“If it can’t be measured, it can’t be managed.” -Peter Drucker
The main mode of transport for world trade is maritime transport: approximately 80% of traded goods are transported by sea. Moreover, in today’s world of intense competition, ports are transforming into commercial and industrial entities driven by changing market conditions and seek to increase their revenues and market shares. When today’s world is affected by a combination of VUCA, disruptions, trade wars and Black Swan events, ports are also affected by these events.
The efficiency of port infrastructure has also been identified as a key factor in the overall competitiveness of ports and the costs of international trade. Various studies carried out in the past have identified a link between port efficiency and the cost of international trade. Reducing inefficiency can lead to increased bilateral trade. A recent study confirmed the impact of port performance on international trade costs, concluding that doubling port efficiency in a pair of ports had the same impact on trade costs as halving the physical distance between ports.
Thus, the importance of measuring port performance increases.
Unfortunately, ports and terminals handling mainly containers can often be the main sources of shipping delays, supply chain disruptions, additional costs and reduced competitiveness. Characteristics of poorly performing ports are limitations in spatial and operational efficiency, limitations in maritime and landside access, inadequate oversight and poor coordination among relevant government agencies, resulting in a lack of predictability and reliability. The result is all too often that instead of facilitating trade, the port increases the cost of imports and exports, reduces competitiveness and hampers economic growth and poverty reduction.
Performance has two components viz. a) Efficiency and b) Efficiency. Both metrics are equally important, but importance is only given to a few operational performance metrics. The perception of its users with regard to the performance of the port, ie the satisfaction of the users, takes a back seat.
After understanding the current situation, we need to understand why measuring efficiency is important.
Ports view port users as unified entities. Each port has a large number of users. Port users are involved in different activities, having different tasks, different deadlines and different needs and expectations. The term port user needs to be defined as there may be different criteria and possible variations. The simplest definition is “anyone who uses a port”. Moreover, today’s port has a much more important role which can be classified as follows.
- The port provides port services to port users; but could also provide infrastructure. In this case, the port user is an entity that consumes port services or uses port infrastructure.
- The port is integrated into supply chains. Thus, port users can be identified either as parties involved in activities taking place either (i) at the port-sea interface, (ii) in the port area or (iii)) at the port-land interface. .
Today everyone is looking for the concept of total supply chain or total value chain. When we talk about the concept of supply chain, users include when activities take place at the port-shore interface, including important players such as customs and other regulatory authorities. The fact that users perceive value creation in a given port to be achieved through tangible and managerial aspects of the entire user value chain. In this case, the users’ perception of the port’s performance must take into account the part of the supply chain that interacts with the port.
This article was written by Dr. Pramod Sant, an industry expert and former Vice President – Head of Import, Export and Customs, Siemens Ltd.