5.5 Types of clusters
5.5.4 Port clusters
Box 5.3. Consolidating information architecture for improved asset utilization within the cluster
ITS planning can offer benefits at the value chain industry cluster level by optimizing the utilization of the assets of transportation related technologies and information flows. This goal has been suggested in recent discussion of an integrated approach to information systems international air cargo operations in the Twin Cities Metropolitan Area. An Air Cargo Task Force in the Mpls/St. Paul region has lead a number of studies which have identified more than 50 air cargo freight forwarders.
A significant issue for the region is that international air cargo drayed to Chicago is often interred for several days while a forwarder attempts to “fill” a truck. A study of the issue has proposed the creation of a consolidation centre whereby all participating air cargo forwarders would operate on a “shared” information system and drayage fleet. This would increase the efficiency of not only the information technology, but of the trucks, warehouse facilities and other key transportation resources in the value chain. By identifying the relevant value-chain clusters to be served by the facility with their relevant strategies and technologies, ascertaining their transportation requirements at the value-chain level, defining the roles and responsibilities of public and private entities and establishing key decision points and decision support requirements as described in the previous section, a cluster-based concept of operations for such a system could offer reduced costs and increased efficiencies for private sector cluster members, and an optimal use of the relevant ports and highways for public sector collaborators.
Source: (Duncan and other, 2005).
transformation depends to a large extent on the capabilities of actors in the port cluster to initiate and sustain coalitions to attract growth activities.”
The concept of postponement (or postponed manufacturing), mentioned in the above quotation was introduced in Chapter 2. Adopting the perspective in the above two quotations, a port is perhaps nothing more than an area of real estate suitable for many uses, including those not necessarily connected with the arrival of goods and ships. The industrial cluster located at a waterfront estate ultimately may be any type of industrial cluster. Therefore, it is preferable to consider the institutions and functions of the cluster as well as the location when defining a port cluster.
Although they are not explicitly writing about clusters, it is clear that Bichou and Gray (2004) are dealing with what are known as “value-chain industrial clusters” (see above). They see ports as complex and multipart organizations in which institutions and functions often intersect at various levels, but within three main interacting channels: the logistics, trade and supply channels. Members of the logistics channel (e.g. shipping lines, freight forwarders) facilitate the efficient progress of cargo through a supply channel. Both the trade channel and supply channel are associated with ownership of goods moving through a system of interacting organizations, the trade channel at the level of the sector or industry (e.g. the oil trade) and the supply channel at the level of the firm. The two levels are the equivalents of the micro-level and meso-level of clusters described by OECD (1999).
This distinction accepts that there are industry-wide conventions based on factors such as the nature of the product or the structure of the industry, but that individual companies have their own corporate culture and methods of operating. Industry-wide conventions are often associated with regulation, enforcing standards, reducing uncertainty, information exchange, supporting mutual interests, or developing a common identity. Traditionally, bulk maritime transport tends to be analysed by trade (crude oil, iron ore, fertilizers, etc.).
Literature on supply channels or chains generally focuses on the level of the firm (Mentzer and others, 2001), and many definitions refer to the firm. For example, a supply chain is defined as a set of firms that pass materials forward (Lalonde and others, 1994); an alignment of firms that brings goods or services to market (Lambert and others, 1998); or a network of firms that, through upstream and downstream linkages, produce value in delivering products or services to the ultimate consumer (Christopher, 1992). The emphasis on the level of the firm means that the term “supply chain management” is frequently used, although, as discussed in Chapter 2, it is difficult to find a universally agreed definition because it has emerged from a number of disciplines. (Croom and others, 2000; Lummus and Vokurka, 1999). As described in Chapter 2, there are a number of alternative terms to “supply chain”, but the literature on clusters tends to prefer the term “value-chain”.
Figure 5.1 has been adapted from Bichou and Gray (2004) and shows the interactions of the three classes of channels as part of a port cluster. It assumes the existence of four flows or
processes (physical flows of goods and cargo, capital flows, payment flows and information flows) common to all commercial cargo ports. In Figure 1, the integrated port management system refers to the aggregate management of the “port community” regardless of the specific details of port ownership and organization. Often, the port authority fits perfectly in this role for service and tool ports. Other external members influence the port system without being an integral part of it, e.g. business associations, public regulators, trade unions and financial institutions. Actors and operators within the port community system (stevedores, multimodal transport operators, logistics providers, etc.) are sub-members of the port management system, and not part of the external world.
