Procurement-focused relationships 'undermine' collaboration on berth productivity

This story originally published on Fairplay.IHS.com.

Communication structures that foster higher levels of trust and collaboration between container lines and terminals are sorely needed for the container shipping industry to make gains in berth and port productivity, a new study has found.

Relationships between lines and terminals focus too heavily on commercial and procurement functions and this severely limits possibilities to unlock large untapped pools of value in the area of berth and port productivity, says the study by the Journal of Commerce/IHS Markit.

"There are few examples of communication structures in the industry today that are capable of fostering required levels of contact, trust, and transparency for effective collaboration across organisations."

The study found the mentality of contacts between key industry stakeholders is often 'zero-sum' in nature and is normally not focused on co-operation to make improvements for mutual gain. The slow pace of adoption of IT best practice by the industry and frequent isolation of IT departments from business objectives is also identified as a major drawback in the quest for higher levels of productivity.

"The embedded 'procurement-focused' culture has led to forms and norms of communication within and across organisations that are not suited to collaborative work for mutual gain," it says.

Titled Port Productivity: Finding New Efficiencies through Collaboration, the whitepaper was published following a day-long workshop on berth and port productivity in Hamburg. Major port authorities, global and regional terminal operators, and liner shipping companies that control over 75% of the world's cellular fleet capacity took part in the workshop to identify blockers to progress in the area of productivity and discuss potential solutions.

Journal of Commerce/IHS Markit analysis of port call data from shipping lines shows the potential to cut hundreds of thousands of hours from the annual time lines spend in port. For each hour saved, lines can save fuel by reducing speed, particularly on long ocean crossings, delivering collective potential savings for the industry on fuel alone that are at least in the 9-digit range.

At the same time, terminal operators have the opportunity to increase capacity by millions of teu per year without the need for additional capital investment.

The study highlights numerous inefficiencies in berth operations.

"Inefficiencies are generated when carrier plans are not tuned to terminal operating preferences and constraints such as labour and tidal issues; when terminal operators are unable to validate loading plans ahead of the berthing of vessels, and when there is lack of visibility on the part of terminals to actions undertaken at terminals visited previously."

Big gaps in the area of adoption and implementation of technologies to support productivity improvements, particularly in the key area of data management and data-sharing are identified.

"Participants noted a lack of consistent and quality data available and limited strategies for the application of data to add value to operations. This undermines the development of the sustained fact-based and decision-driven processes required to make significant improvements in productivity."

The study notes a generally poor level of adoption of IT best practice across the industry and that IT and business departments often operate in isolation from one another. This inhibits innovation and progress in areas such as digitalisation of processes to improve berth and port productivity, it says.

"The limited integration of IT and business departments, and limited scope for IT personnel in one organisation to engage with equivalent personnel in other organisations, restricts opportunities for data-driven innovation.

"IT departments can be unfamiliar with the detail of, and sometimes even at odds with, the objectives of the business."

A general sense of apathy on the part of lines and terminals to work more on productivity is partly attributed to the perception that the value from such initiatives may not be shared equally. While the direct benefit for lines from a reduction in time spent at berth in terms of fuel savings are obvious, the benefit to terminals is less obvious, although still very significant in terms of increasing capacity without additional capital investment, the study found.

Lack of resources is also identified as a significant blocker to collaborative work on productivity.

Projects to improve productivity on a cross-organisational level need to be undertaken on a continuous and sustained basis that requires considerable dedication of resources from several departments. With container lines stuck in a cycle of low profitability and terminals engaged in round after round of cost cutting to offset pressure on tariffs and maintain margins, there are limited resources available for projects that give the perception of offering delayed or diffused value.

The study says better communication structures and a more sustained and proactive approach to the adoption and application of modern technologies are key to making progress in the area.

"Because the sharing of data and other forms of information is critical to making gains in productivity, platforms and tools to manage complexity, handle potentially large quantities of data, and allocate and apply that data in the correct manner have a central role.

"Such platforms and tools need to be capable of sharing data in an automated fashion while at the same time ensure proper handling of sensitive elements."

Sustained effort needs to be put into improving data quality and participating in initiatives to develop suitable standards so that data can be worked with across different stakeholders in the container shipping value chain, it says.

Terminal automation and seeking to manage container terminals as a system rather than through individual operational functions is also identified as an important element in improving berth and port productivity. By managing the terminal as a more holistic system, automation can minimise process variation, making operations more predictable, thereby allowing for better operational control and increased efficiency, the study says.