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To cite this article: Khalid Bichou & Richard Gray (2004) A logistics and supply chain management
approach to port performance measurement, Maritime Policy & Management, 31:1, 47-67,
DOI: 10.1080/0308883032000174454
1. Introduction
Measures of port efficiency or performance indicators use a diverse range of
techniques for assessment and analysis, but although many analytical tools and
instruments exist, a problem arises when one tries to apply them to a range of
ports and terminals. Ports are very dissimilar and even within a single port the
current or potential activities can be broad in scope and nature, so that the choice
of an appropriate tool of analysis is difficult. Organizational dissimilarity constitutes
a serious limitation to enquiry, not only concerning what to measure but also how to
measure. Furthermore, the concept of efficiency is vague and proves difficult to apply
in a typical port organization extending across production, trading and service
industries.
Ports are complex and multipart organizations in which institutions and functions
often intersect at various levels. This paper distinguishes between logistics, trade and
supply channels. The interaction among these three channels makes it difficult to
identify which institutions are (or could be) performing what functions in the port
system. The logistics channel consists primarily of specialists that facilitate the
efficient progress of cargo through a supply chain (e.g. shipping lines, freight
forwarders). Both the trade channel and supply chain are associated with ownership
of goods moving through a system of interacting organizations, with the difference
that the trade channel is normally perceived to be at the level of the sector or
Maritime Policy & Management ISSN 0308–8839 print/ISSN 1464–5254 online # 2004 Taylor & Francis Ltd
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DOI: 10.1080/0308883032000174454
48 K. Bichou and R. Gray
industry (e.g. the oil trade) and the supply chain at the level of the firm. It is impor-
tant to make this distinction because, although there are industry-wide conventions
based on factors such as the nature of the product or the structure of the industry,
it is also true that individual companies have their own corporate culture based on a
variety of factors. Industry-wide conventions are often associated with regulation,
enforcing standards, reducing uncertainty, information exchange, supporting mutual
interests, or developing a common identity [3]. Traditionally, bulk maritime trans-
port tends to be analysed by trade (crude oil, iron ore, fertilizers, etc.) and even
smaller consignments are merged into a ‘trade’ category traditionally called ‘general
cargo’. Industry- or trade-wide markets have existed for centuries. For example, the
origins of the London Metal Exchange can be traced back to 1571 [4] and the Baltic
Exchange was founded about 250 years ago [5]. More modern developments attempt
to enhance the supply chain performance of individual members at the trade channel
level making use of developments in e-commerce. For example, since 2000, major car
manufacturers have combined efforts to form a single global business-to-business
supplier exchange working with manufacturers, suppliers and industry trade groups
to ensure supply chain efficiency [6].
Nevertheless, much literature on supply chains is oriented at the level of the
firm [7]. A supply chain is defined as a set of firms that pass materials forward [8];
an alignment of firms that brings goods or services to market [9]; or a network of
organizations that, through upstream and downstream linkages, produce value in
delivering products or services to the ultimate consumer [10]. The emphasis on the
level of the firm means that the term ‘supply chain management’ is frequently used,
although it is difficult to find a universally agreed definition because it has emerged
from a number of disciplines [11–12]. Indeed, the terminology has not yet stabilized
and alternative expressions such as network sourcing, supply pipeline management,
value chain management, and value stream management are also used [13]. Products
or services can move through or along networks, channels, chains, pipelines or
streams.
Ports have an important role to play in the integration of all three types of
channel. There are many organizations occupied (or potentially occupied) with
logistics and supply chain integration within and around ports, mainly in the role
of logistics channel facilitators (ocean carriers, land-based carriers, port operators,
freight forwarders, port agents, etc.), but also as public institutions such as Customs
authorities. This paper seeks to adopt an approach that incorporates within a valid
framework of analysis existing measures of port performance and efficiency, the
association of ports with logistics and supply chain management, and appropriate
measures of logistics and supply chain management efficiency.
2. Background literature
2.1. Port performance and efficiency
UNCTAD [14] suggests two categories of port performance indicators: macro
performance indicators quantifying aggregate port impacts on economic activity,
and micro performance indicators evaluating input/output ratio measurements of
port operations. In this paper, we focus on the micro level. Various references,
particularly UNCTAD monographs, provide a range of port indicators by ratio-
type and category of operation [see, for example, 15–18].
