Container terminal


Throughput as a measure of port efficiency in contemporary logistic supply chain era is not sufficient, traditional measures of efficiency like how fast containers are loaded and discharged and passed through the container terminal is become a normal quality expectation from the customers. The container terminals are assessed on higher quality, customization responsiveness, scheduling change responsiveness and value added services. Maritime supply chain integration capability is considered a source of competitive advantage for the container terminals. This paper tries to look into the macro and microeconomic perspective of container terminals and the role they play in the maritime supply chain.

Queuing is a major issue facing the container terminals as the number of containers passing through them increases. We will look into the queuing container throughput in detail after maritime supply chain.


Supply chain is defined as a network of organizations which produce value for a customer (Kumar, 2001). Maritime supply chain can be defined as network of container terminals which produce value for a customer by transport of containerized goods from one part of the world to another.

Globalization, decoupling of production and market around different parts of the globe has resulted in the massive increase in demand for maritime supply chain. Container terminals play an important role in a maritime supply chains. As the demand for economy of scale and reduced cost of shipping the goods increases, such channels need to achieve a high degree of integration with other members in the supply chain. This paper will try to identify the integration parameters which are important for the container port/terminal in the global supply chains.

Micro Factors affecting the supply chain

Container terminals have facilitated loading/unloading containers, storage and providing infrastructure for ship operations. The primary focus of container terminals has been efficiency, annual container throughput in TEUs and logistic measures of cost and performance. In order for container terminal to be effective members of the maritime supply chain they have to be able to forecast equipment and capacity requirement, allocate equipment and space to load/unload containers and control operation process to make sure that the planned activities are done on schedule efficiently and effectively.


Maritime supply chain consists of container terminals, shipping lines, inland transport providers and container ships. They are connected electronically which helps container terminals forecast the exact number of ships making a port of call and the containers forecasted to be loaded/discharged to/from the ship/rail/truck.

The rise of use of RFID in containers have enabled container terminals to monitor the ship/rail/truck in real time and exactly know the ETA and ETD of a given container helping them forecast, allocate and schedule load/unload operations, straddle carrier operations more accurately resulting in a lean and just in time utilization of container terminal resources like storage space, equipments and humans. Forecasting plays a very important role in effective maritime supply chains.


Container terminal resources like space, equipments like straddle carriers and trained staff are primary and limited resources. The biggest challenge for the container terminals is to allocate and utilize them in the best possible manner to ensure efficient and effective container terminal operations. Allocation is of strategic interest to the container terminals as container throughput, profitability and maritime supply chain directly depends on it. In a stable maritime supply chain one would expect to see accurate forecast, efficient utilization of resources and just in time delivery of containers to the downstream members on agreed upon time leading to the best possible outcome for the entire chain. In an evolving supply chain the ripple effect of delays would be felt throughout the chain and will lead to excessive container inventory, excessive container moves, escalating cost throughout the supply chain, declining profitability, a poor return on assets and degraded customer service resulting in an out of control supply chain.

Quality & Competitiveness:

Fleming (1997) stated new trends and technological integrations of global trading systems and standards oblige ports to meet the ship operators' requirements with all sorts of modern facilities and services to retain competitive advantage. Hence quality of services is a major factor affecting customers' choices of terminals and ports. Many studies in the past focused primarily on facility development, port management, port privatization, terminal operation costs and schemes to remove physical constraints for more efficient operations. However Frankel (1993) says quality in products and services has become a pivotal marketing concern in the past two decades. But the dilemma according to Cronin & Steve (1992) is that while quality in tangible goods is not difficult to describe and measure, quality in services can be rather difficult to pin down.

Foster (1979) made two surveys and identified several service quality factors. One major finding was that service considerations were more important than costs associated. Other dominant factors were number of sailings, availability of equipment and supporting services, level of congestion, quality of customs handling, amount of free time allowed to cargo, security and port reputation.

Willingale (1981) analyzed port-routing patterns for short-sea shipping services. He identified patterns influencing the development of port-routing pattern and the selection or ports follows: relative levels of port pricing, differential pricing practices, quality of seaward and landward accessibility to a port, nature of terminal working arrangements including ship-work agreements, stability of port's labor position, the different attitudes expressed by the alternative ports authorities to the proposed service ventures, the exclusive or priority usage of a particular berth at a particular scheduled time and personal factors.

Slack (1985) also investigated logistic selection criteria. He focused on containerized traffic and his survey resulted yielding almost similar results where quality focus was associated with: port security, size of port, inland freight rates, port charges, quality of customs, free time, congestion port equipment, number of sailings, proximity of port, and possibility of intermodal links. Again pricing played a more dominant criterion for selection then infrastructure.

