PORT DEVELOPMENT

INTRODUCTION
• All Competitive Ports in the world have the desire to improve their operations
through augmenting the business, effectiveness, efficiency and form an
integrated port by investing in infrastructure and superstructure and improving
terminal and supply chain efficiencies.
• The purpose of this topic is to discuss the operating environments of container
shipping by going through the concept of 4C`s, see below and the 5 Port
Management developments.
 Containerization
 Concentration
 Collaboration
 Competition
CONTAINERIZATION
• Since the first container ship in 1956, it became easier with innovation and developments,
for international trade activities. The study shows that containerization, over the years,
became preferable by relevant parties involved in the shipping business, because:
1. Container ships replaces the vessels that are less efficient;
2. Transportation cost dropped drastically owing to improved cargo handling efficiencies
3. Cost efficiencies enables economic developments
• Containers are helpful in reducing cost and time to load & discharge and easier to
transport cargoes.
• In terms of cargo distribution, it is more convenient and cost effective to move cargoes
around using various intermodal transports
• The cost to distribute cargo dropped by 90% compared to the era before containerization;
• Containerized cargo has influenced both land based and sea-based freight operations since
business had to adapt to the container revolution
CONCENTRATION

• Concentration is the preferred approach for the expansion of

container shipping companies by enlarging their fleet and
allocating more geographical destinations.
• It is known that this industry of shipping competes based on
the economies of scale, the bigger the ships the more cargo
to be loaded by the carriers to optimize the available space.
COLLABORATION

• In container shipping, cooperation among container shipping companies and

their investment in new and larger ships are largely interdependent and these
strategic actions can reinforce one another,
• Space sharing is vital for container shipping companies as the use of larger
container ships helps to reduce the financial risks in new ships investments and
achieve economies of scale in shipping operations,
• The strategic approach of collaborations between shipping liners and terminal
operators for efficient services. At times, collaborations goes as far negotiations
between shipping liners and logistic companies for a door-to-door service
offerings
COMPETITION
• Owing to globalization of business, increased competition in international trade can be expected,
• To compete, increasing the carrying capacity of container shipping firms has become a popular
means to strengthen their leadership positions in the container shipping market.
• Owing to competitive pressure, once a shipping line has indicated its intention to build larger ships,
competitors tend to follow.
• After deploying bigger ships, service rationalization, i.e., restructuring of the processes of delivering
quality services to satisfy customers, is necessary to ensure that additional shipping spaces can be
fully utilized. On the other hand, competition also leads to increasing pressure on ports to reorient
their roles and functions in adapting to the more demanding operational environment.
• Mergers and alliances among large shipping lines can be accounted for by the transformation of
some feeder ports into regional hubs and vice versa.
• As a result, ports could compete locally and regionally serving the same hinterland
DIFFERENCE BETWEEN HINTERLAND
AND FORELAND
• The hinterland is the area where the demand for cargo movement is generated. Its
importance is closely related to the level of connectivity and the level of
competition from other ports. The market areas served by a port can be classified
into two major categories:
1. Main hinterland: An area where a port has a dominant share of cargo flows,
2. Competition margin: An area where a port can be competing with other ports
• Foreland refers to the ports and overseas markets that are connected by shipping
services from the cargo source. The foreland is an area where a port provides
cargo delivery services. With the emergence of intermodal transport and door-to-
door services, the hinterland and foreland of a port have become increasingly
complex.
HINTERLAND AND FORELAND
CONTINUES….
• There 3 major factors that brings upon the significance of a container port:
1. Location: Its important as the port serves industrial activities;
2. Accessibility: Accessibility at the local scale and how well the port is
connected to the regional transport system are of high strategic
importance. It is essential to easily access a port area for convenience
and efficient means of cargo movement
3. Infrastructure: The key function of a port is to handle ships and cargoes.
The port infrastructure must accommodate current traffic, as well as
anticipate future technological developments and changes in operating
environment
• Ports evolved over the years from a traditional business model of ship to
shore cargo management operations to a land side developments and
supply chain management.
• A part of the evolution, there are two strategies for the market players in
the shipping industry:
1. Vertical integration strategies: Integrating operations with ocean carriers
and other transport operators e.g., truck, rail operations
2. Horizontal integration strategies: this has gained support over the years,
to merge, manage or own terminals in ports outside of home country.
EVOLUTION OF SHIPS

• Traditional ports were located close to city cores as shipping activities existed there
in the first place.
• A supply of workers to perform labor-intensive cargo handling activities were also a
reason for the port to be located close to the city.
• In the early 1950s, ports, such as those of London and New York, hired several dock
workers. To meet the high growth rate of seaborne trade, the number of ships and
their size grew very quickly.
• Over time, development of handling equipment and specialization of vessels (e.g.,
bulk carriers and full cellular carriers) resulted in new site requirements. For
example, bigger ships need more dock space and greater water depths.
ANYPORT MODEL