There are many ways of measuring port efficiency or productivity, although
reducible to three broad categories: physical indicators, factor productivity
A logistics and supply chain management approach 49
indicators, and economic and financial indicators [19]. Physical indicators generally
refer to time measures and are mainly concerned with the ship (e.g. ship turnaround
time, ship waiting time, berth occupancy rate, working time at berth). Sometimes,
co-ordination with land modes of transport is measured, e.g. cargo dwell time or the
time elapsed between cargo being unloaded from a ship until it leaves the port.
Factor productivity indicators also tend to focus on the maritime side of the port,
for example to measure both labour and capital required to load or unload goods
from a ship. Similarly, economic and financial indicators are usually related to the
sea access; for example, operating surplus or total income and expenditure related to
gross registered tonnes (GRT) or net registered tonnes (NRT), or charge per twenty
foot equivalent unit (TEU). Port impacts on the economy are sometimes measured
to assess the economic and social impacts of a seaport on its respective hinterland or
foreland. The results may be provided in port statistics, e.g. the port of Rotterdam
[20] or by research institutes such as ISEMAR in France [21].
The traditional port measures focus on sea access rather than land-side connec-
tions, and there is a need for better measurement of land-side efficiency. For
example, on East Coast North America (ECNA) port productivity has been stagnat-
ing, particularly in the context of land-side operations [22]. Many ports, particularly
those in urban areas, have inadequate land-side connections. Land-side efficiency
also needs to be addressed when ways are sought to expand port capacity [23]. Port
capacity is difficult to measure or even to define. It is, nevertheless, likely to be easier
for a port to make better use of existing capacity rather than subsidize new transport
infrastructure [24]. A logistics and supply chain approach may achieve better use of
port capacity.
Port activities are usually measured by cargo output or through production
functions. In the first case, the assessment of efficiency is based either on the
contribution of a single factor productivity to port throughput such as output
per worker [25] or output per wharf [26], or on the measurement of total cargo
handling productivity [27–28], where performance evaluation equates port opera-
tions to the production function [29–30]. Much empirical research falls under this
category and seeks to compare actual output to optimum output using the frontier
method [31].
Frontier models have assessed port efficiency both within a single country [32] and
across different countries [33]. Recent models propose or use data envelopment
analysis (DEA) to evaluate port efficiency [34–37]. A detailed review of such tech-
niques for measuring port efficiency is provided by [38]. Such techniques do not
always provide consistent results. For example, Cullinane et al. [39] suggest that
the size of a port or a terminal is positively correlated with its efficiency, whereas
Coto-Millán et al. [40] found that larger ports are more likely to be economically
inefficient. Such apparently conflicting results suggest that generalization is difficult
and that the complex structural organization of ports is a major obstacle to con-
ducting valid port performance measurement and comparison. Another limitation of
the frontier model literature is that it has focused mainly on container terminals. In
fact, this is a common denominator for much of the literature on port efficiency and
performance measurement.
Some approaches look at ports as business organizations with performance
measurement based on profits. For instance, Léonard [41] analyses port performance
and comparison from a value-added perspective. ‘Value-added’ in this context is
defined as the difference between port revenues and port costs, and varies according
50 K. Bichou and R. Gray
to ship and cargo types. An index adjustment with coefficients for each ship/cargo
type is produced. Despite its originality, Léonard’s model limits port activity to
quay-side operations (i.e. ship services and cargo handling) neglecting other port-
related activities. It also assumes that all ports undertake the same pricing and
marketing strategy based on a universal estimation of ship/cargo-type value.
The techniques and methods mentioned above largely ignore aspects of logistics
and supply chain integration relevant to a port’s role and potential in the modern
international trading system. Conceptual and organizational differences explain the
variety of measures, but also underline the difficulty and complexity of port perfor-
mance measurement and comparison. As long as there is no unanimously accepted
approach to the roles and functions of ports, the subject of what and how to measure
will remain debatable.
2.2. Review of port literature relevant to logistics and supply chain management
In the port and shipping literature, few authors have addressed the issue of logistics
and supply chain management within ports and across their network of organi-
zations, and many published works adopt a fragmented approach to port operations.
