In the context of ports as elements in value driven chain systems, illustrate how ports can create operational, competitive advantage
According to researchers, Mata, Fuerst & Barney (1995), key resources like information technology and operations are very significant in the creation of competitive advantage for shippers. The location of a port is one of the focal points that a port has to utilize to the maximum so that it can meet the international and national supply chain at the point of need. The resources are a natural and well-sheltered harbor, an educated workforce, information technology, and government policies. The most important is the operations, which are done by a number of cranes, which handle quite a number of containers at one time. These resources are unique to a port to a level that another port cannot have them.
The Role of Information systems
The operations at a port need a Port Management Information System that significantly cuts on the turnaround time. This is the time used to process information about the arrival of a ship, the unloading, loadings and departure. Before a ship arrives at a port, the shipping companies or shippers send a message using the PMIS. This message shows the details of the ship like the time it will arrive and reservation for berthing space. This message also has information on the number of containers that the ship has, the arrangement, the destination of the containers and the date that the containers are supposed to have reached their destination. The shipping company also has to apply for a Port Call, which can be done between four working weeks up to 24 hours before a ship arrives.
After receiving this message, the operations concerning the ship are commenced. The PMIS is used to plan for a berthing space, and how the incoming ship will be unloaded. The plans for unloading the ship have to be very particular. This includes if the containers will be directly transferred to a different ship, picked by an inland transporter from the terminal or stacked at the port for later shipment. This system has also to handle the exports and imports of the domestic market for that country (Wu, Wu, Chen & Chen, 2006).
Immediately a ship arrives, it is given a berth. A particular number of cranes are assigned to remove the containers from the ship. The number of cranes depends on the number of containers on the ship or the number than needs to be loaded t the ship. Special trucks known as Prime Movers are then used to carry the containers to/from the ship and from/to the stacking yard.
There are cranes at the stacking yard, which mount and dismount containers. At the yard, containers are placed in a special initial holding place or area. Internal operations at the yard re-stack the containers in the most appropriate places. At this place, the containers are classified as those waiting for shipment, those waiting for inland transport, by special freight forwarders. This PMIS is also responsible for determining the stack locations of various containers (Wu et al. 2006).
A port also needs to have an information system that helps it to process trade documents. This system will enable the port to link the shipping companies, Customs, other Ports, traders, and forwarders. This system cuts down on the turnaround time that is used in processing documents. Instead of manual processing, this is computerized and it can take even less than fifteen minutes.
However, this has to take into consideration things like error-free information and the consequences involved in having slow operations. A port may be limited in terms of lack of land for expansion but it can use IT to utilize to the fullest the small land that it has. The flexibility of the PMIS can help a port to handle more cargo than having huge tracts of land. This is because technology increases the volume of containers handled without necessarily relying on the physical resources like land (Mata, Fuerst, & Barney, 1995). The operating system aids port managers to be flexible, cut down on turnaround time, and deliver quality without compromising on value. This is what makes a port to be a very important part of the value driven chain system.
An educated workforce
A port has to employ people who are equipped with management skills especially in the IT sector. This will help in handling the port operations with skill and prowess and result in the provision of high-class customer service. The management at the port should offer education and training for its workforce.
A government that encourages trade as a means of building the economy will focus on a good port because it is a source of business. The government will build the right-infrastructure, support government organizations that promote both international and national trade. In such a case where foreign investment is highly regarded, there will be the creation of jobs at the port and provision of capital for port expansion and operations.
A port has to be secure at all times. A safe port is one where a ship can arrive, depart, or stay without being exposed to risks that cannot be avoided by seamanship and good navigation. A port should provide cargo, ships, people, facilities, and equipment with security (Ricardson, 2004, Gurning, 2010, 37). The main areas of port safety include surveillance and harbor patrols, prevention of pollution incidents and response, Occupational Health and Safety (OH&S). Accidents at the port can be prevented through, effective monitoring and control of all cargo (explosive and hazardous), coordinate with Port State Control, and plan drills and exercises for evacuation in case of an accident (Gurning, 2010, 38).
A port should comply with national OH&S regulations, the International Ship and Port Security Code (ISPS Code), SOLAS, Load Line Convention (Gurning, 2010,45). Each port facility should have a security officer, and people should be restricted into important and sensitive areas of the port. Maritime terrorist attacks lead to loss of lives, jobs, cut off shipping lines and freight, loss of capital investment that amounts to millions of dollars annually (Flynn, 2004).
A port should have a good tariff system that is based on demand for its services, competitors, covers the operation costs, and reflects on the benefits that the port users will get (Nguyen, 2010, 9). Port pricing can rely on any of the following strategies; marginal pricing, price discrimination, average pricing, congestion cost pricing all a combination of all the strategies. A mix of all the pricing strategies offers flexibility to both the port managers and users. However, the most important thing is that a port should be a profitable corporation that should be able to sustain its operations should the government withdraw any form of support.
Responding to Competition
The government and all the port stakeholders have to be in a position to respond to competition. Every day, the management of other international ports is changing to match the ever-increasing competition (Nguyen, 2010, 9). This means that they have to be flexible to avoid losing clients. The most significant one is having an open door policy where the shipping companies or agents have a say in port management. A good example is the Port of Singapore. This port has services that cannot be equaled to any other port in the world. However, in 2002, they committed a mistake by disallowing two giant shipping companies Evergreen Marine and Maersk Sealand a say in port management (Mahizhnan, & Yap, 2000). As they negotiated through this, Malaysia offered them a say on one condition. They move their shipping operations to the Port of Tanjung Pelepas, which is located in Johor Bahru. The Port of Singapore lost about 235,000 Australian dollars in 2002 alone (Mahizhnan, & Yap, 2000). This forced the government to form a new policy that will focus on customer needs, care, and flexibility.
