Coordination in hinterland transport chains:

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2 Coordination in hinterland transport chains: a major challenge for the seaport community Presented by: Peter de Langen & Martijn van der Horst Port of Rotterdam Erasmus University Rotterdam Erasmus University Rotterdam

3 Outline Introduction and research methodology What is the relevance of research on coordination in hinterland chains of seaports? Which research steps has been undertaken? Coordination problems in hinterland transport chains Why do coordination problems exist? Which coordination problems do exist (focus: container barging)? Analyzing coordination in hinterland chains: an empirical application How does the seaport community solve coordination problems (focus: container barging)? Conclusion

4 Introduction and research methodology Analyze coordination problems in the hinterland chain of the port of Rotterdam and different mechanisms that can be introduced to enhance coordination Focus: Maritime container flows Hinterland transport Inter-organizational perspective

5 Introduction and research methodology Inter-organizational perspective Forwarder Port Hinterland Container shipping line Container stevedore Barge operator Shipper or consignee Terminal operator Terminal operator Road haulage Customs Port authority Inspection

6 Coordination problems in hinterland transport chains Why do coordination problems exist? An unequal distribution of costs and benefits of coordination. Lack of resources or willingness to invest of at least one firm in the transport chain. Strategic considerations Risk-averse behaviour and a short term focus

7 Introduction and research methodology Identifying relevant coordination problems in hinterland chains of the Port of Rotterdam Developing a framework to analyze mechanisms of coordination Based on insights from (New) Institutional Economics: Theory on Collective Action, Property Rights and Transaction Costs 4 types of solutions Introduction of incentives Creation of an interfirm alliance Changing of scope Creating collective action Identifying coordination arrangements to enhance coordination;

8 Coordination problems in hinterland transport chains Coordination problems Barging 3 Rail transport 5 Trucking 4 General 7 Coordination arrangements Introduction of incentives Creation of an interfirm alliance 6 31 Changing of scope 16 Creating Collective Action Two sources 1. Database: reports, studies and newspaper articles 2. Expert interviews: 40

9 Coordination problems in hinterland transport chains Which coordination problems do exist? Container barging Coordination problem Long stay of barges in the port because of too many calls and too small call sizes Insufficient terminal and quay planning with respect to sailing schedule of both deep-sea vessels and barges (will increase crane utilization) Limited exchange of cargo Actors involved Barge operator, container terminal operating company, terminal operator in port, forwarder Barge operator, container terminal operating company, terminal operator in port, Barge operator, forwarder

10 Analyzing coordination in hinterland chains: an empirical application Coordination problem in container barging Long stay of barges in the port because of too many calls and too small call sizes Introduction of incentives Creation of an interfirm alliance Bonus for TOC or barge operator in case of large call sizes Bonus ( time window ) for barge operators in case he follows the operation procedure Penalty for TOC or barge operator for small call sizes Recovery port dues per day (instead of recovery per week) Changing of scope Creating collective action

11 Analyzing coordination in hinterland chains: an empirical application Coordination problem in container barging Long stay of barges in the port because of too many calls and too small call sizes Introduction of incentives Creation of an interfirm alliance Changing of scope Alliance of barge operators establishes a container exchange terminal (de-coupling point) Alliance of barge operators exchanges cargo from/to small terminals in the hinterland Creating collective action

12 Analyzing coordination in hinterland chains: an empirical application Coordination problem in container barging Long stay of barges in the port because of too many calls and too small call sizes Introduction of incentives Creation of an interfirm alliance Changing of scope Terminal operator starts hinterland transport activities 3 rd party distributes containers in port from/to terminals Creating collective action

13 Analyzing coordination in hinterland chains: an empirical application Coordination problem in container barging Long stay of barges in the port because of too many calls and too small call sizes Introduction of incentive Creation of an interfirm alliance Changing of scope Creating collective action Coalition between PA, TOC and barge operators establishes a container exchange terminal Coalition between PA and barge operators exploits a joint ship for container transport in the port region Agreement between TOC and barge operators according performance measurement

14 Analyzing coordination in hinterland chains: an empirical application Coordination problem in container barging Long stay of barges in the port because of too many calls and too small call sizes Introduction of incentives Creation of an interfirm alliance Changing of scope Creating collective action Bonus for TOC or barge operator in case of large call sizes Bonus ( time window ) for barge operators in case he follows the operation procedure Penalty for TOC or barge operator for small call sizes Recovery port dues per day (instead of recovery per week) Alliance of barge operators establishes a container exchange terminal (de-coupling point) Alliance of barge operators exchanges cargo from/to small terminals in the hinterland Terminal operator starts hinterland transport activities 3 rd party distributes containers in port from/to terminals Coalition between PA, TOC and barge operators establishes a container exchange terminal Coalition between PA and barge operators exploits a joint ship for container transport in the port region Agreement between TOC and barge operators according performance measurement

15 Analyzing coordination in hinterland chains: an empirical application Coordination problem in container barging Long stay of barges in the port because of too many calls and too small call sizes Introduction of incentives 2x Creation of an interfirm alliance 1x Changing of scope 3x Creating collective action 7x Bonus for TOC or barge operator in case of large call sizes Bonus ( time window ) for barge operators in case he follows the operation procedure Penalty for TOC or barge operator for small call sizes Recovery port dues per day (instead of recovery per week) Alliance of barge operators establishes a container exchange terminal (de-coupling point) Alliance of barge operators exchanges cargo from/to small terminals in the hinterland Terminal operator starts hinterland transport activities 3 rd party distributes containers in port from/to terminals Coalition between PA, TOC and barge operators establishes a container exchange terminal Coalition between PA and barge operators exploits a joint ship for container transport in the port region Agreement between TOC and barge operators according performance measurement

16 Analyzing coordination in hinterland chains: an empirical application Creating collective action Coalition between PA and barge operators exploits a joint ship for container transport in the port region Barge operator and Port Authority invest together Barge with a crane: inter-regional transport services => reduce congestion for handling barges Benefits the whole port

17 Analyzing coordination in hinterland chains: an empirical application Creation of an interfirm alliance Alliance of barge operators exchanges cargo from/to small terminals in the hinterland Lumplesammler Bundling of cargo for the port area at the terminals in the hinterland Also solution for the coordination problem limited exchange of cargo

18 Analyzing coordination in hinterland chains: an empirical application Changing of scope Terminal operator starts hinterland transport activities Extended Gate Model ECT Rotterdam New phenomenon Terminal Haulage Hierarchical coordination of the chain by deep sea terminal operators will reduce long stay of barges in port

19 Analyzing coordination in hinterland chains: an empirical application Introduction of incentives Bonus ( time window ) for barge operators in case he follows the operation procedure The possibility to win influences barge operator s behavior incentives must be Substantial; and Enforceable => contract/protocol Hinterlink protocol Creating collective action Agreement between TOC and barge operators according performance measurement Multiple solutions can complementary be applied

20 Conclusion Knowledge about coordination in hinterland chains from an inter-organizational perspective is limited Framework provides a basis for assessing coordination in hinterland chains Port of Rotterdam has a good track record with regard to initiating and stimulating coordination in hinterland chains Promising line of research: same analysis in other hinterlands of European ports