) in comparison with Asian and European ports, on a quay crane level, they hold up surprisingly well.
The JOC report does make clear that U.S. container terminals have a good deal of ground to make up if they are to achieve vessel productivity numbers achieved at various terminals in Europe and Asia. Some industry observers think that automation might just be the silver bullet, and Penfold points to the experience at European marine terminals that have invested hundreds of millions of dollars in terminal operating systems, automated transport vehicles and automated stacking cranes. “Although automation reduces labour costs and improves container yard efficiency, vessel operations don’t always see similar gains.”
Improving port and terminal efficiency produces a better bottom line for all
The JOC numbers chart average berth productivity numbers per hour for the top four U.S. terminals reporting ratings ranging from 75 to 91, and the top four terminals in Europe and the Middle East ranging from 77 to 92. Canada appears in the “Top Terminals in the Americas” list with Prince Rupert’s Fairview container terminal (a productivity number of 68), and Vancouver’s Deltaport with a rating of 63 and Halifax with a rating of 50. (Vancouver also appears on the “Top Ports Americas” list with the same 63 rating). If the report should cause alarm bells to ring in any region, it should be Europe. While the top 20 ports are mainly Chinese, other Asian ports also make an appearance such as Busan (Korea), Yokohama (Japan), Taipei and Kaohsiung (Taiwan). In the Middle East, the list includes Dubai, Khorfakkan (UAE) and Salalah (Oman). American entries include Long Beach, California, and Elizabeth, New Jersey. But there’s only one European entry: Southampton, in 20th place.
For Ocean Shipping Consultants Mr. Penfold, terminals that do not lift productivity will see market share decline. “What’s driving costs are bigger ships and port productivity,” he says. Estimated daily cost of keeping container vessels in port are US$33,900 for a 4,500-TEU vessel, $61,321 for a 12,599-TEU vessel and $74,300 for an 18,000-TEU size vessel. “Any move to improve productivity should be welcomed.” Penfold offers as example, a shift from 20 to 30 crane moves per hour for 4,700 port moves reduced port time by 33 percent for a 12,500-TEU vessel, a saving of approximately $20,400, or $1.06 million per annum.
For the Journal of Commerce, the goal, regardless of measurement, is to create through data the benchmarks that carriers, terminals and ports can measure themselves against to assess where they stand and whether there may be opportunities for improvement and Mr. Penfold says, “There can be industry-wide benefits and the need for greater efficiencies in the supply-chain are a shared challenge.”
For those who are interested in more details, kindly visit www.piers.com/port_productivity.