Essay Sample on Ports and Intermodalism

Ports play a significant role in international trade with most of the world's products being transported by ships and through ports. Since the ports have this crucial role in the economy, it is essential that they follow the technological development of other sectors by developing instruments that analyze and evaluate their performance continuously. Logistics includes a range of essential activities for trade, such as transport, warehousing, cargo consolidation, border clearance, distribution, and payment systems. Well-functioning logistics, both internationally and domestically, is a crucial precondition of national competitiveness (Yildiz 2017). Similarly, from a micro perspective, logistics service fulfills the customers' expectations through excellent logistics service provision.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

Global production networks depend on transport operations. Such dependency influences a broad range of value-added activities along supply chains. Mainly, trade and transport facilitation encourage logistics performance, and better logistics support growth improves competitiveness and facilitates investments (Yildiz 2017). More generally, logistics performance is linked strongly with the reliability of supply chains and the predictability of service availability. However, the performance of ports is not a simple issue to address since several determinants influence port performance. Hence, the purpose of this paper is to conduct a critical analysis of port infrastructure quality and logistics performance in the port of Hong Kong.

Importance of Port Logistics Performance

Ports performance has become more complex because of the fact that ports today work as nodes of global logistics chains. It is measured in terms of the number of containers moved through a port (throughput). Ports have traditionally evaluated their performance by comparing their actual and optimum throughputs measured in the number of containers or tonnage handled. Nevertheless, one of the primary challenges of ports is how to measure their logistic performance. Yildiz (2017) defines logistics performance as a degree of efficiency, effectiveness, and differentiation linked to the accomplishment of activities. Taking a supply chain view, it refers to cost, time, and complexity in accomplishing import and export activities (Munim and Schramm 2018). Port efficiency can be measured in several ways depending on the aspects of the port evaluation being evaluated. This paper focuses on the terminal operation aspect since container terminal efficiency is often linked to productivity and performance. It can be reflected in the freight rates charged by shipping companies, turnaround time of ships and cargo dwelling time.

The Logistics Performance Index (LPI) is a benchmarking instrument developed by the World Bank to help in measuring performance along the logistics supply chain within a country (Ojala and Celebi 2015). This tool, by permitting comparisons between countries, enables them to identify challenges and opportunities and improve their logistics performance (Ojala and Celebi 2015). The LPI analyzes countries in six features that include:

• The efficiency of customs and border clearance
• The quality of trade and transport infrastructure
• The ease of arranging competitively priced shipments
• The competence and quality of logistics services such as trucking, forwarding and customs brokerage
• The ability to track and trace consignments
• The frequency with which shipments reach consignees within scheduled for expected delivery times

Munim and Schramm (2018) and Hwang, Hong, and Lee (2017) assert that the most critical aspects of logistics performance are the reliability of supply chains and logistics costs. Good logistics performance increases a port's competitive advantage. In a business environment of just-in-time production processes, reliability and predictability in addition to the time and cost of shipment delivery matter. The port's hedging costs arising from efficient reliability and predictability of logistics service can be remarkably low regarding low inventory maintenance expenditure (Park and Seo 2016). For example, long customs clearance time affects customers' total factor productivity adversely. Conversely, quality logistics service increase the export performance of a port. Consequently, better logistics performance leads to higher seaborne trade. Overall, businesses in countries with good logistics performance have a high probability of exporting to international markets and attracting foreign direct investments (Hwang, Hong and Lee 2017).

Park and Seo (2016) add that the trade-off between reliability and direct freight costs changes depending on a port's goods trade and logistics performance, which can restrict the potential of countries to diversify from time-sensitive products to value-added commodities.

Port Infrastructure Quality

The port infrastructure is a field of relevance in the evaluation of the port logistics performance. Munim and Schramm (2018) argue that port infrastructure is a good representation of the performance, the capacity and the competitiveness of the port because every good produced by the port is dependent on them. The quality of port infrastructure encompasses technologies and equipment. Container terminals are vital inter-modal transportation network that works under numerous operational objectives. The primary one is to minimize ships turnaround time, and thus, maximize the terminal throughput. In addition, it avoids congestion and secures deep-sea container connectivity for economies depend heavily on international trade. They can be attained by efficient loading and discharging of ships. Hence, an accurate ship assignment is usually taken as a key performance measure for the operational efficiency of a terminal. The port infrastructure quality plays a vital role in the logistics performance of a port. In particular, the better quality of port infrastructure helps improve the logistics performance of the port characterized by greater reliability, ability to track and trace shipments, less damage, and timeliness of delivery.

