Port Planning and Logistics Innovations: How Corridors Should Lead to Open Doors Paul E. Kent, Ph.D., Vice President and Port Specialist, Nathan Associates Inc., PKent@nathaninc.com Jacob Greenstein, USAID
Port and Transport Logistics Chain Efficiency Initial interest in shipping/transport costs Limao and Venables 10 % increase in transport costs reduces trade volume by 20 % Radelet and Sachs doubling shipping costs slows GDP growth by 0.5 % Recent growing (research) interest in port and transport logistics chain efficiency Clark, Dollar, Micco (2001) port inefficiency increases distance by 60% Wilson, Mann, Otsuki (2003) efficiency improvement in ports has greater impact than Customs improvements and use of e-commerce Hummels (2001): Inventory costs due to transport delays equivalent to 0.8 %/day of delay of the value of the goods being delivered Kent, Fox (2004) assess impact of port inefficiency on welfare port inefficiency, when mitigated, induces GDP growth by 0.47 percent Djankov, Freund, and Pham (2006) -- each additional day required for a shipment imposes extra economic distance of 70 km per day Fox, Francois, Londoño-Kent (2006) inefficiency at US/Mexican border has effect of widening the Rio Grande river by several hundred miles
Innovations Leading to Improvements in Port and Transport Logistics Efficiency FastPath Transport Logistics Diagnostics Tool Intelligent Logistics Systems Regulating Ports for Anti-Competitive Behavior Post-Privatization
Primer on Transport Logistics Chains and Terminology Transport system composed of links and nodes Links refer to where freight is moved roads, rail, inland water transport Nodes refer to where freight and trucks are processed ports, distribution centers, intermodal yards, border crossings TEUs measure of unit referring to container size twenty foot equivalent unit (1 TEU) or forty foot equivalent unit (2 TEUs or 1 FEU) Port time the time a vessel spends in port Berth utilization percent of time a berth is occupied Berth productivity number of containers ( moves ) loaded and discharged per hour (number moves per crane-hour, number moves per ship-hour) ICD inland container depot (some times referred to as dry port, intermodal yard) TOS terminal operating system computerized process control system for managing port operations
Major Components of a Port Berth Yard Gate
6 Transport Logistics Chain Port Area Truck Staging Inland Transport Inland Cont. Depot Storage/ Distribution Factory/ Retail Factory Warehouse Truck Staging Area (exports only) Road/Rail/Inland Waterways Inland Container Depot Port Hinterland Transport System L9a (inland water transport) L12a (rail) L1 (port) N1 N2 N3 N4 N5 N6 N7 N8 N9 N1 N1 N1 N1 L2 (port) L3 (port) L4 (port) L5 (port) L6 (road) L7 (tsa) L8 (tsa) L9b L10 (ICD) L11 (ICD) L12b L13 (road)
The Cost of Port Inefficiency Directly affects freight rates serving the region Non-integrated terminal means slower berth productivity at berth Ship s gear = 6-8 moves per crane hour; typical geared vessel with two cranes means 12-16 moves per ship hour Fully integrated terminal = 25-30 moves per crane hour; vessel served with 2 gantries means 50-60 moves per ship hour Assuming vessel loading/discharge volume of 800 moves Geared vessel = 50-67 hours working time Gantry served vessel = 13-16 hours working time Extra time required by vessel in non-integrated terminal = 37-51 hours For a 3,000-TEU vessel, hourly ship cost (operating and capital cost) is about $25,000/day or $1,042/hour at port Cost of low productivity: $1,042 x 37 hours = $38,542; $1,042 x 57 hours = $59,394 Range of extra cost from low productivity = $38,542 - $59,394, or $48-$74 per move (or $32 - $49 per TEU) Understanding importance of ports led to port reform and private sector participation
Importance of Transport Corridors Ports represent only a relatively small share of total transport cost Shippers are increasingly interested in total transport cost, time, and reliability With improvements in hinterland routes, interport competition has evolved to inter-corridor competition Shippers now have more options for getting merchandise to final destination Constraints to corridor efficiency drives cargo to other options
FastPath Innovative Tool for Assessing Performance of Transport Logistics Chains Considers constraints to efficiency along entire transport logistics chain Relevant corridors assessed in terms of time, cost, and reliability Logistics score generated Performance of links and nodes compared to global standards and corridors of other countries Effects of improvement options on logistics performance can be tested to help establish investment priorities Applicable to trade facilitation, food security, and disaster assistance Applied to 25 corridors in Africa, 4 in Asia, and 1 in Latin America
FastPath Schematic of Buenaventura- Bogotá Corridor
Data Input Screen for Yard Operation (Time and Cost)
FastPath Price Data Entry Screen for Buenaventura-Mediacanoa Road Link