Question 1 (b). How the operations of a port contribute to the creation of competitive advantage for shippers whose supply chains pass through the port.
A port is very important in handling of cargo since it is part of the International Supply Chain (ISC). The suppliers, consumers, and competitor are global. Supply Chain Management (SCM) plays the role of interconnecting suppliers and customers through international trade (Mahizhnan, & Yap, 2000). This is the basis of imports and exports in any economy globally. The way a port handles its operation is what can create competitive advantage for the suppliers. At this point, logistics come in to guarantee that global sourcing and making of sales is managed in an effective manner.
This brings into light the challenge posed by the five main logistic issues that are part of the SCM. These are movement of service, time, product, information, integration, and costs. All stakeholders in international trade have to understand this. Their services have to be homogeneous in order to meet the needs of all consumers.
Movement of a product in the global supply chain causes an impact throughout the supply chain. Shipping is one of the major forms of transportation in the supply chain. Ships move slowly and do not move on a daily basis. This means that there are high peaks and dips in shipping and yet a company has to satisfy the needs and demands of the customers. This implies that the shipping system has to have a means of compensating for the dips through forecasting accurately, using work plan contingencies and using extra inventories if need be. The most significant point is that the schedule of the supplier should never be interrupted.
Intermodal Operations in the SCM
This forces many suppliers to use Intermodal Operations. Intermodalism involves moving goods between two destinations using more than one means of transport. This involves the use of air and land freight forwarders, satellites and computers, double-stack trains and straddle carriers (Magala, 2009, 35-36). Intermodal operations reduce the costs involved for every unit volume and create more efficiency (Evers, & Johnson, 2000). This also creates a competitive advantage for one supplier over another because transport is dedicated towards serving the needs of a customer. This will thus create competitive advantage for the multinational corporations in the international markets.
Information flow is very important in the SCM. Movement of information over nations changes with time. Every country has its own unique documentation details that are part of the export and import process. The SCM has to meet challenges. For instance, some countries process documents manually, fax delays, slow internet speeds, different time zones, and language differences. Irrespective of this fact, information has to flow throughout this chain and it has to flow in both directions.
The use of the Enterprise Resource Planning (ERP) software will help in increasing intermodal operations in companies involved in world trade (Mahizhnan, & Yap, 2000). Accuracy, speed, and completeness of data are very significant. This information enables clearance at the port and takes the SCM to greater levels of efficiency. Information is very necessary and vital in shipping, warehousing. This is one of the major fundamental elements of an efficient and effective SCM.
Time or Service
Suppliers have to comprehend the kind of service they are purchasing whenever they opt for an ocean carrier. Comprehending means that companies know more than the transport between ports. They have to consider facts like the time involved in inland transport, availability of the container and the total time involved in the whole process (Magala, 2009, 30-32). The time inventory is involved in great distances that are part of international trade. Longer times of transit affect the lead times, product cycles, and this have a direct impact on sales, operating capital needs and responsiveness. Manufacturers and suppliers have to incorporate this time into their schedules and this is where intermodal operations help.
Reduction of Cost
International trade involves many costs. Freight prices vary according to the trade lane and the kind of trade (export/import), insurance, custom duties, warehousing costs, fees given to forwarders and brokers. It is important to know that these costs fluctuate if the place of storage of containers is a place that far from the port. This is what happens in most cases because the port area is usually packed (Magala, 2009, 29). An additional inventory is accepted for finished goods, raw materials, or work in process. Logistics costs fluctuate due to dollar fluctuation (Darren, 2004). The other factor is monetary difference. In international logistics, there are many hidden costs especially in cases where the supplier does not understand the SCM. For instance, if a supplier chooses a slow, and low priced freighter, the costs saved can be minimal. This is because the inventory, cycle, service, and the customer's needs will be affected. According to Damas (2001), it is crucial to have accountable suppliers who embrace intermodalism since they have to adhere to the needs of the customer and manufacturer.
Integration is crucial for both information and product movement. It reduces inventory, time and reduces inefficiencies in the supply chain. Integration reduces natural gaps in the intermodal operations process. These gaps are responsible for errors and delays. Alliances between several means of transport are key to success in the intermodal operations. SCM is a process that requires the entire members to work with each other just like a business partnership.
Integration in SCM has to move in two directions; backwards and forward. If SCM needs are not met, there are very great implications on the price of commodities. Suppliers who understand SCM can sort their problems without going back to a central purchasing location, which is situated in a different region of the world. Centralized international strategic plans take time, control, and management and integration is very vital in their applicability.
The use of traditional shipping in today's world is very expensive and does not help suppliers to gain a competitive edge. Suppliers who comprehend SCM will use tailored programs and in the end get a competitive advantage. Advantage in this case means a higher market share, market differentiation, stronger customer penetration and a wider profit margin. Foreign investment firms, trade unions, and organizations, can utilize the SCM to create competitive advantage for the manufacturers of their respective nations and draw capital investment (Barney, 1991).
All the stakeholders in port operations need to know that for a port to be a part of a successful value adding chain, they have to rely on many resources not just one or two.