Although current literature recognizes the role of ports as integral components of
distribution systems, many studies disaggregate total port operations and focus on
single or a few elements of port activity. Literature on port logistics has only
developed over the last two decades or so, for example by UNCTAD through a
series of monographs on port management and operations, or the World Bank’s
‘Port Reform Tool Kit’ describing recent trends in port management and suggesting
a framework for port reform and development. UNCTAD defines ‘third generation’
ports as those offering value-added services (e.g. warehousing, packaging) in
addition to cargo handling, and ‘fourth generation’ ports as those that are
separated geographically but with common operators or administration, such as
by global multi-port companies [42]. In an effort to assess the logistics potential
of ports, Harding and Juhel [43] distinguish between general logistics services
(GLS) and value-added activities or logistics (VAL), with the latter being a common
feature of containerised and general cargo. They highlight the increasing role of
ports as ‘distriparks’ or dedicated areas for both GLS and VAL. They also
point out the future of inland logistics centres or dry ports (e.g. inland container
depots) for logistics operations that do not need to be carried out in the seaport
area.
Much of the literature advocating the future of ports as logistics centres highlights
their nodal role in the changing patterns of maritime and intermodal transport
(e.g. hub and spoke systems), but overlooks logistics integration of the various activi-
ties performed within the port organization itself. Most published articles address
separately different aspects of port management (cost-analysis, marketing, strategic
planning, etc.) without incorporating them into an integrated logistics framework of
customer service, total costs or trade-off analysis. For instance, the question of the
total cost that a cargo bears throughout different port operations up to the final
customer or user does not appear to have been discussed in the academic literature.
The same applies to competitive benchmarking between the management of seaports
and that of other entities with similar operational features, e.g. airports or regional
distribution centres [44, 45].
For some [46–47], this fragmented approach is mainly due to the complex
organizational structure and management of ports, although recent port privatiza-
A logistics and supply chain management approach 51
tion schemes may have made it relatively easier to apply an integrative logistics
approach to port operations. Fleming and Baird [48] consider that the lack of a
‘competitive community spirit’ among different port actors (e.g. customs authorities)
is largely behind the difficulty of managing activities from a logistics perspective.
The complex organizational structure of ports has always been a central issue
in most aspects of port management, and probably constitutes the major obstacle
to the development of a comprehensive conceptual framework of port logistics
management.
Supply chain management extends the principle of logistics integration to all
companies in the supply chain through strategic partnerships and co-operation
arrangements [49]. Some regard the next challenge of supply chain management is
to manage ‘pliant flows’ so as to ensure that all parts of the chain ‘oscillate together’
in an holistic fashion [50]. In similar vein, others stress the need for ‘agile’ supply
chains in order to survive in a rapidly changing global environment [51]. Paixao and
Marlow advocate the application of ‘agility’ to the port environment, proposing that
ports should be proactive rather than reactive along supply chains in a modern
globalized world economy [52].
In general, only two concepts that can be associated with supply chain integration
in the context of ports, namely intermodalism and organizational integration, appear
to have captured widespread attention in the academic community. The word
‘intermodalism’ is usually associated with the inter-links between different transport
modes and nodes, not only as a technology but also as an interorganizational
process. Thus, there is a call for a framework of systems thinking and process
integration for intermodalism [53], and for organizational integration and partner-
ship prior to achieving an effective intermodal system [54]. As far as seaports are
concerned, most studies associate intermodal development with aspects of container
port management [55–56]. Morash and Clinton studied the role of intermodal
capabilities in international supply chains through a comparative analysis of the
USA, Japan, Korea and Australia [57]. Their survey shows that in a deregulated
and global environment, the contribution of the intermodal function in international
supply chains takes on more importance in countries where organizational efficiency
and co-operation is highly achieved. Organizational co-ordination is of paramount
importance to any successful intermodal planning and management [58]. For
shipping and port businesses, highly competitive logistics channels are required to
compete against other forms of intermodal transport such as landbridges.
Developments in patterns of sea-borne trade (e.g. round-the-world trips, triangular
routes, hub and spoke systems) are typical examples of partnership arrangements
that are beneficial to all members in the intermodal chain.