De Langen, 2003 introduces the concept of a “cluster manager” for ports. The cluster manager is,
A not-for-profit organization that generates income through a ‘cluster tax’ and re-invests this income to improve the performance of the cluster in the long run. In the perfect setting, the cluster manager can create co-finance arrangements with firms that benefit from the investments.” (de Langen, 2003, p. 197).
According to de Langen the port authority is in an ideal position to fill this role which is often lacking in industrial clusters associated with other industries. The table below shows the type of investment that can be seen as cluster management investment in Rotterdam.
Figure 5.1. Interactions of channels in an integrated port management system
Source: Bichou and Gray (2004).
Table 5.1. Cluster manager investments in Rotterdam
Role of port authority Direct cost recovery Indirect cost recovery Investments in port cluster
(location)
Port consultancy; venture capital provision; office space provision;
industrial pipeline infrastructure;
hinterland terminals in Middle Europe
Co-funding of university research Co-funding of innovation projects Co-funding of port labour pool Co-funding of training facility Co-funding of education centre Investments in transport
node
“Standard investments” such as dredging, quay construction, and traffic control.
Market intelligence Port marketing Source: De Langen (2003).
As a landlord the port authority may be more concerned with property and estate development than goods transfer or cargo flows management, and therefore, in such cases, can be said to have a role beyond that of cluster manager. Following recent strategies of vertical integration by carriers (e.g. into terminal leasing and ownership), ship-owners are sometimes associated with port management. Shippers may also sometimes act as ship-owners (operating industrial or bareboat shipping) and even as port managers (in dedicated oil or car terminals). In these cases, all such institutional types are part of the cluster management (the integrated port management system in the terms of Bichou and Gray, 2004).
De Langen (2003) stresses that the cluster manager should be distinguished from a leader firm, which can play an important role in improving the performance of port clusters along various paths such as:
Improving rail accessibility, by setting up a freight rail company;
Improving the quality of the labour force in the cluster;
Improving the “data interchange infrastructure” in a port;
Improving the organizational infrastructure in a port and the cooperation between firms and the port authority;
Increasing the working standards of suppliers in the port; and
Encouraging the introduction of internal competition in a cluster.
The point made by de Langen is clear enough, but the issue of conflict between a cluster manager and a leader firm needs to be addressed. For example, a leader firm may press for exclusive use of a terminal against the wishes of the port authority (or cluster manager).
Collective action is necessary in some circumstances in a port. It is required when the benefits of investment are for many cluster members and the price cannot be charged to individual members. Areas where collective action is necessary are innovation, training and education, internationalization, marketing and promotion, and hinterland access. Good hinterland access
benefits all port cluster members, but usually no single member can develop it (de Langen, 2003).
Much of the recent history of port development can be seen as a process of geographical “de- clustering” where service providers formerly based on ports have moved away from the immediate port vicinity. For example, logistical operations move to inland logistics centres, dry ports, or inland container depots. De Langen (2003), citing van Klink (1995) refers to the process of decline in port employment as “maritime deconcentration”. Whether or not they are located at the port, De Langen (2003) identifies at least six types of intermediary typically associated with a port cluster. They are forwarders (intermediary between shippers and providers of transport services); non-asset based logistics service providers (between shippers and asset-based providers of logistics services); ship brokers (between ship-owners and providers of shipping services); ships’ agents (between ship-owners and providers of port services or between ship-owners and shippers); commodity traders mediating between producers of commodities and buyers of those commodities.
Associations are also intermediaries but of a different order, because they aim to promote the interests of their members. However, they should be included in any analysis of intermediaries, since they have “an important mediating role, for instance between different members, between members and the Government and between members and research institutes.” (de Langen, 2003, p. 112). Using the terminology introduced earlier, they are operating at the meso-level (OECD, 1999) or in the trade channel (Bichou and Gray, 2004).
5.6 Government policy and clusters