Murphy et al (1987) suggested a new framework which focused on specific decisions. He used univariate and multivariate analyses to identify port selections of international shipments. He identified key factors which are: loading and unloading facilities for large and/or over-sized freight, accommodation of large volume shipments, low freight for handling shipments, low frequency of cargo loss and damage, equipment availability, convenient pickup and delivery times, ready availability of information concerning shipments, assistance in claims handling and flexibility in meeting special handling requirements.

Yeo, Roe & Dinwoodie (2008) evaluated the competitiveness of container ports in Korea and China. They deduced several factors that contributed to not just competition but to quality of the Korea and China port services. Their findings were factored on thirty-eight components that were broadly underpinned under eight divisions. These were: Port Service, Hinterland Condition, Availability, Convenience, Logistic Cost, Regional Center and Connectivity.

From the above researches it can be inferred that logistics practices have pressure on transport operators to reduce costs while increasing quality. To achieve this objective, suggestions regarding multimodal transport chains can be developed. Streamlining flows is crucial towards making multimodal/integrated transport chains effective and efficient. Marlow and Paixo (2001) suggested that ports should introduce agility to compete more efficiently. Agility implies to the flexibility and the development of a structure which allows rapid response to customer demand changes. UNCTAD (1991) explained that through agility ports can evolve from logistics distribution centers (theirs generation) into transport solution providers (fourth generation). As opposed to third generation ports where development required capital and know-how, the development of agile fourth generation ports required application of efficient knowledge. Because ports carry out operations governed by a knowledge-based economy, the implementation of agility supports itself on the concepts of lean, flexibility, just-in-time and business process re-engineering techniques. Paixao and Marlo (2003) have researched extensively on concepts of agile logistics concepts. Fourth generation ports a question of agility.

Agile ports require an infrastructure with extensive focus on road, rail modes and special entry-exit layouts. These are requirements for just-in-time and lean logistics. Agility also requires continuous research to anticipate market trends thus powerful info-structures with information technology/systems back ends are required. These systems must be subscribed to all other ports and must interface data constantly online with a central communication centre for control and monitor purposes. All subscribed ports distribute activities towards the directions of their hinterlands; in doing so controlled trade routes can be tracked/developed and a proactive attitude as opposed to a reactive can be achieved.

Agile systems also require just-in-time decision making and thus the port organizational structure also must adapt to suite these requirements. Empowerment for on-spot decision making is key across all network collaborators to achieve just-in-time decision making thus horizontal/flatter organizational structures are recommended.

Prerequisite to agility, port operations must be streamlined. Consequently before agility; ports must incorporate lean systems. A lean port business unit makes best use of available resources both tangible and intangible, it eliminates waste (documentation/information processes) and deliver improved customer services. In doing so it reduces operating costs and strategic levels, including capital expenditure because resources are used more efficiently thus enhances overall quality of the system. A critique to the system it that one port using lean will not make a significant improvement but that a network or subscribed ports following lean system will exponentially improve efficiency. Thus common mission, objectives, values and beliefs must be shared by all the subscribed ports adhering under a common control centre. Figure 1 is a particular welcome in the development of a multimodal transport system that can compete more effectively as opposed to a unimodal transport system.

The lean concept can imply a continuous measure of the systems performance. A port with this system can easily identify waste, bottlenecks and defects as processes streamline since every process gets carefully mapped. As operations transgress towards leaner processes measuring process is critical thus feedback is recorded to compare with previous results. If deviations from targets occur, immediate corrective measures should be implemented and again the process is revaluated. With continuous cycles of feedback, evaluation, change and re-evaluation total quality port management system can be achieved and thus responses to market pressure with just-in-time approaches can become a step closer in achieving port total quality port management certification. Figure 2 shows a total quality management system cycle.

By providing ports with substantial information concerning every aspect of multimodal process, port can carry out a robust SWOT market analysis. With the information collected and shared by competitors ports under the command control centre; ports can improve overall system quality and raise the benchmark to meet the needs and wants of present day customers. This will promote the port not just on national or regional geographies but over international markets as well and transform into more reliable gateways of moving goods. In addition when applying properly the knowledge; ports can choose their core competencies and tailor services more effectively and efficiently thus quality and competitiveness overall is achieved.

Queuing Container Throughput:

We have learnt from our quality factors that the transportation of container cargo has evolved into a highly standardized model in the intermodal shipping industry. The World Bank group (2006) reports that the number of containers units handled at maritime ports was estimated to have increased 55% between 1998 and 2005, to a total of 270 million 20-foot equivalent units in 2005. According to the Container International website (2007) in 2005 the volume of traffic handled in the world ports was 386 million TEC and that it is estimated to increase to 795 million TEU by the year 2015. These alarming figures poses a constant need for optimal use of port resources to attend to the ever growing capacity and additionally reducing operating costs and increasing cargo throughput.