• Anyport model was developed to describe how port infrastructure evolves. The model identifies three
major phases to explain the port development process:
1. Setting: The initial setting of a port depends on geographical considerations. Evolution of a port
started from the original port, mainly a port equipped with cargo handling facilities to handle trading
and related activities. Port-related activities were mainly confined to warehousing and wholesaling,
located at sites directly adjacent to the port.
2. Expansion: The industrial revolution and growth in seaborne trade volume created impacts on port
activities. Quays were expanded and docks were required to handle growing amounts of freight and
increasing numbers of larger ships. Furthermore, the development of intermodal transport enhanced
the integration of rail operations with port terminals to increase accessibility to hinterlands. Port-
related activities also expanded to include value-added activities such as cargo consolidation.
3. Specialization: This phase of development involved the construction of specialized terminals to
handle specialized freight such as containers. Larger ships often required deeper channels, longer
berths, more yard spaces, and comprehensive intermodal transport facilities. As a result, original
port sites, located adjacent to downtown areas, became obsolete and were abandoned. This created
opportunities for port operators to build large and new ports to cope with the increasing demand
from port users.
DEVELOPMENT OF SHIPPING HUBS

• With growing complexity in shipping services, a hierarchical set of shipping networks has
emerged.
• The key characteristics of contemporary shipping networks are fewer ports of call and the
deployment of bigger vessels.
• The shipping networks are operated by mega vessels between major regions and supported
by a hub-and-spoke system. There is a trend in the shipping industry to change shipping
operations to hub and-spoke services.
• Hubs, because of their direct connections to many spoke cities, are highly accessible places.
Hubs also allow the development of indirect linkages among various locations. As a result,
the hub-and-spoke operations can benefit from cost-efficiency, service provision, and
market position. The development of shipping hubs indicates a higher level of integration
between sea-based and land-based transport systems, particularly by using an intermodal
transport system.
DEVELOPMENT OF PORTS
CONTINUES…
• The main forms of integration between maritime and inland transport
systems include inland waterway and inland feeder operations:
1. Inland waterway ports: These are inland maritime ports that are
integrated with inland waterway services on direct shuttle services by
barges or small ships.
2. Inland feeder terminals: This is a recent concept proposed to enhance
direct inland connection with a direct rail service. The agile port system
is a typical example that benefits from intermodal transport with
improved efficiency in port operations.
TRANSPORT COMPLEX ECONOMY
• A transport complex economy refers to an economy that emerges from the joint location of
transport-related activities that have substantial trading links with one another.
• One of the most striking features of a transport complex economy is the presence of clusters of
linked industries. A cluster can be defined as “a geographically proximate group of
interconnected firms including suppliers, service providers and associated institutions in a
particular field, linked by externalities of various types
• Cluster also refers to “geographically concentrated groups of interconnected firms and
associated institutions in a similar field”
• This system is characterized by a set of identifiable and stable business relations among firms.
These relations among firms are conceived primarily in terms of trading links, and it is these
patterns of transactions that are seen as principally governing their decision on where to locate.
• A transport complex economy is a phenomenon explaining why transport users and service
providers move to and are in the same area. For instance, there are different transport-related
business operators, such as barge operators, truckers, container terminal operators, and
logistics service providers, located at a busy transport hub such as Hong Kong.
FIVE DIFFERENT PORT MANAGEMENT
MODELS IN PORT DEVELOPMENTS
• Each of the models comes with different characteristics concerning the ownership of
infrastructure, equipment, terminal operation, and who provides port services such as pilotage
and towage. While service and tool ports primarily promote public interests, landlord ports
attempt to balance public and private interests. At the other end of the spectrum, private
service ports are maximizing the interests of the shareholders.

• The five port management models are:

1. Public service ports
2. Tool ports
3. Landlord ports
4. Corporatized ports
5. Private service ports
• Public service ports. The port authority of public service ports performs the whole range of
port-related services and owns all the infrastructure. They are commonly a branch of a
government ministry, and most of their employees are civil servants. Some ancillary services can
be left to private companies. Because of the inefficiencies, they are related to, the number of
public service ports has declined.
• Tool ports. Like a public service port, the tool port differs only in the private handling of its cargo
operations, albeit the port authority still owns the terminal equipment. In several cases, a tool
port is a transitional form between a public service port and a landlord port.
• Landlord ports. Represents the most common management model where infrastructure,
particularly terminals, are leased to private operating companies with the port authority retaining
ownership of the land. The most common form of lease is a concession agreement where a
private company is granted a long-term lease in exchange for rent that is commonly a function of
the size of the facility as well as the investment required to build, renovate or expand the
terminal. The private operator is also responsible for providing terminal equipment to maintain
operating standards.
• Corporatized ports. Concerns ports have almost entirely been privatized,
except that ownership remains public and often assumed as a majority
shareholder. The port authority essentially behaves like a private enterprise. This
management model is unique since it is the only one where ownership and
control are separated, which lessens “public good” pressures landlord port
authority faces and “shareholder value” pressures private ports face.
• Private service ports. The outcome of the complete privatization of the port
facility mandates that the facilities retain their maritime role. The port authority
is entirely privatized, with almost all the port functions under private control, with
the public sector retaining a standard regulatory oversight. Still, public entities
can be shareholders and thus gear the port towards strategies that are deemed
to be of public interest.
THE END!!!!!