Time, Cost, Reliability and Logistics Scores for Export Containers
Existing Conditions and Norms Export Containers
Impact of Reducing Congestion Delay by 30 Minutes at Each Point 6 road bottlenecks Bogota-Buenaventura Route Total volume = 351,322 TEUs Imports 175,661 TEUs Exports 32,934 TEUs Import truck trips - 112,696 TEUs Full export truck trips: 22,226 TEUs Empty TEU export truck trips: 71,363 TEUs Total truck trips in both directions: 206,285 Reducing congestion delay by 30 minutes at each bottleneck: total potential saving time is 3 hours. Current travel time between Buenaventura and Bogota = 30.5 hours, assuming 10 hour rest time With travel truck reduction and resulting truck productivity improvement, same volume of containers could be handled using only 185,995 truck trips (vs 206,285) If original number of trucks remains constant, number of additional cargo volume that could be transported is thus about 34,500 TEUs Assuming a 100 truck company, operating costs reduced by 8 percent
Comparing Results with Other Corridors Logistics Component Tema- Ouagadougou Laem Chabang- Vientiane Dacca- Chittagong (a) Durban- Nelspruit (a),(b) Maputo- Nelspruit I N B O U N D Overall logistics chain 51 64 59 63 62 Port 55 55 49 60 51 Road transport 55 70 58 65 51 Border post 1 73 (Ghana) 67 (Thailand) n/a n/a 73 (Mozambique) Border post 2 20 (Burkina Faso 1 ) 63 (Laos) n/a n/a 73 (South Africa) O U T B O U N D Overall logistics chain 62 66 54 68 60 Port 72 65 52 70 57 Road transport 70 70 58 65 51 Border post 1 53 (Ghana) 67 (Thailand) n/a n/a 67 (Mozambique) Border post 2 53 (Burkina Faso) 63 (Laos) n/a n/a 63 (South Africa)
Benefits of Comparative Measurements Allows for benchmarking against other corridors, including rivals Enables benchmarking against previous years performance to gauge impact of interventions (or not) Scenario testing allows for assessing impact for various interventions Encourages competition
Smart Thinking Intelligent Logistics System Port/truck staging area Dry port Source: Intelligent Logistics System concept developed by Paul E. Kent, Ph.D., Nathan Associates Inc., PKent@nathaninc.com
Components of Intelligent Logistics System Network of dry ports and truck staging areas Monitoring and control IT technologies GPS/smart seals, data exchange technologies Services to trucks, cargo, and drivers
Monitoring Shipments RADIO SURVEILLANCE WITH GPS AND LINKED REPEATERS THROUGH ETHERNET VHF INTERNET repeaters with IP link Blue arrow, link between truck & GPS radio, also with telemetry Control center SPRC
Freight Corridors Colombia
Medellin
Truck Staging Area / Dry Port
Services Offered at Truck Staging Areas and Dry Ports For the cargo check in/dispatch GPS monitoring/control container storage smart seals Consolidation/deconsolidati on warehousing customs clearance For the trucks truck repair environmental permits sales tires, fuel, spare parts parking GPS monitoring/control For the truck drivers electronic bulletin boards for freight bookings cafeteria food store/pharmacy hotel communications center (internet/phone) dispatch Ancillary services Banking Offices for logistics services freightforwarding, ships agents, etc.
Benefits of Integrated Truck Staging Area/Dry Port Approach Reduces urban congestion Reduces fuel costs Reduces pollution Reduces equipment capacity requirements Increases equipment utilization rates Decreases freight costs Decreases traffic congestion on freight corridors Reduces road maintenance costs Enhances security of trucks, cargo, and drivers Enhances driving safety Reduces insurance costs Creates local employment opportunities Reduces total logistics costs Enhances global competitiveness
Services offered at truck staging areas and dry ports For the cargo check in/dispatch GPS monitoring/control container storage smart seals Consolidation/deconsolidation warehousing customs clearance For the trucks truck repair environmental permits sales tires, fuel, spare parts parking GPS monitoring/control For the truck drivers electronic bulletin boards for freight bookings cafeteria food store/pharmacy hotel communications center (internet/phone) dispatch Ancillary services Banking Offices for logistics services freightforwarding, ships agents, etc.
Benefits of integrated truck staging area/dry port approach Reduces urban congestion Reduces pollution Decreases freight costs Decreases traffic congestion on freight corridors Reduces road maintenance costs Enhances security of trucks, cargo, and drivers Reduces insurance costs Reduces AIDS risk Integrated Transport Logistics + Security = Efficiency
Benefits to investors Captive cargoes, trucks, and truck drivers 1,500 trucks call Buenaventura each day! Various revenue generation activities Truckers and shippers are encouraged to enter this secured transport logistics chain (fined for truck parking violations in cities, more inspections required, etc.) less market risk to investors