In the context of organizational integration, we are in an era of substantial
restructuring of the logistics channel [59]. Typical examples include carrier’s owner-
ship and/or management of ports or terminals, freight forwarding agencies, logistics
providers, and even IT and e-commerce companies [50–61]. Sometimes it may be
difficult for members of the international logistics channel to integrate. For instance,
integration between shipping lines and ports is difficult to implement if both parties
try to optimize the use of their respective assets (ships versus berths and warehouses)
by transferring costs to each other. Other types of international logistics channel
conflict may be between freight forwarders and shipping lines or between freight
forwarders and ports. Taylor and Jackson [62] rank ocean carriers as the most
dominant in the current organization of international logistics channels for container
52 K. Bichou and R. Gray
and intermodal transport, whereas logistics channels of bulk commodities are more
likely to be controlled by shippers or their agents.
Ports rarely control logistics channels although they are key institutions in
international shipping and logistics. Some may argue that the emergence of ‘global
port operators’ (GPOs) is an effort by ports to control logistics channels, but GPOs
often have other business interests, including as shipping lines. In any case, the
nature of ports as non-movable assets facing the growing number of footloose
arrangements (both from shippers and shipping lines) does not encourage a close
collaboration nor a long-term partnership among channel members in the port and
shipping industry.
Nevertheless, ports could be more proactive in the supply chain [63], and, despite
channel conflict, ports should be seen as key elements in value-driven chain systems,
contributing to supply chains through the creation of competitive advantage and
value-added delivery [64]. Robinson’s [65] model of the port value chain, albeit
limited only to the logistics channel, depicts various flows and relationships in
a typical port organization. They range from completely fragmented systems of
shipping line, shipping agent, customs agent, stevedore, freight forwarder, inland
transport, etc. to a fully functionally integrated system controlled by ‘mega-carriers’.
and neutral role in benchmarking. Any valid performance model, within a logistics
and supply chain management context, should integrate different measures of
internal activities and link them to measurement activities of other entities in the
supply chain [79].
External world
Current interactions
Information
flows
Supply channels
(shippers)
Payment
flows
Logistics channels
(shipowners,
intermediaries, landside
Physical transport)
flows
associations, public regulators, trade unions and financial institutions. Actors and
operators within the port community system (stevedores, multimodal transport
operators, logistics providers, etc.) are sub-members of the port management system,
and not part of the external world.
Figure 2 links different components throughout a chain of influence and relation-
ships. The upper part of the model shows external drivers of change and associates
them to management concepts of logistics (internal integration) and supply chain
management (external integration) within the context of an integrated port manage-
ment system. The lower part of the model depicts core management disciplines, both
operational and strategic, and traces their contribution to performance management
systems. Note the links between logistics and operations on the one hand, and supply
chain management and strategy on the other hand.
The key performance indicators (KPI) for ports form the focal point of the model
and integrate both the port management system and the performance management
system. Since the objective of our investigation is to propose a valid framework of
port efficiency and performance management, a combination of the two components
should constitute the central issue of analysis. The next stage is to develop a model of
port performance measurement as an interim stage on the way to developing a
working KPI model for ports (see figure 3).
A logistics and supply chain management approach 55
Developments of
production
manufacturing and
Evolutions in global distribution
production and trade management systems
channels
Total costs
Structural changes in Trade-off analysis
international logistics Channel management and Modern inventory
inter-firm process systems
Intermodalism integration Customer service
Vertical integration
Outsourcing
Logistics patterns of External integration
maritime transport Supply chain mgt Internal integration
Port management
Ports as logistics
system Improvement
centres
Operational
productivity
4. Methodology
4.1. Action research
The methodology adopted for this study works within the action research paradigm.
Action research is a process suitable where change is the main research subject, and
the researcher participates in the change process. It requires a close relationship and
collaboration between practitioners and researchers, made possible in the research
described in this paper when one of the authors undertook a short-term appointment
with the World Bank. Action research is most suitable for technique development or
theory building, but is less suitable for hypothesis testing [84]. Its advantage over
traditional survey approaches is that the latter tend to be past-oriented or ‘snap-
shots’ [85], whereas action research is a forward-looking process with implications
beyond the immediate project. Action research is undertaken by using an appropri-
ate intervention technique analogous to experimentation [86]. The technique used in
this approach is to present port managers and other experts with a model of port
performance for examination and assessment by them, leading to an improved
model. This technique is supported by a questionnaire of port managers focusing
on performance indicators.