Container handling process is quiet sophisticated, each container may go through one or more of the four phases: loading, unloading, storage and transfer to other land based transportation or forwarded to other ships. Each phase requires the use of a mix of equipments. These include quayside cranes (QC) at berths, rubber tire gantry cranes (RTGC) at storage yards, terminal trucks. Because of the large volumes in container movements delays bring significant queuing issues in these processes.

Delays can occur at all stages for example if trucks are queued at the berth and/or yard depending on the availability and the number of cranes and the arrival rates. Because delays affect overall quality and performance of the port several measures are deployed to avoid such circumstance.

First potential delay would occur due to the variation in ship arrival time where it would directly affect the berth throughput (total tonnage of cargo handled at berths/total no of berth) and utilization rate of the equipments. As accurate arrival time is needed for better schedule planning, many ports had incorporate this in their policy for example, Port of Saldanha in Cape Town would require vessels to update on the estimated arrival time at certain interval prior to arrival and penalty will be imposed if vessels to arrive 12 hours later than estimated arrival time or required information like types of cargo, number and size of consignments are not furnished within 72 hours before arrival. The implementation of such policy would limit the exposure of delay beyond 12 hours and with the daily resource scheduling planning done for equipments and drivers, optimization of resources could be achieved.

Following to that, availability of equipments would also contribute to delays and decrease in berth throughput. As these equipments are expensive, forecasting the purchase of these equipments is based on average daily throughput, hence when surge occurs, slower turnaround of cargo unloading would lead to longer queue or waiting time for ships at berth. Hence to order to improve equipment allocation, BJ Thomas (1989) had suggested proper daily planning procedure to predict the level of equipment demand; and efficient equipment holding policies in accordance to port layout as smaller port could adapt central holding policy for better control as all equipments are stored in a location and only dispatch upon demand where as larger port should adapt sectional handling policy where equipments are distributed at different zone for quicker transfer since it's nearer to the working area. In addition to that, when surge occurs, operation team should be aware on the sequence of handling where top priority should be given to ship and quay transfer operation in order to minimize ship's time in port as it directly affects the terminal throughput, follow by receipt and delivery operations from/to storage area and finally in-terminal movements. If all of the above failed, port might need to invest more in equipments to ensure high standard of service to customer however this is done at the cost of having low equipment utilization.

Assuming that cargo are now successfully delivered to the container yard awaiting for pickup via rail or road, there is evidence of congestion causing further delay in total turnaround time due to the increase in the number of handled containers where limited gate capacity is one of the critical issue which needs to be addressed. Gate capacity is determined by the number of gate lanes, the operating hours and gate processing productivity hence adding number of gate lanes during peak hours or extending operating hours would also help in resolving congestion. As for gate processing productivity, the fluctuation of truck arrival time needs to be constraint and according to Nathan Huynh (2009), trucks arriving at their earliest convenience had contributed to long turnaround time (time taken to pick up an import container or drop off an export container) even under control condition where all other resources (eg: gates, clerks and yard cranes) at terminal change little on any given day as number of waiting trucks (demand) exceeding terminal's resources (supply) at certain times during the day. One of the initiatives taken in California was via legislation where California Assembly Bill 2650 was passed in 2004 to include a penalty of $250 on truck which queue more than 30 minutes while waiting to enter the terminal gate. Based on the 16 months assessment done by Giuliano, O'Brien, Sara and Paul (2006) after California Assembly Bill 2650, it had been observed that gate processing and terminal's productivity had increased as a result of appointment scheduling system implemented in Los Angeles, Long Beach and Oakland terminals to avoid the penalty over long waiting time by trucks. On top of that, this had also reduced the highway congestion and vehicle emissions.

The above suggested resolutions are targeted to improve port efficiency within the boundary of the limited capacity like the number of berth, number of equipments, number of gate lanes, road space, rail tracks and etc, however these might not be sufficient to cater for the growing industry. Though expansion or building new infrastructure are much needed as part of long term solution, there had been a switch to multimodal transport at present to tackle port congestion issues by spreading it's load. According to W.-J Schijndel (2000), in order to reduce congestion in Rotterham port, dedicated freight line was built via the Betuweroute project with the intention of connecting to the European railway network for better leverage of train-truck combination instead of truck only for longer distance route and investments in the waterways to other ports like Germany and Belgium for the purpose of transhipment. Though switching transport mode can ease port congestion, however W.-J Schijndel (2000) suggest that there are challenges (eg: price competitiveness and less flexibility compared to road transport, the need for good integration of advance information technology to ensure reliable flow of goods and the requirement of high setup cost) which need to be overcome before benefits of multimodal transport services could be harvested.

