Logistics and Port Management

C. Bert Kruk
Senior Port Specialist
The World Bank

April 2004
Logistics

 Military origin: Getting the right supplies in the

right place, in the right quantity, at the right time
 In transport: Getting the right goods in the right
place, in the right quantity, at the right time at
the least possible costs
 Essential: Price / Quality Ratio
 Possibility of choice is essential

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Port Competition

 Inter-port competition
 Within-port competition
 Intermodal competition
 Competitive ports should offer selection of
choice of hinterland connections
 Example: Dedicated Freight Railway line in the
Netherlands

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Trade Facilitation

 Commonly accepted definition?

 Logistics of moving goods through Customs or
more efficiently processing documentation
associated with cross-border trade
 Indicators can be useful

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Trade Facilitation Indicators

 Basis for development of further Indicators for

analysis of impact of Trade Facilitation
 Guide for project preparation, supervision and
evaluating logistics project performance
 Benchmark for regional comparisons
 Track effectiveness of domestic reform processes
associated with accelerating Trade Facilitation
 Assist in shaping policy-oriented empirical research
in sectors which suffer from lack of data

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Need for effective Customs and EDI

 In ‘just in time’ manufacturing, outsourcing and

global production sharing, firms cannot afford
delays with complex and inefficient Customs
rules and lack of modern systems of information
 Reduction of trade-related transaction costs can
expand trade and create employment
opportunities

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Some figures
 Hummels (1999): Exporters with 1% lower
shipping costs enjoy 5 to 8% higher market share
 Limao and Venables (2001): Infrastructure quality
accounts for 40% of variation in transport costs for
coastal countries and up to 60% for landlocked
countries
 Fink et al (2001): Liberalization of provision of port
services and regulating exercise of market power
in shipping could reduce shipping costs by nearly
33%

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Port Management models

 Public Service Port

 Private Service Port
 Tool Port
 Landlord Port

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Basic Port Management table

Model Infrastructure Superstructure Cargo

handling
Public Public Public Public
Service Port
Private Private Private Private
Service Port
Tool Port Public Public Private

Landlord Public Private Private

Port

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Examples

 Public Service Port: common model of ports in

developing countries
 Private Service Port: usually industrial types of
ports
 Tool Port: French model
 Landlord Port: Larger, developed ports

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Introduction of Containerization

 Difficult for many developing ports:

• Lack of funds

• High investment costs

• Lack of skilled labor

• High risk investment

 Change in management structure was option

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Other reasons for change
 Higher labor costs
 Higher ships’ costs
 Globalization of commerce
 Introduction of EDI and ICT
 Pressure of shipping lines regarding turnaround
time of their vessels
 Intermodal and multimodal requirements
 Bureaucracy
 Possibility to decrease staff and / or labor force

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Sharing the Commercial Risks

 A method often applied is introduction of

(usually) private and often foreign partner
 Partner has required skills and often also
sufficient capital
 Process is Commercialization, not Privatization
 Privatization requires transfer of ownership

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Commonly used methodologies
 Concession: usually leasing of facility to
operator (Joint Venture or single operator)
 Management Contract

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Concession

 Operator leases plot for long period of time

 Lease is amount of money to be paid per m2
per year (Flat Rate Lease)
 Combination of land lease and performance
hardly applied (Shared Revenue Lease)
 Lease usually indexed
 Long period (> 15 years) to allow operator to
develop business and get return on investments

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Equipment existing terminals
 Operator may buy existing from Port Authority /
Government
 Usually at second hand price
 Operator will provide new equipment, systems
and facilities from his own resources
 Former staff may be contracted by Operator
 Operator takes Commercial Risk

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Operator existing facility
 Private single operator, or Joint Venture of new
operator and previous operator (Government /
Port Authority)
 Joint Venture: Sharing of Commercial Risks

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Operator new facility
 Option 1: Government invests in infrastructure
and new operator or Joint Venture in
superstructure
 Lease can be Flat Rate of Shared Revenue
 Other options: BOT or BOO

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Build-Operate-Transfer (BOT)
 New Operator develops new facility
(infrastructure and superstructure) from his own
funds
 Operates terminal
 Income used to get return in investment
 After agreed period, terminal operator hands
over terminal (infra- and superstructure) to
public sector

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Build-Operate-Transfer (BOT) - 2
 BOT period at least 15 years
 Handover usually at written-down value
 BOT for container terminals hardly used:
income insecurity (competitive market)
 If operator is linked to major shipping line more
chance of success

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Build-Own-Operate (BOO)
 Basically same principle as BOT, but
 No pre-determined date of handing over of
facility to Government / Port Authority

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Management Contract
 Experienced operator provides expertise (staff
and means) to existing or new terminal
 Operator is paid agreed Management Fee
 Possibility of Contract:
• Under-Performing: Penalty