The Port of Hong Kong

The Port of Hong Kong is a major hub with around 340 container liner services per week, connecting to approximately 470 destinations worldwide. The port comprises nine existing container terminals with 24 berths at Kwai Chung and Tsing Yi Island. Through various productivity enhancement measures, their combined throughput capacity is around 21 million TEUs per year. In 2018, approximately 2,622 vessels were listed on the Hong Kong Shipping Register (HKSR), boasting a sum of 125 million gross tonnes. These figures made Hong Kong the fourth largest shipping register globally, behind Panama, the Marshall Island, and Liberia.

However, despite the size of the shipping register, the Port of Hong Kong has lost its position as the world's busiest container port since 2005 (Zhang, Lam and Huang 2014). Its global position in container throughput has been on the decline surpassed by Shanghai, Singapore, Shenzhen and recently Ningbo-Zhoushan. Merk and Li (2013) associated this decline with the high terminal handling charges, which undermine its competitiveness. In particular, the terminal handling charges per TEU in Hong Kong are much higher than of neighboring ports are. Additionally, its outdated infrastructure, transport networks and distance to cargo sources affect its competitiveness negatively (Zhang, Lam and Huang 2014).

Logistics Performance of the Port of Hong Kong

The logistics performance of the Port of Hong Kong has been on the decline in the last decade as per the World Bank's LPI. The overall LPI score for 2018 was 3.92 a decline from 4.07 in 2016 (The World Bank 2018). It is characterized by yard congestion especially during peak seasons, which in turn affect the truck turnaround times adversely. Mainly, the primary cause of this problem is insufficient land and quay. For example, the port stands on an average of 14 hectares of land per 400 meters berth. Notably, this is below the international standard of 25 hectares for optimal performance. On the quayside, there has been an increase in the transshipment throughput volume by approximately 30% in the last decade attributable to increased barge operations. Undeniably, this growth in barge volume has led to a significant barge waiting time, which disrupts connections with on-forwarding ships.

Strategies for enhancing Port Infrastructure Quality and Logistics Performance at the Port of Hong Kong

Competitiveness of the Port of Hong Kong is hampered by lack of sufficient logistics infrastructure. Strategic infrastructure development seeks to attain logistics performance in the form of competitiveness, time-based services, and value creation and delivery to large sections of logistics users.

First, the Port of Hong Kong needs to develop communication network configurations encompassing complex logistics decision support systems (LDSS). Such systems have a direct effect on improving logistics performance in terms of time, cost, and value delivery. Mainly, the ever-growing availability of internet-based communication and information mechanisms enable many customers to access transportation services, schedules, and rates. As Heilig, Stahlbock and Voss (2019) record, timely communication through network configurations among maritime transport mode can reduce the expenditure needed for logistics performance at the port of Hong Kong. Likewise, the Port should promote the application of high technology such as the port Internet of Things (IoT), which is vital in enhancing the efficiency of port operations.

There is a truism that a transportation asset such as a ship must be in motion to assure its economic survival. Therefore, as the sizes of ships increase, the port of Hong Kong must ensure that its harbor waters, berths, and approach channels are of sufficient depth. It must invest in constant dredging to achieve this. Additionally, the berths themselves must be large enough and properly equipped to handle the larger vessels (Acciaro and McKinnon 2015). In particular, it must meet the international standard of 25 hectares for optimal logistics performance. For instance, it must increase terminals to provide sufficient area to accommodate the containers as the vessels are being discharged and loaded. Similarly, the crane capacity, regarding both the number of cranes and their cycle time, must be adequate to minimize port stays (Acciaro and McKinnon 2015). Undeniably, market forces will continue to influence the evolution of the Port of Hong Kong as it strives to continue providing improvements in cost, reliability, speed, and customer satisfaction.

Finally, according to Munim and Schramm (2018), the quay crane operation is one of the essential operations for the container terminal logistics that carries out loading a container form a truck to a vessel or unloading a container from a vessel to a truck. The Port of Hong Kong can reduce the waiting times already affecting its quayside negatively by increasing intermodal operations to carry the containers from the port. Moreover, container infrastructure needs to be complemented by efficient hinterland transport connections to ensure the port exploits its potential as a growth catalyst and supply chain node fully (Acciaro and McKinnon 2015). In particular, in addition to the river transport system into the inland ports, more advancement should be made on the road and rail transport systems. Undeniably, this strategy can go a long way towards reducing container dwell time, and consequently, the high freight costs at the Port.

References

Acciaro, M. and McKinnon, A., 2015. Efficient hinterland transport infrastructure and services for large container ports.