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Thought Leadership
Our Partners and Associates are regular speakers at conferences, trade events and seminars in UK, Europe, Asia and North America. As regular contributors to trade magazines and national publications we offer expert, independent opinions on portcentricity as applied to collaborative supply chains, business clusters, port traffic growth, wider economic development and specific port industry growth sectors such as offshore wind farm developments.

PCLP Director Budha Majumdar removes some of the mystique and corrects any misunderstandings about Port Centric Logistics in this paper for Port Technology International 2012

Supply chain pressures

Our world is changing and these changes are becoming increasingly unpredictable as economic conditions buffet producers, consumers and transportation service providers from every direction. Who would have thought in those heady days of 2007/2008 that the large so-called ‘fast’ container ships would now be plotting how to super slow steam at speeds where they could be overtaken by the Clipper sailing-ships of nearly a couple of centuries ago ?

This and manipulating slot availability by hard pressed liner operators have simply added to the woes of shippers and their global logistics providers because on top of everything else, that elegant JIT system of having a continuous production line providing an optimum inventory exposure has just blown out of the window. So now that the shipper cannot rely on fast deliveries, the need is for certainty. Certainty of knowing when the consignment is going to arrive and certainty in the knowledge of the condition of that consignment. Who and how is this service going to be provided ?

In the UK context, the conventional wisdom was to take the containers to the ‘golden triangle’ for consolidation and onward despatch to satellite distribution centres or to the processor. This involved a laden journey of the container and an empty haul back to the port for restitution. PCL enables the ‘system track & trace’ to be augmented by ‘mark one eyeball’ to report consignment received, checked and confirm quantity and condition at a much more local point to the port. Note again, not necessarily inside the port, but co-located so as to minimise and perhaps even avoid the ‘inspect and confirm’ transport leg.

Cost pressures

Rising energy prices, but perhaps more importantly, volatile energy prices, are adding to this uncertainty. Everyone is looking at ways to reduce fuel consumption, avoid unnecessary journeys, avoid carrying less-than-full loads and increase rail and, preferably, sea miles over road miles.
The same goes for multiple handling. Every time someone touches a container or consignment, it adds to the risk of damage or loss - on top of the increase in cost.
PCL allows the shipper or his global logistics partner to pre-plan bulk deliveries of containers from the port, turn-out in secure own premises adjacent or co-located to the port using own trained staff and return containers without the risk of incurring demurrage and damage. Reports to the cargo owner at this point carry the certainty of consignment having been received in correct quantities in sound condition awaiting despatch instructions.

The theory behind logistics strategies for major importers looking to reduce supply chain costs are already pretty well known., Robert Leachman from the University of California for example, described the options for large US retailers importing products from Asia.
The ‘push’ strategy is appropriate for low value goods to reduce transportation costs. Importers make their allocation decisions when the product is still in Asia. They ship the containers intact through a US seaport and on to an inland distribution centre before they decide the final destination.
The ‘push/pull’ strategy is employed to reduce inventory-carrying costs. Consumer goods imported through a major gateway are trucked to a nearby distribution centre where they sit until the retailer determines where in its regional network the product will end up.

But what about strategies for the port ?

Traditionally, the port’s customer for most non-bulk products has been the shipping line. This is especially true on the burgeoning containerised trades. Deeper and wider channels, 1km long clear quays in a straight line, rail-mounted ship-to-shore gantry cranes (extending from handling just a few containers across deck to now spanning 22 rows of containers) and a large yard to store containers, sometimes 6 high. So the shipping line, quite rightly, has determined the development of container terminals. But who would deny the inherent lack of ‘stickiness’ of a shipping line’s custom ? Most port managers would testify to the experience of being told that a Line would gladly call at his terminal – no problem with facilities, productivity, reputation and perhaps even rates – but they need their customers to want them to call at that terminal. And no prizes for guessing what the shipper customers say. Yes - would happily move our containers through your facility but our shipping line of choice doesn’t call there.

So, here’s the strategy now being followed by new container terminals servicing a sustainable hinterland – be it national or trans-national – the ‘pull’ strategy.

If you are building a terminal, or expanding an existing facility, in a location that can service a significant hinterland, then look at what DP World are doing at London Gateway; look at the development of storage facilities around Felixstowe South and read again the comments made by Forth Ports management extolling the benefits of having large warehouses in the vicinity of their newly acquired 100% control of London Container Terminal.

The subliminal message from each is that they are providing first-class facilities for cargo owners and for the global logistics providers whose influence is rapidly gaining traction. These global 3PLs are increasingly growing their share of the global container trade and require cost-effective facilities for their mixed-bag of customers who all demand that costs be taken out of their supply chain and at the same time improve service reliability. More and more of the larger importers are demanding greater transparency in the structure of supply chain costs and, perhaps even more importantly, greater confidence in cargo availability.

These large warehouses which are co-located to deep-sea container terminals provide just this. The container terminal operators are hedging their bets by providing the excellent facilities for their important ship-owner customers, and also making sure that their cargo-owner customers get what they need. And if a number of large cargo owners are co-located to an efficient deep-sea container terminal – where is the shipping line going to go ? This is the terminal operator’s ‘pull’ strategy – provide facilities for and have the cargo owner on site (so to speak) and the ships will come.
And this is the essence of PCL.
Provide transparency, reduce costs, reduce waste and provide certainty, for all the parties.

Societal pressure

The final thoughts on this matter reflect on the pressure that a provider of goods face. As consumers, we not only demand our household goods and consumer items at low cost and in perfect condition, but we want it on time and we want the producer to demonstrate that his carbon footprint is not excessively wasteful. Annual Reports and CSR publications now require global multinationals and large producers to report on the carbon emissions arising out of their business and especially from their transportation choices. This so called ‘green’ argument is also driving the concept of PCL and has been enthusiastically embraced by the global logistics providers as a way of helping their clients (the cargo owners) to report continuous improvement in carbon emissions.

Witness the GoGreen programme instigated by Deutsche Post DHL, which is committed to increase the carbon efficiency of the company’s operations
and those of its subcontractors by 30% by 2020, while also helping customers achieve their (own) sustainability goals.
Container terminal operators are included in the catch-all phrase of ‘subcontractors’ and will not be able to avoid the scrutiny of these 3PLs acting for their principals for much longer. And these global logistics providers are skilled in cost-effective logistics flows and have mastered the art of Value-Stream Mapping and now commonly employ Six Sigma black belt practitioners. Amongst other things, they will have an ‘interesting’ view of the common practice of shuffling and re-shuffling boxes in the yard (which is euphemistically called ‘house-keeping’). This is ‘waste’ and arises due to ineffective yard management systems and, more commonly, due to untimely requests for deliveries. This is an additional terminal operating cost which can be effectively tackled by a customer using the PCL concept.

There remains some confusion about the meaning and application of Port Centric Logistics and this short paper has tried to remove some of the mystique and to correct any misunderstandings. The benefits of PCL are undeniable, especially when faced with the problems of ageing infrastructure of large distribution centres located in the ‘golden triangle’ of Distribution Centres in the UK; for improved visibility of stock; for faster availability of stock once landed in the port; for direct delivery to market avoiding wasteful double handling and empty hauls; for enabling order fulfilment direct from a port-adjacent site.
However, PCL is not a panacea for the container transportation industry which has to face up to even more pressing problems and may not even be appropriate for the ultra-large container transhipment hub operated by shipping lines. But if you handle gateway traffic into a hinterland, then PCL ticks all the boxes for all your customers.

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