LOGISTICS
4. Performance B 3. Improvement of
internal process
TCA/VAD/customer
service
Aggregate
performance
SUPPLY CHAIN
5. Design supply chain process 6. Current performance
By cargo: logistics channel Performance = Channel
By trade: trade channel output/profit
By customers/suppliers: supply
chain Performance C
proposed model, shown in figure 3 with covering notes (see appendix). The partici-
pants consisted of three panels of experts, namely:
Ports Panel (1). 45 employees drawn from a sample of 60 ports world-wide, of
which 35 ports have completed projects financed by the World Bank. Continents
or regions represented by the sample were: for World Bank financed ports
(Africa, Asia, Central and Latin America, Europe); for other respondent ports
(Australasia, Europe, Asia, North America).
International Institution Panel (2). Fourteen employees of international
institutions (mainly World Bank Group) drawn from a sample of seventeen
originating from eleven countries.
Academics and Consultants Panel (3). Fourteen academics and other experts:
drawn from a sample of seventeen academics, three consultancy firms, and three
independent (freelance) consultants originating from eleven countries.
The nature and limitations of the research inquiry shaped the size of each panel of
experts. The number of qualified participants, especially in the academic and con-
sultant panel, is very limited world-wide and budget constraints did not allow the
enlargement of group members to more than 100 or so participants. Out of 57 ports
that have completed projects financed by the World Bank Group (WBG) between
A logistics and supply chain management approach 57
1985 and 2000, 35 ports were contacted. 25 other ports were also approached to
reflect a wider variety of organizational, operational and managerial features of
ports.
A combination of interviews and questionnaires were prepared for each panel of
experts, consisting of:
. An on-line questionnaire was designed exclusively for port managers in order to
investigate their perception of logistics concepts and processes. In some cases,
surveys were conducted and administered over the telephone.
. A model (see figure 3) was examined and assessed by all participants.
. Extensive telephone and face-to-face open interviews were used to contact
Panels 2 and 3.
Both open-ended and closed questions were used depending on the type of infor-
mation required.
The high response rate (73%) is attributable to the careful selection of partici-
pants showing a direct interest in the subject of inquiry, and in particular to the
established contact base through the WBG. Repeated telephone calls and emails
helped to raise the response rate. The varying degrees of association of 43 partici-
pants (59%) with the WBG could constitute bias, but it was considered acceptable
given the wide range of ports, countries and types of expertise represented by the
participants.
Always 2 4.4
Often 7 15.6
Sometimes 11 24.4
Very few times 15 33.3
Never 10 22.2
Total 45 100
and management over half of the ports replied that they use them very seldom or
never (see table 4).
Although responses may reflect a lack of interest in logistics operations and
management, an alternative explanation may be the difficulty in understanding or
applying logistics concepts and measurement techniques.
Respondents were also surveyed about aspects of channel relationships and
co-operation, being asked to recognize and rank their customers/suppliers out of
seven categories of organizations in order of importance. The cumulative score
(high ¼ most important) of rankings shows shipping lines as most important, but
closely followed by freight forwarders and NVOCCs, shippers, inland transport
providers and port operators (see table 5).
A logistics and supply chain management approach 59
The fact that shipping lines do not dominate in the rankings suggests a strategic
commitment of ports as a group to diversify their client portfolio, and be less reliant
on the decisions of shipping lines. This was confirmed by 63% of respondents
regarding themselves in competition with their suppliers (mainly shipping lines
and freight forwarders), and many consider this competition to focus on the cost/
price and sometimes the marketing of port services. Furthermore, other ports
(almost 21%) claim to act in conflict with their major suppliers and customers. In
this context, ports expressed their concern about the current practices by shipping
lines and freight forwarders who may suddenly change the port of call or operation
sometimes without notice. Ports take a particular interest in the recent mergers
and acquisitions in the shipping and port industry, and the resulting footloose
operations. Nonetheless, the majority of ports (85%) expressed their interest
in collaborating with other logistics channel members and developing current
co-operation arrangements (e.g. information sharing through EDI) to a more
advanced partnership to the benefit of all participants.
5.2.1. Panel 1: Ports. Almost all respondent ports have measured efficiency in a
way similar to that of Performance A in the model. However, about half (53%)
mentioned the problems of accountability and process continuity in performance
control and management. Members of the port community still disagree on which
actor or operator should bear the responsibility and authority to collect data, mea-
sure and assess the overall port performance. Some ports do not know where their
logistics process (or activity sequencing) starts and particularly where it ends, simply
because many activities are at the interface between the port area and the outside
world (e.g. industrial parks).