• Over-Performing: Bonus

 No Commercial Risks for Management

Contract party

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Regulatory Function
 In all options some form of Regulation essential
 High level authority to control articles of agreement
between public and private parties
 Not complying: Penalties
 Involves intervention in functioning of markets in
terms of setting or controlling tariffs
 Also deals with control of market and fair and
competitive behavior and practices
 Regulation essential in case of monopoly or
significant market power

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Port Performance Indicators
 Useful tools to obtain insight in performance of
port or terminal on comparative level
 Definition of Indicators important for comparison
 Most commonly used Indicators:
• Ship Productivity

• Ship Waiting Time

• Cargo Dwell Time

• Cargo Handling Charge

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Ship Productivity
 Total number of moves (containers) or tons
(break-bulk and bulk cargoes) divided by total
number of ship hours in port

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Average Ship Waiting Time
 Total number of hours or days vessels wait for a
berth (buoy-to-berth time) divided by total
number of hours ships are at berth

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Average Cargo Dwell Time
 Product of cargo handled and period of time
(hours or days) between moment of unloading
of cargo and time cargo exits port or terminal
(for export cargo) divided by total quantity of
cargo handled
 Import cargo: vice-versa

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Cargo Handling Charge
 Total charges for handling of given quantity of
cargo in units or tons divided by total number of
units of tons handled

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Examples of Container Ship
Productivity
 Average container gantry crane productivity for
multi-berth terminal and Berth Occupancy
Factor (BOF) in range of 50%: 60 to 70,000
moves per year
 PSA record 2000: handling of 1,375 moves in 6
berth hours, or 234 moves or 376 TEU per
berth hour

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Top 5 Operators 2002
 Hutchison 37 mio TEU
 Port of Singapore Authority 26 mio TEU
 AP Moeller 17 mio TEU
 P&O Ports 13 mio TEU
 Eurogate 10 mio TEU

 Total: 103 mio TEU, or 37% of world total

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 Hutchinson Whampoa Limited
FELIXSTOWE KWANGYANG
ENSENADA
HARWICH
BUSAN
THAMESPORT ROTTERDAM HONGKONG
LAZARO CARDENAS

DAMMAN

VERACRUZ

FREEPORT
MANZANILLO KARACHI
BALBOA
CRISTOBAL
DAR ES SALAAM

RANGOON PORT KLANG

BUENOS AIRES
LAEM CHABANG
March 2004 SHANGHAI, WAIGAOQIAO, YANTIAN, BEILUN, JAKARTA
Cbk/wb JJIANGMEN, NANHAI, SHANTOU, XIAMEN,
ZHUHAI 31
APM Global Terminals SHANGHAI

BREMERHAVEN
NEW ORLEANS YOKOHAMA
AARHUS KAOSHIUNG
KOBE
CONSTANTZA

ROTTERDAM

GIAO TAURO
TACOMA
ALGECIRAS
BALTIMORE
OAKLAND
PELAPAS
CHARLESTON
LOS ANGELES
ONNE PORT PIPAPAV

SAVANNAH

PORTSMOUTH
HOUSTON
MIAMI SALALAH
PORT ELIZABETH
PORT
EVERGLADES KINGSTON LAEM CHABANG
BUENOS AIRES PORT SAID
MARCH 2004
JACKSONVILLE
CBK / WB
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Port Reform Toolkit
 Comprehensive document produced beginning
of this century
 Update of practical examples in FY 2004-2005
 Download from web:
www.worldbank.org/transport

33
Trade Logistics Agenda
 Trade Facilitation and Competitiveness
 Transit Logistics and Ports
 Border Crossing and Clearance Management
 Customs Reform
 Multimodal Transport
 Transport Security

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Trade Facilitation and
Competitiveness
 Economic Benefits of Trade Facilitation
 Logistics Costs and Export Earnings:
Geography, Competitiveness and Poverty
 Facilitation Performance and Competitiveness
Index

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Transit Logistics
 Port Efficiency
 Bilateral and Regional Transit Agreements
 Landlocked Developing Countries Access:
Corridor Agreements
 Transit Guarantee Systems :
Customs/Insurance/Operators (TIR, TIF and
similar)
 Cost/Benefits of Transit Trade for Transit
Countries

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Border Crossing Management
 Single Window Environment
 Adjacent Border Posts
 Border Monitoring Systems
 Inland Clearance Facilities

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Customs Reform
 Streamlining and Harmonization of Procedures
 Information Technology and Electronic
Processing
 Risk Assessment Methods: Security with
Facilitation
 Integrity Programs
 Training / Capacity Building : Customs
Officials / Private Operators

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Multimodal Transport

 Legal Aspects
 Regulatory Framework
 Liability Regime of MTO
 Implementation/Amendments of/to MTO
Regimes

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Transport Security
 US Regulations: CSI, 24 hour-Rule
 IMO Revised Standards: ISPS Code
 Supply Chain Security Concept
 Security with Facilitation

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Thank you for your attention

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