Operation Control

The operation control process needs to have a tight control over forecasting, allocating resources, scheduling, monitoring the real time operation and taking necessary steps like anticipating delays, communicating delays downstream in a timely manner, taking stock of excessive container inventory and clearing it as soon as possible, monitoring and scheduling equipment to perform minimum possible moves per containers. Container terminal operation processes can be very complex when you consider the number of container passing through the ports in a day thereby creating a need for efficient real time systems, RFID integrated signaling systems and a highly automated command and control system. If container terminals can be compared to a giant robot the operation control process acts like a brain of the giant robot.

Macro Factors affecting the supply chain

Maritime supply chain is continuing to evolve with the globalization and is playing an important role in long term strategy of corporations who are looking to cut down cost, and time. The demand for lean container terminal with just in time container delivery to the next leg of the supply chain and effective communication of the delivery is gaining momentum. Macro factors affecting the performance of the big jigsaw puzzle called maritime supply chain would be technology for data sharing, relationships with shipping lines, value added services like stuffing/un-stuffing containers, transport mode integration, relationship with inland transport providers and performance monitoring of the entire supply chain.


Maritime supply chains collaborate with upstream and downstream parties of the supply chain by integrating and exchanging information with them in real time. Since there are many players up and down the supply chain line integration can break at many points along the line for reasons like incorrect information, invisible inventory along the line, incorrect forecast, decision making based on out of date or inaccurate data, manual and error prone processes affecting the supply chain causing supply chain failure and ripple effect along the line. RFID has been emerging as a technology and its ability to track the goods in a cost effective manner can be a solution to the problem facing maritime supply chain. Integrated information systems should be shared between supply chain partners and container terminals.

Shipping Lines

Research has proven that long term relationships with few important customers increase the profitability than the container terminals who adopt a on and off per transaction based approach. Long term relationships works out to be a win-win situation for both container terminals and shipping lines, container terminal get more business, shipping lines get more discounts and priority berthing, storage and delivery rights. The container terminals can improve container and goods distribution by better coordination like streamlining container flow and reducing empty hauls which can be achieved by communicating more often and sharing integrated information systems with shipping lines.

Value Added Service

Value added services act as a competitive advantage of the container terminal in maritime supply chain. As more and more goods pass through container terminals, container terminals are seen as the decoupling point in the maritime supply chain. The effect of global production model is to design generic components in different part of the world and delay specific local customization decisions at one of the decoupling points or point of actual demand. The demand for value added service like stuffing/un-stuffing, land for rail/road access, tailored services handling different types of products like perishable item and hazardous material, speed at which the port can alter schedules, modify orders, change design processes specific to customers demand, capacity to deliver cargo through diversified routes/modes in least possible time to end user premises and capacity to deliver tailored services to different market segments as an when the need arises. Container terminals differentiate themselves based on the value added services they can offer.

Channel Integration

Container terminals handle bi-directional traffic where they receive container and goods from container ships which they distribute inland via road, rail or inland container terminals that deliver them to the destination as containers or goods based on the value added service commitment they have with other partners of the supply chain, whereas at the same time they receiver container and good from road, rail or inland container terminals and deliver them to container ships. This requires a high level of co-ordination and inter-connectivity capabilities between the members of the maritime supply chain. Container flow will seek container terminals that offer lowest cost, value added services and efficient delivery mechanism to road, rail, inland container terminals and customer premises as fast as possible. The container terminals have evolved to become a value chain in maritime supply chain and they compete with each other based on transport mode capabilities they can offer in the supply chain.

Inland Transport Providers

Relationships with Inland transport providers are of strategic competitive advantage to the container terminals. Inland transport providers with efficient road, rail and waterway transport capability offer competitive advantage to container terminals by efficiently delivering the container or goods to customer premises on time. Long term relationship with inland providers is as important as relationships with shipping lines. The container terminals can improve container and goods distribution by better coordination like streamlining container flow and reducing empty hauls which can be achieved by communicating more often and sharing integrated information systems with inland transport providers.


Integration of container terminals in maritime supply chain leads to performance improvement and competitive advantage for container terminals. The container terminals have to be capable of attaining objectives of the maritime supply chain in addition to the objectives of traditional efficiency and this would be critical to competitiveness of the container terminals in supply chain world. Cost advantage, customization, responsiveness to customers needs, reliability and quality are increasingly seen as measures of today's container terminal performance. Competition between container terminals in the same geographical area has intensified and depends to a large extent on the ports ability to integrate in global supply chain.

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