For further stages of performance measurement (stages 3 to 11 in figure 3), most
respondents approved of the logistics and supply chain management integration
60 K. Bichou and R. Gray
despite their unfamiliarity with concepts and techniques introduced in the model. 31
ports (69%) considered that Performance B would be an improved measure of port
performance. Of these, 18 ports already applied a variation on Performance B to one
or several segments (cargo type, ship type, etc.) while the remaining 13 ports only
approved the method without implementation. The continuous improvement of
internal processes through total cost and trade-off analyses is of interest to ports,
and many support the use of TCA as a tool for the measurement of port’s aggregate
efficiency. Even so, over 90% of replies in support emphasized the need for
appropriate organizational structures or integration of the port community prior
to implementation.
With respect to channel organization (stages 6 to 11), 87% of respondent ports
suggested major obstacles in successfully designing and managing their channels.
Some ports attributed these limitations to the lack of reliable data and information
while others explain such a problem by the complexity of channels and the confusion
that surrounds their categorization. Many respondents admitted difficulty in under-
standing the complex and changing logistics and trade channels, and that in most
cases they do not participate in the design and management of channels.
Nevertheless, nearly all ports appreciated the concept of channel organization and
supported shared management with other channel members based on long-term
partnership arrangements. There were 102 citations of the word ‘partnership’ and
related terms.
Performance measurement through supply chain management was even more
difficult to understand and apply. Most respondents could not compute quantita-
tively the overall channel output (performances C and D) nor had they been able to
use and apply some of the proposed techniques of analysis such as process bench-
marking. In their comments on the measurement of supply chain performance, 19
ports (42%) approved the method, 9 (20%) considered it impossible or too difficult
to implement and 17 ports (38%) remained undecided about the validity and prac-
ticability of the proposed techniques. Such a high proportion of undecided responses
suggests that many ports are unfamiliar with the concepts and practices of channel
organization and management.
Subsequent informal communications with 25 ports (out of the 45 total port
respondents) confirmed these results. There was substantial misunderstanding
of the concepts or techniques of process management, channel output and bench-
marking.
In conclusion, it appears that most ports are already aware of their logistics
potential and try, although sometimes unsystematically, to apply logistics techniques
for performance measurement and analysis. Nevertheless, they lack an understand-
ing of supply chain management concepts and consequently an ability to apply the
related techniques to identify, manage and assess channel output and performance.
the need to generalize these concepts beyond container-related activities to all types
of ships and cargo movement.
All respondents considered the proposed technique for performance evaluation
through internal process mapping (stages 1 to 4 of the model) particularly interest-
ing. They consider logistics activity sequencing and segmentation, if applied within
the framework of the port system an innovative tool of analysis. This reflects a
frequent criticism of conventional financial techniques, where, for example, the orig-
inal cost and profit estimates of most World Bank Group port projects carried out
between 1950–1990 were lower than expected. This is due to intense competition
among contractors as well as inaccurate traffic forecasting. Such biased estimates
could not measure real improvement in port efficiency.
The proposed analytical framework has the advantage of computing the real
performance by sequencing port operations (Performance A) and continuously
improving them (Performance B). In this way, every project seeking to improve
port organization and management can be assessed through the measurement of
the real performance before and after the project’s implementation. Respondents,
however, stressed the need to quantify further the proposed tools and instruments of
performance measurement. In addition, respondents suggested training assistance
and guidance such as IMO model courses and UNCTAD monographs prior to
using, applying and generalizing any of the proposed techniques.
The proposal to design, manage and improve supply chain processes in which
ports are active members appealed to almost all participants (93%) with only one
respondent questioning the relevance of the whole approach. The suggested tech-
niques for channel efficiency measurement (performances C and D) would only be
practicable with adequate information access and sharing among different channel
members. Partnership and collaboration seem to be the key elements for the success
of any performance improvement and channel management. Respondents stated the
need to expand and develop current co-ordination arrangements between channel
members in international shipping and logistics to a closer partnership aimed at
reducing total distribution costs and increasing the efficiency of the integrated
logistics system.
