“If it cannot be measured, it cannot be managed.” — Peter Drucker
The main transport mode for global trade is ocean shipping: around 80% of traded goods are carried over the waves. Further, in today’s world of intense competition, ports are transformed into commercial and industrial entities driven by changing market conditions and looking to increase revenues and market shares When today’s world is affected by a combination of VUCA, Disruption, trade wars and Black Swan events, ports also get affected by these events.
The efficiency of port infrastructure has also been identified as a key contributor to overall port competitiveness and international trade costs. Various studies done in past identified a link between port efficiency and the cost of international trade. Reducing inefficiency can result in an increase in bilateral trade. A recent study confirmed the impact of port performance on international trade costs, finding that doubling port efficiency in a pair of ports had the same impact on trade costs as halving the physical distance between the ports.
Thus the importance of measuring Port Performance is increasing.
Unfortunately, ports and terminals mainly handling containers can often be the main sources of shipment delays, supply chain disruptions, additional costs, and reduced competitiveness. Characteristics of poorly performing ports are limitations in spatial and operating efficiency, limitations in maritime and landside access, inadequate oversight, and poor coordination between the public agencies involved, resulting in a lack of predictability and reliability. The result far too often is that instead of facilitating trade, the port increases the cost of imports and exports, reduces competitiveness, and inhibits economic growth and poverty reduction.
Performance has two components viz. a) Efficiency & b)Effectiveness. Both parameters are equally important however importance is given to only a few operational performance parameters. Perception of its users as regards the performance of port i.e. users satisfaction is given second priority.
Measurement of Effectiveness
After understanding the present situation, we need to understand why the measurement of effectiveness is important.
Ports are considering port users as unified entities. Each port has a large number of users. Ports users are involved in different activities, having different tasks, different timelines and different needs and expectations. The term port user needs to be defined as there may be different criteria and variations possible. The simplest definition is “anyone who uses a port”. Further today’s port has a much bigger role which can be categorised as follows.
- The port provides port services to port users; but might also provide infrastructures. In this case port user is an entity that consumes port services or uses port infrastructures.
- The port is embedded in supply chains. As such port users can be identified either as parties involved in activities taking place either at (i) the port-sea interface, (ii) the port area or (iii)) the port-land interface.
Today everybody is looking for the Total Supply Chain concept or total value chain. When we are talking about the supply chain concept, users include when activities take place at the port-land interface including important players such as customs and other regulatory authorities. The fact that users perceive the value creation at a given port to be achieved by tangible and managerial aspects of the total user value chain. In this case, the users’ perceptions of the performance of the port should take into account the part of the supply chain that interacts with the port.
This article has been authored by Dr Pramod Sant, an industry expert & Former Vice President – Head of Import Export and Customs, Siemens Ltd.