Port Management: Why striving for efficiency should be your main goal.

The shipping industry has always been considered to be a conservative industry having its own dynamics and economics. The shipping industry is the backbone of the world economy. Without the shipping industry, it would not be possible or too expensive to ship goods and raw materials across the globe. Think about avocados, pineapples, crude oil, ore, grain, but also flat screens, smartphones and cars... How many trucks or planes would you need to transport these items, let alone the gigantic environmental and administrative impact this would cause?

Using ships instead of trucks and airplanes is hence the more efficient and obvious option, at least for non-time critical goods. Now, looking at the total logistics chain, shipping is of course just a piece of the puzzle. Cargo, whichever type (containerized, dry bulk, liquid bulk, break bulk...), first needs to be transported from the harvesting location or factory to the port of origin, and after its journey over water, be transported again from the port up to the factory or final distribution centers. Between point A and B, these goods only bear a cost (time, storage, handling, fuel consumption...). The higher that cost, the higher the final end-user price will be, or the more disadvantageous it will be to process or sell the goods at point B. This thus means that in most cases, a port is an economic stimulator and a natural economic attraction for a wide variety of businesses. It also means that the more efficient the logistics chain is organized, the better it is for all economic stakeholders.

Factories and warehouses therefore use a broad variety of tools such as Enterprise Resource Planning or Warehouse Management System tools to optimize their part of the logistics chain. Trucking companies often use dispatching tools in combination with navigational aids, to optimize their contribution to the logistics chain. Terminal operators strive to optimize their part using Terminal Operating systems, Gate Operating Systems and Vehicle Booking Systems for planning and managing their activities.

So why then do ports often still use pen and paper, enhanced with some spreadsheets, to manage their port data? Aren't they as vital in the whole logistics chain as the other operators? Sure, they may not benefit directly from any efficiency improvement they may implement, although one might also argue about that. On the long term and in a broad sense, Ports have many reasons to actually care about their level of efficiency. If the cost of the total supply chain is higher than elsewhere due to longer wait times, unreliable planning and inefficient service delivery, shipping lines will decide to send their ships to a competing port, or large international companies might decide to invest in another state or country.

One would assume it should be every port CEO's top priority to be efficient. So what can port management teams do to reach this goal? Well it depends largely, on the type of port in question and what services are being offered to its stakeholders. Is the port primarily focused on marine operations and safety or is it acting more as a landlord? Does it provide services such as pilotage, tug and tow operations or is it also responsible port terminal operations? Whatever services the port is offering, planning, handling vessel calls is a common activity for almost all ports. And the more vessel calls a port has and the more diverse the activities of the port, the higher the need of a port to use tools to manage their activities.

Just as warehouses and terminals are using Warehouse Management Systems and Terminal Operating Systems to plan their resources, ports can use Port Management Information Systems (PMIS) to plan their resources to. PMIS help Harbour Masters, port captains and operations teams to have an overview of the scheduled vessel calls, resource planning (tug boats, pilots, mooring men, bunkering, lock & bridge operators...), berth planning etc. But PMIS also helps Port Authorities in managing unforeseen events such as ship delays, adverse weather conditions among other things. A PMIS is thus a very powerful tool for a port management team that allows them to be well organized.

Now looking at the business setup of a port, ports mainly get their income from conservancy charges, rendered services (pilotage, tug & tow operations, mooring teams...) and renting contracts (concessions & real-estate). Correct billing of all these services is often a very labor intensive and time consuming job. A cluttered amount of different papers, often handwritten, has to be manually entered into the billing system before invoices can be made and sent. Especially collecting the info of services rendered by pilots and tug-boats can be a challenging job, also when these services were performed by 3rd parties. Handwritten statements are prone to misinterpretation and are frequently being contested by shipping agents. A good PMIS therefore will make use of web-portals and/or mobile apps, where pilots and tug & towing companies can log the start and stop time of their activities. This makes this information directly available to the system and therefore the rest of the organization in real-time. In addition, because the data is digitally managed, the number of discussions with shipping agents will also drop drastically. The same goes for the conservancy charges: the moment the shipping line agent shares the shipping manifest with the port (via EDI or via a web portal), this data is immediately available for the accounting department to start creating the invoice.

What does this mean for a port? Suppose a port has a yearly revenue of 25.000 k EUR, then on average a port would invoice a bit over 2.000 k EUR per month. Now suppose the port can have its invoices paid at least 1 week sooner due to the faster processing, then the port can benefit 1 week longer from the interests on this revenue (or does not need to lend to invest). Assuming an interest rate of 5%, this would mean a monthly financial gain of 24 k EUR or a yearly gain of almost 300 k EUR!

Imagine which investments a port can make or discounts it can give to make itself more attractive. Just as an ERP (Enterprise Resource Planning) system, or in the logistics world the TOS or WMS, a PMIS not only helps ports being more efficient operationally but also administrative and financially. And as we said at the beginning, we have to look at the cost of the total supply chain.

Do you want to know more about Port Management and how we can help you, please do not hesitate to contact me via LinkedIn or e-mail.