5.2.3. Panel 3: Independent academics and consultants. The response rate for this
group was lower, with more than half of responses commenting on aspects other
than those primarily requested, e.g. the model’s design and presentation.
Respondents largely (83%) supported the contents and objectives of the proposed
model, but three key conditions prior to implementing or generalizing the proposed
model emerged from this group.
First, it is necessary to quantify the proposed techniques of performance mea-
surement. In order to assess performances C and D it is essential to provide the port
manager with quantifiable and visible ratios and formulae capable of designing,
correlating and computing the contribution of both individual and aggregate chan-
nel output. Second, respondents cast serious doubts on the usefulness and relevance
of segmenting trade channel processes since the real contribution of seaports in
international trade channels is not that obvious. Finally, the different concepts,
procedures and techniques introduced in the proposed model should be both further
detailed and simplified. Port managers are not very familiar with logistics and supply
chain concepts, nor are they willing to apply them without a clear and detailed
description. In this regard, some proposed changing the layout of the proposed
62 K. Bichou and R. Gray
model into cyclical diagrams with inter-related stages and procedures evolving
around evaluation, implementation and re-evaluation.
6. Conclusions
The research aims at conceptualizing the port system from the perspective of logistics
and supply chain management, and suggesting a valid framework of efficiency mea-
surement capable of reflecting the logistics scope of port operations and complement-
ing, if not replacing, the conventional methods for port performance measurement
and management biased towards sea access. By adopting a structured approach and
methodology and involving a range of interest groups, the authors tried to ensure
a valid and reliable inquiry given the time and cost constraints.
The results show a common interest in logistics and supply chain management
concepts across the various panels of experts. Respondents from the port group
showed a lack of familiarity with logistics and supply chain management concepts,
especially those related to logistics integration, benchmarking and channel design,
although there is common recognition of ports as key logistics and distribution
centres.
An important conclusion relates to channel control and management.
Respondent ports mention the problems of information sharing and highlight the
need for collaboration or partnership arrangements with other logistics channel
members. This is in a context of an increasing rate of mergers and acquisitions
favouring vertical integration, and a growth of footloose practices by shipping
lines. Despite traditional conflict relationships between channel members in inter-
national shipping and logistics, there is a need to expand the scope of the inquiry
beyond seaports to other logistics channel members (e.g. shipping lines and freight
forwarders) in order to investigate their perceptions and potential contribution to a
shared management of international supply channels. Academics and consultants
commonly expressed this view.
Finally, a logistics and supply chain management approach to ports may prove of
great benefit in underlining the strategic role and future potential of ports within
the framework of international business in general. It can serve particularly as a
valid analytical framework allowing an unbiased assessment of port performance
measurement and management. The enquiry described in this paper stands as an
initiative requiring further research and investigation.
Acknowledgements
Acknowledgements to the Ports and Logistics Division of the World Bank for their
assistance in part of the empirical study described in this paper.
Appendix
Interim model of port performance measurement
(Numbers 1–11 refer to boxes in figure 3.)
Logistics performance
(1) Designing the internal logistics process (sequence of port activities and opera-
tions).
By ship-type calling at the port and by cargo-type moving through the port.
(2) Assessing current performance.
Performance A ¼ Profit ¼ Revenue Cost
A logistics and supply chain management approach 63
where
Cost (C) ¼ total cost [Capital, labour, time (expressed in cost/monetary unit),
other expenses, etc.]
Revenue (R) ¼ revenue earned from a particular sequence:
For cargo sequence: R ¼ revenue from services to cargo (handling rates, ware-
housing, consolidation, etc.);
For ship sequence: R ¼ revenue from services to ship (mooring, pilotage, wharf
dues, bunkers, ship repair, etc).
(3) Improving internal process or activity sequencing through a combination of
three logistics performance measurements:
Total Cost Analysis (TCA): reduction of the total cost relative to the whole
process or sequencing, even if this may lead to an increase of individual costs
of some operations/activities.
Value-added (VAD): increasing profit by offering new services to ships and
cargoes. Note that any revenue from a proposed service (value-added) should
be higher than it costs.
Customer service: implementation of TCA and VAD should always take into
account the satisfaction of a certain level of customer service (as defined by the
port).
(4) Re-designing internal process and determining new performance.
Performance B ¼ new performance (from new sequencing) Performance A
¼ new profit former profit (as calculated in 1)
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