London, 04.02.2013 – The themes to be discussed at the upcoming TOC Container Supply Chain Asia conference – to be held in Hong Kong, 12-14 March 2013 – are many and varied. TOC, itself, has evolved over 40 years from its origins as a port and terminal operations event. Today, what makes the conference unique is that it places the maritime container terminal at the heart of the container supply chain, the primary interface between surface and maritime transportation.
Many of the themes the event focuses on revolve around the central issue of how all stakeholders in the container supply chain – cargo owners, logistics service providers, ocean carriers and ports & terminals – can truly collaborate to produce more effective outcomes. To pursue this issue we spoke with Andy Lane, former Regional Head Asia – Terminal Partnering for Maersk Line, and now an Independent Consultant & Container Operations Expert. Andy Lane moderates the conference session on Day 1 (12 March 2013) entitled Leveraging Carrier-Terminal Collaboration for Improved end-to end Supply Chains.
Recently there have been comments in the maritime media suggesting that the productivity of container terminals in Asia has slipped behind many of their peers in Western Europe. However, Andy Lane disputes this contention. “In general terms, and after weighting based on call size quantity, container vessel turn-around is faster in Asia than in Europe, or anywhere else for that matter, ” he says. “Asian Terminals generally have a higher crane/quay metre intensity than elsewhere, and a younger, keener workforce – which is essentially union-free. Gross crane rates are also slightly higher.” In looking specifically at China, Lane adds that most Chinese terminals are reasonably efficient from a terminal operations perspective: “They are, however, hampered significantly by an overly conservative approach to vessel navigation, resulting in ‘port productivity’ losses and severe effects on down-line vessel scheduling.” In fact, defining and measuring genuine terminal productivity is one of the principal messages Lane will seek to get across to the supply chain professionals gathering at TOC CSC Asia. “A container terminal has not ‘arrived’ once it is consistently achieving 30 moves per crane per hour, ” he asserts. “Quay cranes are designed to produce at least 40 cycles in one hour, which then with multi-lifting sets a ‘ceiling’ with a true measure of success being 50 or more container moves per hour, again consistently.””
The factory without a roof
For Andy Lane it is instructive to compare terminal processes with other industrial sectors. “Take automotive assembly. When you compare a quay crane, in terms of its utilisation and ‘overall equipment effectiveness’ to automotive assembly, then some huge performance gaps exist. “Let’s not forget that automotive assembly involves bringing more than 6, 000 component parts together to produce a single product, so complexity cannot be the driver, ” he states. “Also, in various manufacturing sectors automation generally delivers significantly higher production rates, yet this has not been experienced in container terminals! Therefore, it must then come down to mindsets. A ‘continuous improvement’ mentality is missing (from container terminals), setting an artificially low ceiling and many ‘handy hooks’ on which to hang operational inefficiency. “A container terminal is a production line – a factory without a roof – and must be operated far more efficiently in the future. This is obviously not at the risk of safety, and does not need to come with additional operating costs, but can be attained and sustained through creating a performance culture similar to that which already exists in other industries. Getting more output from the same or fewer resources can only be a win-win, for terminals and their customers, both landside and quayside. This will then contribute positively to the overall efficiency of the end-to-end supply chain.”
Of course extraneous factors will always impact supply chain management and terminal owners have to be able adapt quickly to changing circumstances, particularly in a volatile global transport environment. However, some factors are much clearer, such as the advent of even larger container vessels. “Big ships will always produce the lowest possible transportation costs, so long as they can be filled, ” says Lane. “But we might already be getting close to the ‘ideal maximum size’. This is due not so much to physical constraints, either on marine architecture or port/terminal capabilities, but more to do with transit-time and environmental concerns. “There are very few markets in which you can place an 18, 000 TEU vessel calling at just a few large ports (i.e., having a large cargo hinterland) and expect to fully utilise these expensive assets. With increased port time (more moves and no major productivity gains) coupled with the need to steam at the slowest possible speed, then a simple 4 ports to 4 ports Asia-Europe service already requires up to 12 of these behemoths, with a 12 week rotation cycle. “With stagnant headhaul growth on Asia-Europe and Transpacific trades, coupled with larger ships on the horizon, then fewer ships will be required on these trades resulting in the cascading of mid- to large-sized container vessels onto emerging trades. The emerging markets will then need to have sufficient infrastructure and superstructure in place to handle these larger vessels, and that is something which barely exists today.”
This is significant for markets that are looking to benefit from the diffusion of manufacturing from China. This is not necessarily because manufacturing will be displaced from China into other emerging markets; rather the latter will be integrated into a complex web of contract manufacturing, producing components that must be shipped from one country to another before final assembly. These so-called ‘south-south’ trade linkages (e.g., Intra-Asia, Asia-ME/Africa, Asia-South America) now account for nearly 50% of global trade. But how many are capable of handling significantly greater volumes of container flows. “North and East Asia, and to an extent the Middle East, already have the infrastructure in place to deal with these trends. Separately, China needs to develop better intermodal spokes. However, in South East Asia (ASEAN) countries the challenges are different. Countries like Myanmar, Cambodia and Indonesia will need to continually gear-up their terminal capabilities. On the other hand in Thailand and Vietnam, the challenge is more to do with inland infrastructure, as both already have far too much terminal capacity, ” says Lane. “Clearly in Africa and Latin America a lot of investment is still required – and soon – to help facilitate further commerce and consequently improved prosperity in these still somewhat impoverished locations. The new Brazilian Port Reform bill goes a long way here, as does the continued heavy investment in West Africa from multinationals, although corruption and security continue to be big issues here. Let’s also not forget the emergence of Eastern Europe as a manufacturing power-house, although the vast majority of what is produced there will be consumed in Western Europe.” Does this mean the advent of more ‘near-shoring’? If so, what are the implications for container logistics? “All things being equal, then distance = time = money! Not only the cost of transportation, but also the cost of inventory will drive consumer suppliers to manufacture as close to market as possible. Potentially this could lead to more regional than international production. Obviously shorter transportation distances require fewer ships, and really short distances might well favour land transportation, which is not good news for ship or terminal owners. However, it will all come down to relative costs.” One of the external cost drivers is pressure to reduce emissions for environmental reasons. Lane sees this potentially having a high cost impact. “Currently, I do not see ship builders or fuel providers moving very expeditiously towards satisfying legislation which WILL come into force during this decade. There is a risk that widespread and expensive retro-fits will be necessary, and that ‘clean’ fuel will either not be available, or only available at a significant cost mark-up compared with today’s stock fuels. This at best will create large cost increases in water-borne supply chains, and might even result in insufficient capacity being available to cater for expected demand.”
In short, diverse challenges face container supply chain stakeholders over the coming years. And perhaps genuine collaboration between carriers and terminal operators is the starting point. For further updates on the TOC CSC Asia agenda please check our website regularly. In the meantime we will be posting further speaker interviews ahead of the event to give you a flavour of what to expect in Hong Kong