Connecting Hub Port Gateways to the Inland Infrastructure
2.1 LOGISTICS INTEGRATION OF PORT ACTIVITIES
The aim of this section is to investigate the ports’ transformation inside integrated sup- ply chains and consider challenges and opportunities in a rapidly changing—yet much promising—industry.
Logistics integration may be defined as “the integration of key business processes from end user through original suppliers that provides products, services, and information
(e)
FIGURE 2.2 (Continued) US ports and logistics network. (a) US deepwater ports. (From US Maritime Administration (MARAD), US Department of Transportation. Available at http://www.marad.dot.gov/ports_landing_page/deepwater_port_licensing/dwp_map/
dwp_map.htm [accessed on June 15, 2013].) (b) US major ports. (From 101 Shipping. 2013.
Available at http://101shipping.com/shippingseacost.html [accessed on June 15, 2013].) (c) US tonnage on highways, railroads, and inland waterways. (From US Department of Transportation, Federal Highway Administration. 2013. Available at http://www.ops.
fhwa.dot.gov/freight/freight_analysis/nat_freight_stats/tonhwyrrww2007.htm [accessed on June 15, 2013].) (d) US national oil and gas production. (From Penn State University 2013. Available at http://www.personal.psu.edu/uxg3/blogs/coal/assets_c/2009/08/
US%20Oil%20and%20Gas%20Reserves%20Map-62158.html [accessed on June 15, 2013].) (e) US national pipeline mapping system. (From US Department of Transportation, Gas Transmission and Hazardous Liquid Pipelines. 2012. Available at http://www.
phmsa.dot.gov/staticfiles/PHMSA/ImageCollections/Images/Pipeline%20Map.jpg.)
that add value for customers and other stakeholders” (Lambert et al. 1998). The benefits of integrated transport include cost efficiency and time efficiency between transshipment nodes, shared risk, distributive arrangements of investment and profit-sharing, reduced risk of cargo damage, pilferage or loss, the multimodal carrier retains network and coor- dination flexibility, efficient management of goods transported, efficient information and funds flow along their overall value chain, simplified formalities, and documentation processes.
Key objectives of integration include (a) benefits from economies of scale, based on joint resources; (b) visibility throughout the entire supply chain; (c) meeting—and exceed- ing—the final customer’s product needs; and (d) strengthening the supply chain’s perfor- mance and enhancing their marketing edge, as they compete with other supply chains.
It entails the broadest visions of holistic supply chain management that links the activ- ities of supply chain partners as a source of customer value and competitive advantage.
From a ports’ perspective, integration encompasses three levels:
a. Port operations, that is, from cargo handling to storage
b. Port facilities planning, monitoring, controlling, and maintenance
c. Holistic integration at a corporate level, where the port reaches out to the entire supply chain for the exchange of information, resources, and corporate goals In essence, integration is (a) internal, that is, commences from within a port, or any company within the supply chain; and (b) external, that is, expands throughout the sup- ply chain:
a. Internal integration in the shipping industry entails the following key characteristics:
• Corporate leadership and teamwork
• Interdepartmental goals, tasks, and performance
• Getting the credit, sharing the risk
• Exchange of customer information and market knowledge
• Sharing innovation, talent, and resources to achieve economies of scale
• Efficient IT, interdepartmental sharing of knowledge
• Cross-functional planning
b. External integration in the shipping industry pertains to the following elements:
Supply chains may collaborate like pools of companies, sharing compatible goals, ethics, and plans at a micro and macro level.
• IT networks and software that encompass the entire supply chain and enable visibility, cargo, and carrier tracking
• Alignment of leadership and strategies within the network
• Exchange of customer information and market knowledge with selected client
• Performance evaluation to be applied through the entire network
• Performance adjustments to be applied horizontally (supply chain) and verti- cally (port authorities)
• Getting the credit, sharing the risk
• Sharing innovation, talent, and resources to achieve economies of scale
• Cross-functional planning
It is worth noting that the maritime industry employs state-of-the art computer software, satellite systems, and technology that can be employed in every aspect and
department, for example, security and safety monitoring, cargo operations, maintenance, emergency response, and so on. Furthermore, because of the industry’s global nature, maritime professionals undergo continuous training and are more attuned to working in an interactive international environment. Therefore, the benefits of integration can be greater compared to other industries.
2.1.1 The Five Stages of Integration for the Maritime Industry
Globalization and technological innovations have enabled integration to transform supply chains to a great extent. Almost 25 years ago, integration was distinguished into four dif- ferent stages within a supply chain. The outcome of integration will greatly depend upon the company’s marketing strategy, structure, and operational process (Stevens 1989).
In this book, the stages of integration need to be redefined and restructured in order to encompass the modern global reality for the maritime industry and ports in particular:
Level I: The supply chain consists of different corporate entities and divisions; port strategy and operations are formed on the basis of the company’s resources. Lack of information exchange creates lack of visibility throughout the logistics pro- cess, causing delays and poor outcome. Information breakdowns cause inability to follow a lean and agile process; lack of cohesion (Port Strategy 2013). The company misses opportunities of growth, owing to poor information exchange and poor market visibility. In order to prevent the port’s collapsing, its only option will be to pursue integration, initially internal, and eventually external.
Level II: The organization applies internal integration, aiming at profit maximiza- tion and obtaining low-cost factors of production. The company lacks long-term visibility, and communication is not used effectively in order to attune to the supply chain’s goals and objectives.
Level III: Corporate integration is focused on the port’s territories. The port inter- acts with clients and its supply chain partners only in regard to operations, time, services, and activities that affect the port. Interdepartmental collaboration and information exchange have been achieved, and the port has achieved a holistic strategy. The port’s vision and objectives pertain to annual market forecasts and growth. Because of the port’s introvert attitude, it fails to reach out to global market opportunities and fails to deeply comprehend its clients’ strategic goals and therefore fails to meet them.
Level IV: The port attains external integration throughout the entire supply chain.
This new corporate attitude enables the port to expand its vision throughout the markets, manufacturers, terminal and liner operators, and other clients. The port now has a new, interactive approach and information sharing that enable it to share the risk and resources and benefit from economies of scale. It now func- tions as an efficient component of the supply chain that adds value to its partners’
activities.
Level V: The external integration expands from a supply-chain level to a regional, national, or global level. The port authorities aim to increase the port’s bargain- ing power by designing long-term strategies. With a keen understanding that the port’s power within the current supply chain may be influenced by other, com- peting ports, the port extends its vision and marketing activities to other supply chains and new clients.
2.2 STRATEGIC LOCATION AND MARKET ACCESSIBILITY